[Federal Register Volume 88, Number 27 (Thursday, February 9, 2023)]
[Notices]
[Pages 8494-8502]
[FR Doc No: 2023-02717]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96798; File No. SR-FINRA-2022-015]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving a Proposed Rule Change To Amend FINRA
Rule 8312 (FINRA BrokerCheck Disclosure) To Release Information on
BrokerCheck Relating to Firm Designation as a Restricted Firm

February 3, 2023.

I. Introduction

    On June 3, 2022, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend FINRA Rule 8312 (FINRA
BrokerCheck Disclosure) to release information on BrokerCheck as to
whether a particular member firm (hereinafter referred to as ``member
firm'' or ``firm'') or former member firm is currently designated as a
``Restricted Firm'' pursuant to FINRA Rule 4111 (Restricted Firm
Obligations) and FINRA Rule 9561 (Procedures for Regulating Activities
Under Rule 4111).
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal
Register on June 17, 2022.\3\ On July 20, 2022, FINRA consented to
extend until September 15, 2022, the time period in which the
Commission must approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
approve or disapprove the proposed rule change.\4\ On September 15,
2022, FINRA responded to the comment letters received in response to
the Notice.\5\ On September 15, 2022, the Commission issued an order
instituting proceedings to determine whether to approve or disapprove
the proposed rule change.\6\ On November 25, 2022, FINRA responded to
the comment letters received in response to the Order Instituting
Proceedings.\7\ On November 25, 2022, FINRA consented to extend the
time period in which the Commission must approve or disapprove the
proposed rule change to February 10, 2023.\8\ This order approves the
proposed rule change.
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    \3\ See Exchange Act Release No. 95092 (June 13, 2022), 87 FR
36551 (June 17, 2022) (File No. SR-FINRA-2022-015) (``Notice''). The
Notice is available at https://www.sec.gov/rules/sro/finra/2022/34-95092.pdf.
    \4\ See letter from Michael Garawski, Associate General Counsel,
FINRA, to Daniel Fisher, Branch Chief, Division of Trading and
Markets, Commission, dated July 20, 2021. This letter is available
at https://www.finra.org/sites/default/files/2022-07/sr-finra-2022-015-extension1.pdf.
    \5\ See letter from Michael Garawski, Associate General Counsel,
FINRA, to Vanessa Countryman, Secretary, Commission, dated September
15, 2022 (``FINRA September 15 Letter''). The FINRA September 15
Letter is available at https://www.sec.gov/comments/sr-finra-2022-015/srfinra2022015-20143024-308848.pdf. Comments received on the
proposed rule change are available at https://www.sec.gov/comments/sr-finra-2022-015/srfinra2022015.htm.
    \6\ See Exchange Act Release No. 95791 (September 15, 2022), 87
FR 57731 (September 21, 2022) (File No. SR-FINRA-2022-015) (``Order
Instituting Proceedings''). The Order Instituting Proceedings is
available at https://www.sec.gov/rules/sro/finra/2022/34-95791.pdf.
    \7\ See letter from Michael Garawski, Associate General Counsel,
FINRA, to Vanessa Countryman, Secretary, Commission, dated November
25, 2022 (``FINRA November 25 Letter''). The FINRA November 25
Letter is available at https://www.sec.gov/comments/sr-finra-2022-015/srfinra2022015-20151669-320145.pdf.
    \8\ See letter from Michael Garawski, Associate General Counsel,
FINRA, to Daniel Fisher, Branch Chief, Division of Trading and
Markets, Commission, dated November 25, 2022. This letter is
available at https://www.finra.org/sites/default/files/2022-11/sr-finra-2022-015-extension2.pdf.
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II. Description of the Proposed Rule Change

A. Background

1. FINRA Rules 4111 (Restricted Firm Obligations) and 9561 (Procedures
for Regulating Activities Under Rule 4111)
    FINRA Rule 4111 established an annual process to designate member
firms as ``Restricted Firms'' when the member firms present a high
degree of risk to the investing public, based on numeric thresholds of
firm-level and individual-level disclosure events, and then impose on
such member firms a ``Restricted Deposit Requirement'' \9\ or, in
addition or in the alternative, conditions or restrictions on the
member firm's operations that are necessary or appropriate to protect
investors and the public interest.\10\ The rule is designed to protect
investors and the public interest by strengthening the tools available
to FINRA to address the risks posed by member firms with a significant
history of misconduct.\11\ It creates incentives for member firms to
change behaviors and activities, either to avoid being designated or
re-designated as a Restricted Firm.\12\
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    \9\ See FINRA Rule 4111(i)(15) (definition of ``Restricted
Deposit Requirement''). A firm subject to a Restricted Deposit
Requirement will be required to establish a Restricted Deposit
Account and deposit in that account cash or qualified securities
with an aggregate value that is not less than the member's
Restricted Deposit Requirement. See FINRA Rule 4111(a); 4111(i)(14)
(definition of ``Restricted Deposit Account'').
    \10\ See Exchange Act Release No. 92525 (July 30, 2021), 86 FR
42925 (August 5, 2021) (Order Approving File No. SR-FINRA-2020-041,
as Modified by Amendment Nos. 1 and 2) and Exchange Act Release No.
92525 (July 30, 2021), 86 FR 49589 (September 3, 2021) (Order
Approving File No. SR-FINRA-2020-041) (Correction) (collectively,
``FINRA Rule 4111 Order'').
    \11\ See FINRA Rule 4111 Order, 86 FR 42926.
    \12\ See id. at 42926 and 42932.
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    FINRA Rule 9561 established expedited proceedings that: (1) provide
member firms an opportunity to request a hearing with FINRA's Office of
Hearing Officers to approve or withdraw any and all of the
requirements, conditions, or restrictions imposed by FINRA's Department
of Member Regulation (the ``Department'') under FINRA Rule 4111; \13\
and (2) enables

FINRA to address a member firm's failure to comply with any
requirements imposed under FINRA Rule 4111.\14\
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    \13\ See FINRA Rule 9559(n)(6) (stating that ``[i]n any action
brought under Rule 9561(a), the Hearing Officer may approve or
withdraw any and all of the Rule 4111 Requirements, or remand the
matter to the department that issued the notice for further
consideration of specified matters, but may not modify any of the
Rule 4111 Requirements imposed by the notice or impose any other
requirements, obligations or restrictions available under Rule 4111.
In any action brought under Rule 9561(b), the Hearing Officer may
approve or withdraw the suspension or cancellation of membership,
and may impose any other fitting sanction.''); see also FINRA Rule
4111 Order, 86 FR 42928 notes 55 and 65.
    \14\ FINRA Rule 4111 Order, 86 FR 42931.
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2. FINRA Rule 8312 (FINRA BrokerCheck Disclosure)
    FINRA Rule 8312 (FINRA BrokerCheck Disclosure) governs the
information FINRA releases to the public through its BrokerCheck
system.\15\ Information available to investors through BrokerCheck
includes, among other things, information reported on the most recently
filed ``Registration Forms'' (with limited exceptions) for both member
firms and registered individuals, and summary information about certain
arbitration awards against the firm involving a securities or
commodities dispute with a public customer.\16\ This information
includes a description of where and when the firm was established,
people and entities that own controlling shares or directly influence
the firm's daily operations, a firm's history that details mergers,
acquisitions or name changes affecting the firm, the firm's active
licenses and registrations, the types of businesses it conducts,
information about arbitration awards and disciplinary matters, and
information as to whether a particular member is subject to FINRA Rule
3170 (Tape Recording of Registered Persons by Certain Firms) (the
``Taping Rule''),\17\ among other information and disclosures.\18\
FINRA stated that BrokerCheck helps investors make informed choices
about the brokers and member firms with which they conduct business by
providing registration and disciplinary history to investors at no
charge.\19\
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    \15\ According to FINRA, users of BrokerCheck include, among
others, investors, member firms and other entities in the financial
services industry, regulators, and individuals registered as brokers
or seeking employment in the brokerage industry. See Notice, 87 FR
36553. FINRA requires member firms to inform their customers of the
availability of BrokerCheck. See FINRA Rule 2210(d)(8) (requiring
that each of a member's websites include a readily apparent
reference and hyperlink to BrokerCheck on the initial web page that
the member intends to be viewed by retail investors and any other
web page that includes a professional profile of one or more
registered persons who conduct business with retail investors) and
FINRA Rule 2267 (requiring members to provide to customers the FINRA
BrokerCheck Hotline Number and a statement as to the availability to
the customer of an investor brochure that includes information
describing BrokerCheck); see also Notice, 87 FR 36552 note 12 and
accompanying text (stating FINRA requires member firms to inform
their customers of the availability of BrokerCheck). The BrokerCheck
website is available at brokercheck.finra.org. See Notice, 87 FR
36552 note 11.
    \16\ See Notice, 87 FR 36552 note 13; see also FINRA Rule
8312(b)(2)(A) (using the term ``Registration Forms'' to refer
collectively to the Uniform Application for Securities Industry
Registration or Transfer (Form U4), the Uniform Termination Notice
for Securities Industry Registration (Form U5), the Uniform
Disciplinary Action Reporting Form (Form U6), the Uniform
Application for Broker-Dealer Registration (Form BD), and the
Uniform Request for Broker-Dealer Withdrawal (Form BDW)).
    \17\ For further information regarding the Taping Rule see infra
note 21 and accompanying text.
    \18\ See Notice, 87 FR 36553-54. On its website, FINRA
elaborates on the contents of a firm's BrokerCheck report.
Specifically, FINRA states that the BrokerCheck report includes,
among other things, a summary report, providing ``a brief overview
of the firm and its background'' (``Summary Report''), and a more
detailed report, providing ``information about any arbitration
awards, disciplinary events, and financial matters on the firm's
record,'' including ``pending actions or allegations that have not
been resolved or proven'' (``Detailed Report''). The website is
available at https://www.finra.org/investors/learn-to-invest/choosing-investment-professional/about-brokercheck.
    \19\ See Notice, 87 FR 36552.
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B. Proposed Amendments to FINRA Rule 8312

    The proposed rule changes would amend FINRA Rule 8312 to release
information on BrokerCheck as to whether a particular member firm or
former member firm is currently designated as a Restricted Firm
pursuant to FINRA Rules 4111 and 9561. Information that a member firm
is currently a Restricted Firm would be displayed in BrokerCheck on
both the firm's Summary Report and Detailed Report.\20\ Specifically,
those reports would include the text, ``This firm is currently
designated as a Restricted Firm pursuant to FINRA Rule 4111 (Restricted
Firm Obligations),'' in a color or font that is prominent. The alert
also would include the text ``Click here for more information,'' with a
hyperlink to a page on FINRA's website that provides for the investing
public a clear explanation of FINRA Rule 4111 and what it means to be a
Restricted Firm.\21\ Under the proposed rule change, this information
would be displayed during the course of any FINRA Rule 9561 expedited
proceeding to review the Department's decision, since the effectiveness
of FINRA's decision that designates a member firm as a Restricted Firm
will not be stayed during these proceedings.\22\
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    \20\ For further information regarding the Summary Report and
Detailed Report displayed on BrokerCheck see supra note 18.
    \21\ This disclosure would be made in a similar manner to how
FINRA discloses on BrokerCheck that a member firm is a ``taping
firm'' pursuant to the Taping Rule. See Exchange Act Release No.
90635 (December 10, 2020), 85 FR 81540 (December 16, 2020) (File No.
SR-FINRA-2020-011) (approving the disclosure of information as to
whether a particular member firm is a Taping Firm). In that case,
FINRA provides a simplified disclosure that a firm is subject to the
Taping Rule on the firm's Summary Report on BrokerCheck, along with
a hyperlink to a separate page on FINRA's website containing a
clear, more detailed description of what it means to be a taping
firm. See Notice, 87 FR 36552 note 19; see also FINRA Rule
8312(b)(2)(F).
    \22\ See Notice, 87 FR 36552; see also FINRA Rule 9561(a)(4)
(Effectiveness of the Rule 4111 Requirements).
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    FINRA explained that disclosing on BrokerCheck the member firms and
former member firms that are currently designated as Restricted Firms
would ``provide material information to investors concerning the
identity of firms that FINRA has determined pose far higher risks to
the public than firms of similar size,'' while incentivizing investors
to ``research more carefully the background of the firm.'' \23\ In
addition, FINRA expressed that the public disclosure of the member
firms and former member firms currently designated as Restricted Firms
would create additional incentives for those firms with a significant
history of misconduct to change behaviors and activities to reduce
risk.\24\
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    \23\ See Notice, 87 FR 36552.
    \24\ See id. at 36552-53.
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    If the proposed rule change is approved, FINRA stated that it will
announce an effective date that is after the date FINRA completes the
first annual FINRA Rule 4111 cycle, but no later than the ``Evaluation
Date'' \25\ for the second annual FINRA Rule 4111 cycle.\26\ FINRA
stated that after the effective date, FINRA would make the relevant
disclosures on BrokerCheck beginning with the member firms or former
member firms that are designated or re-designated as Restricted Firms
in the second annual FINRA Rule 4111 cycle.\27\ FINRA stated that this
would allow FINRA to gain meaningful experience with new FINRA Rule
4111, including any operational shortcomings, before FINRA begins
disclosing Restricted Firms on BrokerCheck.\28\
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    \25\ See FINRA Rule 4111(i)(5) (definition of ``Evaluation
Date''). FINRA established June 1, 2022 as the first Evaluation Date
for FINRA Rule 4111, and indicated it expects the Evaluation Date in
subsequent years will also be June 1. See FINRA Information Notice
2/1/22, FINRA Announces Rule 4111 (Restricted Firm Obligations)
Evaluation Date (Feb. 1, 2022) at note 12. The FINRA Information
Notice 2/1/22 is available at https://www.finra.org/rules-guidance/notices/information-notice-020122.
    \26\ See Notice, 87 FR 36553.
    \27\ See id.
    \28\ See id.
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III. Discussion and Commission Findings

    After careful review of the proposed rule change, the comment
letters,\29\ and

FINRA's responses to the comments, 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.\30\ Specifically, the
Commission finds that the proposed rule change is consistent with
Section 15A(b)(6) of the Exchange Act, 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.\31\
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    \29\ See letter from Francis J. Skinner, Esq., Chief Legal
Office, CoastalOne, dated July 6, 2022 (``CoastalOne Letter'');
letter from Nicole G. Iannarone, Assistant Professor of Law, Drexel
University Thomas R. Kline School of Law, and Christine Lazaro,
Professor of Clinical Legal Education and Director of the Securities
Arbitration Clinic, St. John's University School of Law, dated July
7, 2022 (``Drexel and St. John's Letter''); letter from Michael
Edmiston, President, Public Investors Advocacy Bar Association
(``PIABA''), dated July 8, 2022 (``PIABA Letter''); letter from Mark
Quinn, Director of Regulatory Affairs, Cetera Financial Group, dated
July 8, 2022 (``Cetera Letter''); letter from Steven B. Caruso,
dated September 21, 2022 (``Caruso Letter''); letter from William A.
Jacobson, Clinical Professor of Law, Cornell Law School, and
Director, Cornell Securities Law Clinic and Erik Olson, Class of
2024, Cornell Law School, dated October 10, 2022 (``Cornell Law
Letter''); and letter from Andrew Hartnett, NASAA President, NASAA,
and Deputy Administrator for Securities, Iowa Insurance Division,
dated October 12, 2022 (``NASAA Letter'').
    \30\ In approving this rule change, the Commission has
considered the rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \31\ 15 U.S.C. 78o-3(b)(6).
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    As discussed in more detail below, four commenters supported the
proposed rule change.\32\ One of these commenters supported adoption of
the proposed rule change without modification.\33\ Three of these
commenters recommended that FINRA make additional changes to enhance
the presentation of the BrokerCheck disclosure.\34\ Two of these
commenters also recommended that FINRA disclose on BrokerCheck the
historical Restricted Firm designations of member firms and former
member firms.\35\
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    \32\ See NASAA Letter; PIABA Letter; Drexel and St. John's
Letter; and Cornell Law Letter.
    \33\ See NASAA Letter at 2.
    \34\ See PIABA Letter at 1; Drexel and St. John's Letter at 2;
and Cornell Law Letter at 2.
    \35\ See Drexel and St. John's Letter at 2; Cornell Law Letter
at 3.
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    Three commenters opposed the proposed rule change.\36\ One of these
commenters opposed the proposed rule change because it would only
require FINRA to disclose whether a member firm is currently designated
as a Restricted Firm, but not all historical Restricted Firm
designations.\37\ Two of these commenters opposed any proposed rule
change to publicly disclose Restricted Firm designations on BrokerCheck
because they assert that such disclosure could irreparably harm those
firms and their personnel.\38\ One of these commenters recommended
that, if Restricted Firm designations are disclosed, FINRA amend the
proposed rule change to give those firms the opportunity to appeal
their Restricted Firm designation through a FINRA Rule 9561 expedited
proceeding before disclosing their restricted status.\39\ Further, one
commenter stated that the proposed rule change is unnecessary because
information about the events giving rise to the Restricted Firm
designation are already publicly available on BrokerCheck.\40\
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    \36\ See Caruso Letter; CoastalOne Letter; and Cetera Letter.
    \37\ See Caruso Letter at 2.
    \38\ See CoastalOne Letter at 3 and Cetera Letter at 2.
    \39\ See Cetera Letter at 3.
    \40\ See CoastalOne Letter at 2.
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A. Support for Adopting Rule as Proposed

    One of the commenters who supported the proposed rule change
favored adopting the proposed rule change without modification, stating
that Restricted Firm designations ``should be public information.''
\41\ More specifically, this commenter stated that such disclosure
would be ``consistent with the purpose of BrokerCheck,'' \42\ serving
as ``clear, simple, and warranted notice to investors to think
carefully before doing business with these firms and their associated
persons.'' \43\ This commenter further stated the disclosures included
in the proposed rule change would advance the goal of investor
protection, pointing to studies indicating that ``past disclosures can
be powerful indicators of future misconduct.'' \44\ Moreover, this
commenter stated that disclosure of Restricted Firm designations on
BrokerCheck would ``facilitate remediation of underlying issues'' by
``incentiviz[ing firms] to be more proactive in taking remedial
measures . . . to avoid being designated as a Restricted Firm.'' \45\
This commenter also stated that the proposed rule change is consistent
with the similar required disclosure on BrokerCheck of firms whose
behavior is subject to restrictions under the Taping Rule.\46\ Finally,
this commenter stated the proposed rule change would provide state
securities examiners with information that would help ``enhance risk
assessments, simplify examinations, and alleviate potential
misunderstandings and wasted effort during examinations,'' as it would
make such examiners aware that the named firms were likely subject to
certain conditions and restrictions, including the possibility of a
Restricted Deposit Requirement.\47\
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    \41\ See NASAA Letter at 2.
    \42\ Id.
    \43\ Id. at 2.
    \44\ Id. (citing Mark Egan et al., The Market for Financial
Adviser Misconduct, at 3, 12-15, and 52 Fig. 4 (Feb. 2016),
available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2739170; Hammad Qureshi & Jonathan Sokobin,
Do Investors Have Valuable Information About Brokers?, at 17 (FINRA
Office of the Chief Economist Working Paper, Aug. 2015), available
at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2652535).
    \45\ Id.
    \46\ See id. at 3; see also FINRA Rule 8312(b)(2)(F).
    \47\ NASAA Letter at 3-4.
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B. Recommended Enhancements to Presentation of BrokerCheck Disclosure

    Three of the commenters who generally supported FINRA's proposed
rule change recommended that FINRA make additional changes to help
further improve BrokerCheck disclosure.\48\ Two of these commenters
recommended that FINRA enhance the presentation of the disclosures made
on BrokerCheck.\49\ One of these commenters expressed concern that
investors were unfamiliar with BrokerCheck and how to use it \50\ and
therefore recommended that FINRA establish ``an investor outreach
program or marketing effort that draws attention to the importance of
BrokerCheck and the types of information that can be found there.''
\51\
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    \48\ See PIABA Letter at 1 (stating that ``making this
information about firms publicly available on BrokerCheck is the
common-sense next step to the newly adopted FINRA Rule 4111 and
comports with that rule's intended investor protection goal'');
Drexel and St. John's Letter at 2 (stating that ``[d]isclosure of
restricted firm status would further improve BrokerCheck and allow
retail investors to make more informed choices and ask pertinent
questions to financial professionals before engaging them''); and
Cornell Law Letter at 2 (stating that the proposed rule change would
help investors by making this information more easily accessible,
and would help explain to investors the meaning of such a
designation, providing ``a more accurate view of the firm they are
considering'').
    \49\ See PIABA Letter at 1 and Drexel and St. John's Letter at
2.
    \50\ See PIABA Letter at 1 (stating that ``[m]ost investors have
no idea that their trusted financial professionals and firms had
disclosure events, despite the fact that they were disclosed on
BrokerCheck'').
    \51\ PIABA Letter at 1.
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    FINRA responded that it appreciated the commenter's suggestion,
stating that it ``has taken, and continues to take various measures to
increase investor awareness of BrokerCheck.'' \52\ For example, FINRA
pointed to its adoption of rules that: (1) require any member firm
website to include a ``readily apparent reference and hyperlink to
BrokerCheck'' on the web page the firm

intends retail investors to view, along with ``any other web page that
includes a professional profile of one or more registered persons who
conduct business with retail investors;'' \53\ and (2) require member
firms to ``provide to customers the FINRA BrokerCheck Hotline Number
and a statement as to the availability to the customer of an investor
brochure that includes information describing BrokerCheck.'' \54\
Finally, FINRA stated that it also already ``regularly promotes''
awareness of BrokerCheck through the media, its own social media
channels, and at various investor-focused events.\55\
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    \52\ FINRA September 15 Letter at 7.
    \53\ Id. (citing FINRA Rule 2210(d)(8)).
    \54\ See id. at 7-8 (citing FINRA Rule 2267).
    \55\ See id. at 8.
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    The other commenter stated that it ``[does] not believe a link to
the rule on its own would be enough for unsophisticated retail
investors to understand the importance of the disclosure and make an
informed decision about working with such a firm'' and therefore
recommended that FINRA ``provide a plain English explanation of what
[R]estricted [F]irm designation means on the BrokerCheck report if a
firm is so designated.'' \56\
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    \56\ See Drexel and St. John's Letter at 2.
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    FINRA responded that the proposed disclosure on BrokerCheck would
be designed to include hyperlinks not only to FINRA Rule 4111, ``but
also to a page on FINRA's website that provides for the investing
public a clear explanation of FINRA Rule 4111 and what it means to be a
Restricted Firm.'' \57\ FINRA stated that it chose to provide this
explanation through a hyperlink to a separate web page to facilitate
BrokerCheck usability, as ``the explanation of what it means to be a
Restricted Firm would be several paragraphs long,'' and its inclusion
at the top of the relevant firms' BrokerCheck reports would necessitate
using a font ``too small to be easily readable'' due to space
constraints.\58\ FINRA asserted that it believes, based on ``general
user testing'' of BrokerCheck, that inclusion of this information on
each member firm and former member firm's BrokerCheck report would
``create a cluttered presentation that has a detrimental impact on the
user's experience.'' \59\ Despite this, FINRA indicated that it
appreciated the commenters' suggestions, and stated it would ``revisit
this presentation choice as part of its routine monitoring of
BrokerCheck information design'' if the proposed rule change is
approved.\60\
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    \57\ See FINRA September 15 Letter at 6.
    \58\ See id.
    \59\ See id.
    \60\ See id.
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    One of the opposing commenters similarly stated that without
further guidance, disclosure of Restricted Firm status on BrokerCheck
would be confusing and misleading to the general public.\61\ This
commenter stated that although FINRA stated in the Notice that it would
provide a hyperlink to additional information defining Restricted Firm,
without an example of the proposed linked web page the commenter could
not opine on its adequacy. Moreover, the commenter stated that there is
no guarantee that investors researching a member firm on BrokerCheck
would access the hyperlink.\62\
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    \61\ See CoastalOne Letter at 2.
    \62\ See id.
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    In its response, FINRA disagreed with the commenter's assessment,
stating that the proposed rule change would provide investors with
clear and accurate information about Restricted Firms and that the
specific display of those firms' Restricted Firm designation on
BrokerCheck would make this status more readily apparent to
investors.\63\ Further, FINRA stated that, under the proposed rule,
FINRA would present both the information about a member firm's
restricted status on BrokerCheck, as well as a hyperlink to a separate
page providing a more detailed explanation of what it means to be a
Restricted Firm, in the same manner as FINRA discloses similar
information about member firms currently subject to the Taping
Rule.\64\
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    \63\ See FINRA September 15 Letter at 5.
    \64\ See id.
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    The Commission finds that FINRA's proposal to disclose Restricted
Firm designations is reasonable, and that the proposed rule change
would enhance the investor-protection benefits of FINRA Rule 4111. As
with the Taping Rule disclosures, the proposed rule change would make
it easier for investors to obtain information about member firms that
are currently designated as Restricted Firms, as well as those
registered representatives associated with those member firms, through
a preexisting database with which the public is already familiar.
Moreover, the proposed rule change would incentivize investors to
research more carefully the background of their financial
professionals.
    Furthermore, the proposed rule change will add an alert to a member
firm's Summary Report that the member firm is currently designated as a
Restricted Firm, in conjunction with a link to a separate web page with
a description of what this designation entails. A firm's Summary Report
is meant to provide readers with an overview of information pertinent
to their decision to hire or retain a financial professional. And,
BrokerCheck is already structured to employ hyperlinks directing
investors to more detailed information, both as to a firm's Detailed
Report, and in the case of firms subject to restrictions under the
Taping Rule, a hyperlink to a page providing a detailed explanation of
the more simplified disclosure found on the firm's Summary Report. As
such, the Commission believes FINRA's proposed further use of layered
disclosure of summary information combined with the proposed use of
hyperlinks to direct investors to more detailed information on what a
Restricted Firm designation entails is reasonable, as it aligns with an
approach to disclosure on BrokerCheck that investors are already
familiar with. In doing so, the proposed rule change appropriately
balances investors' need for information about the significance of a
Restricted Firm designation with the need to bring the most salient
information to the attention of investors in a user-friendly manner.
Accordingly, for the reasons set forth above, the Commission finds that
the proposed rule change is designed to protect investors and the
public interest.

C. Recommended Disclosure of Historical Restricted Firm Designations

    As discussed above, the proposed rule change would impose a
disclosure obligation on FINRA as to the current Restricted Firm
designations it has made. One commenter opposed the proposed rule
change because it would not require FINRA to disclose historical
Restricted Firm designations.\65\ This commenter stated that
``BrokerCheck helps investors make informed choices about the brokers
and member firms with which they conduct business by providing
registration and disciplinary history to investors.'' \66\ As such, the
proposed rule change would be ``inconsistent with this historical
disciplinary predicate,'' as it would only require the release of
information about current Restricted Firm designations.\67\ Separately,
this commenter stated that requiring the release of information on
BrokerCheck of only current Restricted Firm designations ``would be
inconsistent with the disclosure requirements on Form BD which, in
questions 11E(3) and (4), requires disclosure as to whether any self-

regulatory organization has `ever' either `restricted' the activities
of a member firm or `otherwise restrict[ed] its activities.' '' \68\
This commenter stressed that if the purpose of both BrokerCheck and
Form BD is to help investors make more informed choices by providing
registration and disciplinary history of firms to investors, then ``the
fact that a member firm was ever designated as a Restricted Firm is
information that is clearly critical and material to investors.'' \69\
---------------------------------------------------------------------------

    \65\ See Caruso Letter at 2.
    \66\ Id.
    \67\ Id.
    \68\ Id. See also Form BD, the Uniform Application for Broker-
Dealer Registration. 17 CFR 249.501, available at https://www.sec.gov/files/formbd.pdf (asking in Questions 11E(3) and (4)
whether ``any self-regulatory organization or commodities exchange
ever: . . . (3) found the applicant or a control affiliate to have
been the cause of an investment-related business having its
authorization to do business denied, suspended, revoked, or
restricted?; (4) disciplined the applicant or a control affiliate by
expelling or suspending it from membership, barring or suspending
its association with other members, or otherwise restricting its
activities?'').
    \69\ Caruso Letter at 2.
---------------------------------------------------------------------------

    Two other commenters that supported the proposed rule change also
recommended that FINRA disclose on BrokerCheck a member firm's
historical Restricted Firm designations.\70\ One such commenter stated
that ``[a] historic record of when--and how many times--a firm has been
a restricted firm assists investors in making informed decisions.''
\71\ This commenter further stated that requiring FINRA to disclose
historical Restricted Firm designations would incentivize member firms
and associated persons ``to reform and not engage in future
misconduct'' because a prospective customer observing on BrokerCheck
``a lengthy period of time after a restricted firm designation has been
removed may signal that a firm has made significant positive changes.''
\72\
---------------------------------------------------------------------------

    \70\ See Drexel and St. John's Letter at 2; Cornell Law Letter
at 3.
    \71\ Drexel and St. John's Letter at 2.
    \72\ Id.
---------------------------------------------------------------------------

    In response to comments that disclosing only current, but not
historical, Restricted Firm designations would be inconsistent with how
a member firm's ``disciplinary history'' is disclosed on BrokerCheck,
FINRA noted that it has previously stated that, in its view, ``a
Restricted Firm designation is not disciplinary in nature.'' \73\
Instead, FINRA stated that it believes that disclosure of Restricted
Firm designations more directly analogizes ``to how Rule 8312 requires
the disclosure of information as to whether a particular member firm
`is' subject to the provisions of [the Taping Rule].'' \74\ Regarding a
commenter's assertion that disclosure of only current Restricted Firm
designations would be inconsistent with the disclosure requirements of
Questions 11E(3) and (4) on Form BD, FINRA stated that the proposed
rule change ``would not impact a firm's obligations under Form BD or
alter how Rule 8312 requires the release on BrokerCheck of `any
information reported on the most recently filed . . . Form BD.' '' \75\
---------------------------------------------------------------------------

    \73\ See FINRA November 25 Letter at 3 (citing to Notice, 85 FR
78566).
    \74\ Id. (citing to FINRA Rule 8312(b)(2)(F)).
    \75\ Id. at 4 (citing to FINRA Rule 8312(b)(2)(A)). FINRA also
noted that it had ``previously acknowledged that `information about
a firm's status as a Restricted Firm . . . could become publicly
available through existing sources or processes,' such as `through
Form BD.' '' See Notice, 85 FR 78467 note 159.
---------------------------------------------------------------------------

    FINRA further stated that it believes the potential for a
Restricted Firm disclosure to be removed from BrokerCheck would provide
``a strong incentive'' to Restricted Firms to improve their behavior,
and ``thus, would further the primary purpose of Rule 4111 itself.''
\76\ However, FINRA stated that it appreciated the suggestion to
disclose all historical Restricted Firm designations, and ``will
revisit it after gaining experience with disclosing Restricted Firm
designations on BrokerCheck.'' \77\
---------------------------------------------------------------------------

    \76\ FINRA November 25 Letter at 3.
    \77\ See FINRA September 15 Letter at 8 and note 24; see also
FINRA November 25 Letter at 3 (reiterating FINRA's assertion that
the lack of disclosure of historical Restricted Firm designations
would incentivize currently Restricted Firms to improve their
behavior).
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change for FINRA to
prominently display current Restricted Firm designations on BrokerCheck
is reasonable, and that such disclosure would enhance the investor
protection benefits provided by FINRA Rule 4111. Specifically, the
disclosure of current Restricted Firm designations on BrokerCheck would
provide investors with valuable information in an easily accessible
format, including FINRA's determination that a firm currently has a
higher risk profile relative to similar firms, and that the firm may be
subject to certain conditions and/or restrictions on its operations.
    Further, FINRA's determination not to require disclosure of a
historical Restricted Firm designation is reasonable. The potential for
removal from BrokerCheck of the prominent display of a current
Restricted Firm designation once the firm is no longer so-designated
could incentivize currently Restricted Firms to improve their behavior,
and thereby benefit investors.\78\ FINRA's approach with this proposed
disclosure obligation is also consistent with its approved approach to
disclosing a member firm's Taping Firm status pursuant to FINRA Rule
3170.\79\
---------------------------------------------------------------------------

    \78\ See infra note 95 and accompanying text (identifying
examples of how FINRA believes firms that are currently designated
as Restricted Firms could improve their behavior).
    \79\ See supra note 21; see also FINRA Rule 8312(b)(2)(F).
---------------------------------------------------------------------------

    The Commission also acknowledges FINRA's commitment to revisit the
proposed rule change (including commenters' suggestions to require
disclosure on BrokerCheck of the historical Restricted Firm's
designations of member firms and former member firms pursuant to this
rule) after gaining experience with disclosing Restricted Firm
designations on BrokerCheck.\80\
---------------------------------------------------------------------------

    \80\ See FINRA November 25 Letter at 4.
---------------------------------------------------------------------------

    The Commission also finds that the proposed rule change would not
be inconsistent with the approach to disclosure of a member firm or
former member firm's disciplinary history on BrokerCheck. The
disclosure of such firm's disciplinary history on BrokerCheck flows
from the information reported on Registration Forms (including Form
BD),\81\ and appears in the firm's Detailed Report within a discrete
``Disclosure Events'' section. As FINRA stated, the proposed rule
change would have no impact on such disclosures. Relatedly, the
Commission also finds that the proposed rule change would not be
inconsistent with a firm's disclosure obligations under Form BD. The
proposed rule change would not impact any of the requirements imposed
upon firms by Form BD, or amend FINRA's obligation under FINRA Rule
8312 to release on BrokerCheck ``any information reported on the most
recently filed . . . Form BD.'' \82\ Instead, the proposed rule change
would only impose a distinct disclosure obligation on FINRA as to the
current Restricted Firm designations it has made.
---------------------------------------------------------------------------

    \81\ See FINRA Rule 8312(b)(2)(A).
    \82\ Id.
---------------------------------------------------------------------------

    For the reasons discussed above, the proposed rule change to
require FINRA to prominently display current Restricted Firm
designations on BrokerCheck is consistent with Section 15A(b)(6) of the
Exchange Act, 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.

D. Potential Harm to Firms and Their Personnel of Disclosing Restricted
Status

    Two commenters opposed any proposed rule change to publicly

disclose Restricted Firm designations on BrokerCheck because they
assert that such disclosure could irreparably harm those firms and
their personnel.\83\ In particular, one commenter stated that while
FINRA Rule 4111 enhances investor protection by ``giving FINRA
additional authority to enforce compliance with its rules, encourage
member firms toward more compliant business models, and better ensure
that firms are able to meet their financial obligations to customers or
potential claimants,'' publicly identifying Restricted Firms on
BrokerCheck pursuant to the proposed rule change would likely
``undercut the effectiveness of Rule 4111.'' \84\ The commenter stated
that while the information ``would be relevant to investors in
determining whether to establish relationships with or continue to do
business with [a firm,] the negative connotation [would] increase the
likelihood that the firm will fail.'' \85\ Further, the commenter
stated the possibility of failure would ``make [the firm] less able to
meet its obligations to customers, and perhaps worse, increase the
possibility of disorderly failure or closure.'' \86\ As a result, this
commenter stated that ``customers may well be worse off than had the
restricted status of the firm not been disclosed.'' \87\
---------------------------------------------------------------------------

    \83\ See CoastalOne Letter at 3 and Cetera Letter at 2.
    \84\ Cetera Letter at 1-2.
    \85\ Id. at 2.
    \86\ Id. In particular, the commenter opined that public
disclosure of Restricted Firm status may ``create `run on the bank'
situation[s] in which representatives and customers leave the firm
quickly and cause it to fail.'' Id.
    \87\ Id.
---------------------------------------------------------------------------

    The other commenter stated that the disclosure of a member firm's
Restricted Firm status would be a ``Scarlet Letter'' that would have a
``severe economic impact'' upon the member firm, and would ``serve[ ]
no purpose other than to put additional financial strain on Restricted
Firms.'' \88\ This commenter stated that this additional financial
strain would result from the fact that: (1) some existing and
prospective customers would no longer do business with the member firm;
and (2) the member firm would lose, and have trouble recruiting, good
employees, which is contrary to FINRA's goal of improving ``bad''
member firms.\89\ Accordingly, this commenter stated that the harm to
Restricted Firms and their personnel under the proposed rule change
would outweigh the potential investor protections.\90\ This commenter
also stated that FINRA's Notice failed to identify or discuss ``any
objective evidence which would demonstrate the effectiveness'' of
providing disclosure of a member firm's designation as a Restricted
Firm on BrokerCheck.\91\ Without such evidence and understanding of the
impact of the proposed rule change, the commenter stated that ``FINRA
is proposing a rule which has no rational basis to support its
implementation,'' and thus that it should be reconsidered.\92\
---------------------------------------------------------------------------

    \88\ CoastalOne Letter at 2 (stating that ``[u]nder Rule 4111,
FINRA may impose upon a Restricted Firm a monetary cash escrow
deposit which FINRA will effectively control, and that sum cannot be
calculated in net capital. This alone will put some small firms on
the edge of net capital failure. In addition, FINRA may order other
remedies, such as shorte[r] examination cycles, which result in
additional overhead costs to firms. Those remedies alone are
sufficient to achieve FINRA's purposes in Rule 4111.''). The
commenter concluded that the proposed rule change is an
``unnecessary `add-on' to a [r]ule which is already extremely
punitive in nature.'' Id.
    \89\ See id.
    \90\ See id.
    \91\ Id. at 1.
    \92\ Id.
---------------------------------------------------------------------------

    In response, FINRA cited its Notice and the economic impact
analysis therein, which detailed a range of the potential economic
impacts of the proposed rule change, and which FINRA stated is
``consistent with FINRA's approach to economic impact assessments for
proposed rulemakings.'' \93\ Among the benefits to investors outlined
in FINRA's economic impact analysis is that the proposed rule change
``may . . . prompt[ ] [investors] to learn more about such Restricted
Firms, engage[ ] with them more cautiously, or--for investors currently
using the services of Restricted Firms--critically review their
experiences with these firms,'' which ``may help some investors avoid
the harms associated with future misconduct.'' \94\ FINRA stated that
due to this additional investor caution, ``Restricted Firms may respond
by offering more competitive pricing or improved customer service . . .
[and] may also act to improve internal controls in order to avoid
additional reputational harm and being re-designated as a Restricted
Firm in subsequent years.'' \95\
---------------------------------------------------------------------------

    \93\ FINRA September 15 Letter at 7 and note 22 (citing
Framework Regarding FINRA's Approach to Economic Impact Assessment
for Proposed Rulemaking, available at https://www.finra.org/sites/default/files/Economic%20Impact%20Assessment_0_0.pdf). In the
Notice, FINRA discussed the qualitative impact to investors, firms
and financial professionals of the disclosure of Restricted Firm
designations. For example, FINRA stated that ``[w]hile the magnitude
of . . . reactions from investors and third parties cannot be
quantified, it is possible that the disclosure of the designation as
a Restricted Firm may result in some firms going out of business.''
See Notice, 87 FR 36554.
    \94\ Notice, 87 FR 36554; see also FINRA September 15 Letter at
2-3.
    \95\ Notice, 87 FR 36554; see also FINRA September 15 Letter at
2-3.
---------------------------------------------------------------------------

    FINRA also stated that additional investor caution, along with
potential reactions by third parties,\96\ may lead to financial
distress at a Restricted Firm.\97\ While FINRA indicated that the
``magnitude of those reactions cannot be quantified,'' it acknowledged
that some Restricted Firms may go out of business; but these potential
impacts should be mitigated by the inclusion of ``numerous features''
within the FINRA Rule 4111 process that are ``designed to narrowly
focus the new obligations on the firms of the most concern.'' \98\
---------------------------------------------------------------------------

    \96\ FINRA stated that ``Restricted Firms may have greater
difficulty or increased costs associated with maintaining a clearing
arrangement, loss of trading partners, or similar impairments where
third parties can determine that a firm meets the Preliminary
Criteria for Identification or has been deemed to be a Restricted
Firm. While some third parties like clearing firms may require a
firm to disclose Restricted Firm status during private contract
negotiations, other third-party firms may learn of a Restricted
Firm's designation only after the information is disclosed publicly.
These third-party firms may anticipate an increase in legal and
contingent costs through the potential liabilities that they face
through their business relationships with a Restricted Firm. As a
result, Restricted Firms may find that costs of these third-party
agreements increase and potentially lose access to such providers.''
Notice, 87 FR 36554 (citing Exchange Act Release No. 90527 (November
27, 2020), 85 FR 78540 (December 4, 2022) (File No. SR-FINRA-2020-
041) (``Rule 4111 Notice''), available at https://www.sec.gov/rules/sro/finra/2020/34-90527.pdf); see also FINRA September 15 Letter at
3.
    \97\ See FINRA September 15 Letter at 3 (citing Notice, 87 FR
36554).
    \98\ Id. at 3 (citing Rule 4111 Notice).
---------------------------------------------------------------------------

    Further, FINRA cited regulatory frameworks designed to help
mitigate the potential impact on investors should the public disclosure
of a member firm's Restricted Firm designation lead to a member firm's
failure, such as the Net Capital Rule,\99\ the Customer Protection
Rule,\100\ and the Securities Industry Protection Corporation
(SIPC).\101\ To the extent there are any residual risks to customers,
FINRA stated that ``they would be outweighed by the investor-protection
benefits from publicly

disclosing a firm's designation as a Restricted Firm.'' \102\
---------------------------------------------------------------------------

    \99\ Exchange Act Rule 15c3-1 (Net Capital Rule) requires
broker-dealers to maintain certain levels of liquid assets.
    \100\ Exchange Act Rule 15c3-3 (Customer Protection Rule)
requires broker-dealers that have custody of customer assets to keep
those assets separate from their own accounts.
    \101\ See FINRA September 15 Letter at note 13 (stating that
``when a brokerage firm liquidates, securities regulators `work with
the firm to make sure that customer accounts are protected and that
customer assets are transferred in an orderly fashion to one or more
SIPC-protected brokerage firms.' ''). See also Investor Alert, If a
Brokerage Firm Closes Its Doors, available at https://www.finra.org/investors/alerts/if-brokerage-firm-closes-its-doors.
    \102\ FINRA September 15 Letter at note 13.
---------------------------------------------------------------------------

    FINRA also addressed the potential impact of BrokerCheck disclosure
of Restricted Firm designations on the employees of such member firms,
stating that it anticipated an indirect effect on individuals
associated with Restricted Firms.\103\ For example, employees with
clean disciplinary records who work for a currently designated
Restricted Firm, or a member firm that an employee anticipates may soon
be designated as a Restricted Firm, may be incentivized to leave.\104\
However, FINRA stated that the extent to which disclosure of Restricted
Firm designations on BrokerCheck would impact future employment
prospects of those firms' registered persons, including those with
relevant disclosures, ``is expected to be limited,'' \105\ particularly
as ``none of the Rule 4111 metrics are based on an employee's prior
associations with Restricted Firms.'' \106\ Moreover, FINRA stated that
prospective firms likely already consider the disclosure history of
individual registered persons seeking new employment, ``including in
determining if the individual's disclosures impact the firm's Rule 4111
metrics,'' because ``most of the underlying events included in the
[Rule 4111 metrics] are already [captured] in BrokerCheck.'' \107\
FINRA stated that there is ``some possible risk that a person's
association or prior association with a Restricted Firm may potentially
impact future employment prospects in ways unrelated to Rule 4111,''
but, as discussed above, such risks are ``outweighed by the investor
protection benefits of the proposed rule change.'' \108\
---------------------------------------------------------------------------

    \103\ Id. at 4 (citing Notice, 87 FR at 36553).
    \104\ Id. at 4.
    \105\ Id. at 4-5 (citing Rule 4111 Notice at 78553 and note 62,
wherein FINRA asserted that ``the economic impact from Rule 4111 on
individuals' employment prospects is expected to be limited to a
small proportion of registered persons, specifically those with a
significant number of disciplinary and other disclosure events on
their records, and that the vast majority of member firms would
likely be able to employ most of the individuals seeking employment
in the industry, including ones who have some disclosures, without
coming close to meeting the Rule 4111 Preliminary Criteria for
Identification'').
    \106\ Id. at 5.
    \107\ Id. at 4-5.
    \108\ Id. at 5.
---------------------------------------------------------------------------

    The Commission acknowledges commenters' concerns that the proposed
rule change could negatively impact Restricted Firms and their
financial professionals. To the extent customers avoid using, or leave,
a Restricted Firm in response to the disclosure of its Restricted Firm
status, the concomitant reduction in revenue generated by that member
firm could increase the risk of that member firm's failure, which could
negatively impact the remaining customers of the member firm. In
addition, the disclosure of a Restricted Firm's status could negatively
impact the firm's ability to hire or retain the type of employees
likely to help improve the firm sufficiently to remove the designation.
    Despite these possibilities, the Commission finds that the proposed
rule change reasonably balances the potential negative impact to
Restricted Firms and their employees against the benefits to investors
of public disclosure of a Restricted Firm's restricted status, and that
it would enhance the investor-protection benefits of FINRA Rule 4111.
BrokerCheck is designed to provide free public access to detailed
information about member firms and their registered representatives,
including information about arbitration awards, disciplinary history,
and information concerning conditions and restrictions on the firm or
individual's operations, such as whether a particular member firm is
subject to the Taping Rule. Investors can use this information to help
make informed choices about the member firms with which they conduct
business. Public disclosure of a Restricted Firm's status on
BrokerCheck, as the proposed rule change would provide, would similarly
give investors information they could use to research more carefully
the operations of a member firm before engaging it; or, for existing
customers, it may encourage them to reevaluate their relationship with
the firm. In addition, the display of Restricted Firm designation--
which would only occur when a member firm is currently designated and
not for historical designations--may encourage Restricted Firms to
improve internal controls to avoid further potential reputational harm
in being re-designated as a Restricted Firm in subsequent years, which
would provide investor protection benefits to both customers and
potential customers of Restricted Firms.
    It is possible that disclosure of a Restricted Firm's status on
BrokerCheck may negatively impact that firm by warning away existing
and potential customers. And as a consequence, those firms may
experience financial hardship or even failure. It is also possible that
the proposed rule change would negatively impact employees, or prior
employees, of Restricted Firms. However, any potential effect on the
firm or their financial professionals of such a designation must be
considered in light of the potential benefits to customers and
potential customers of having these disclosures made available to them.
As commenters indicate, many investors could find the information
regarding a Restricted Firm designation, which FINRA expects to apply
to a relatively limited number of member firms with significantly
higher levels of risk-related disclosures than similarly sized peers
and that present a high degree of risk to investors (i.e., according to
FINRA, only 1.3% of all member firms as of December 31, 2019, would
have been identified as Restricted Firms),\109\ material to their
decision of whether to engage or remain with the firm. In addition, to
the extent the proposed rule change results in the failure of a
Restricted Firm, the regulatory regime governing firm failures provides
sufficient investor protections to help ensure the orderly winding up
of the firm's business and the protection of their customers.\110\ In
light of this, the Commission finds that FINRA has appropriately
balanced the investor protection benefits of the proposed rule change
against the potential harm to Restricted Firms and their registered
representatives, and that FINRA has reasonably considered the impacts
of the proposed rule change as outlined in its economic impact analysis
and its response to comments.
---------------------------------------------------------------------------

    \109\ See Notice, 87 FR 36553 note 25 (citing SR-FINRA-2020-041,
Exhibit 3g).
    \110\ See supra notes 99-101 and accompanying text.
---------------------------------------------------------------------------

    Accordingly, for the reasons set forth above, the Commission finds
that the proposed rule change is consistent with the provisions of
Section 15A(b)(6) of the Exchange Act, 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.

E. Recommended Withholding of Disclosure During a FINRA Rule 9561
Expedited Proceeding

    As stated above, FINRA Rule 9561 established expedited proceedings
providing member firms and former member firms, among other things, an
opportunity to challenge any requirements the Department has imposed,
including any Restricted Deposit Requirements, by requesting, pursuant
to FINRA Rule 9561, a prompt review of its decision in the FINRA Rule
4111 process (``FINRA Rule 9561 expedited proceeding''). Under the
proposed rule change, FINRA would prominently disclose a Restricted
Firm's

status on BrokerCheck, including while such a challenge is
ongoing.\111\
---------------------------------------------------------------------------

    \111\ Proposed FINRA Rule 8312(b)(2)(I) would require the
disclosure on BrokerCheck of information as to whether a particular
current or former member is currently designated as a Restricted
Firm pursuant to FINRA Rules 4111 and 9561. This would include the
obligation to disclose while a FINRA Rule 9561 expedited proceeding
to review the Department's decision is pending, because a decision
that designates a firm as a Restricted Firm will not be stayed
during a FINRA Rule 9561 expedited proceeding. See Notice, 87 FR
36552; see also FINRA Rule 9561(a)(4) (Effectiveness of the Rule
4111 Requirements).
---------------------------------------------------------------------------

    One commenter recommended that FINRA amend the proposed rule change
to give member firms and former member firms the opportunity to appeal
their Restricted Firm designation through a FINRA Rule 9561 expedited
proceeding before disclosing their restricted status.\112\ The
commenter stated that publishing a Restricted Firm designation prior to
completion of the adjudicatory process denies that firm adequate due
process.\113\ As such, the arrangement ``fails to strike the correct
balance between the need for investor protection and the procedural due
process rights of the firm.'' \114\
---------------------------------------------------------------------------

    \112\ See Cetera Letter at 3.
    \113\ See id.
    \114\ Id. (stating that ``[g]iven the potential for serious
consequences upon disclosure of Restricted Firm status, it seems
only fair that any such disclosure should be delayed until the
entire adjudicatory process has been completed'').
---------------------------------------------------------------------------

    In response, FINRA stated that it proposed disclosing Restricted
Firm designations during the pendency of a FINRA Rule 9561 expedited
proceeding, because a ``firm's obligations under Rule 4111 are not
stayed [during a Rule 9561 expedited proceeding].'' \115\ Specifically,
FINRA stated ``a designated Restricted Firm will still be required to
comply with any conditions and restrictions imposed on the firm and
deposit a portion of any Restricted Deposit Requirement.'' \116\ FINRA
stated that although it appreciates the commenter's suggestion, it
continues to believe that the display of any member firm's current
designation as a Restricted Firm on BrokerCheck, including during the
pendency of a FINRA Rule 9561 expedited proceeding, ``strikes the right
balance in support of investor protection.'' \117\ For example, FINRA
stated that ``[d]isplaying the firm's Restricted Firm status on
BrokerCheck while the Rule 9561 expedited proceeding is pending could
prompt investors to ask the firm about the firm's status.'' However, in
response to the commenter's concerns, FINRA stated that it will work to
disclose on BrokerCheck that any firm that is appealing its Restricted
Firm designation pursuant to a FINRA Rule 9561 expedited proceeding has
a Restricted Firm designation that is ``on appeal.'' \118\
---------------------------------------------------------------------------

    \115\ FINRA September 15 Letter at 9 (citing Notice at 36552 and
note 15).
    \116\ Id.
    \117\ Id.
    \118\ Id.
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change to display the
current Restricted Firm designations of member firms and former member
firms, during the pendency of a FINRA Rule 9561 expedited proceeding is
reasonable, and appropriately enhances the investor protection benefits
of the proposed rule change. The structure of the FINRA Rule 4111
process is designed such that Restricted Firm designations themselves
are not stayed, nor are the concomitant obligations and conditions to
which the firms are subject, during a FINRA Rule 9561 expedited
proceeding. Therefore, it is reasonable for FINRA to require
publication of the firm's active Restricted Firm designation on
BrokerCheck in light of the important investor protection benefits such
disclosure brings, and for FINRA to not delay such disclosure solely
because the designated firm has requested a hearing (which may or may
not be successful) pursuant to the FINRA Rule 9561 expedited proceeding
provisions.\119\ Accordingly, for the reasons set forth above, the
Commission finds that the proposed rule change is designed to protect
investors and the public interest.
---------------------------------------------------------------------------

    \119\ The Commission notes that FINRA's commitment to work to
enhance its display of Restricted Firm designations on BrokerCheck
to convey to investors when member firms and former member firms
have requested a hearing pursuant to FINRA Rule 9561 that such a
designation is on appeal would make additional information available
to investors, who may benefit from knowing that a firm is
challenging its designation.
---------------------------------------------------------------------------

F. The Disclosure of Restricted Status Is Redundant

    As stated above, FINRA Rule 4111 authorizes FINRA to designate as
Restricted Firms those member firms that present a high degree of risk
to the investing public, based on numeric thresholds of firm-level and
individual-level disclosure events.\120\ One commenter stated that the
proposed rule change is unnecessary because information about the
events giving rise to the Restricted Firm designation are already
publicly available on BrokerCheck.\121\ The commenter pointed out that
disclosures about member firms' and former member firms' history of
litigation, regulatory actions, and financial disclosures (among other
things) are reported on Form BD, which information in turn appears on
BrokerCheck.\122\ The commenter stated that, similarly, information
about firms' registered representatives is reported on Forms U4 and U5,
which information is also available on BrokerCheck.\123\ Because
investors already have access to the relevant data forming the basis of
a Restricted Firm designation, this commenter stated the proposed rule
change would result in redundant disclosure.\124\
---------------------------------------------------------------------------

    \120\ See FINRA Rule 4111(i)(11).
    \121\ See CoastalOne Letter at 2.
    \122\ See id.
    \123\ See id.
    \124\ See id. at 2-3.
---------------------------------------------------------------------------

    FINRA disagreed with the assertion that such proposed disclosure
would be redundant.\125\ FINRA stated that although Restricted Firm
designations stem from events already disclosed on BrokerCheck,
including certain events that are reported on Registration Forms, ``the
disclosure of a firm's designation as a Restricted Firm would provide
additional information to investors.'' \126\ Specifically, this
information ``would convey [to investors] that FINRA has designated the
firm as a Restricted Firm after determining that the firm meets the
Preliminary Criteria for Identification, conducting an initial
evaluation, and having a consultation with the member; that the firm
has significantly higher levels of risk-related disclosures than other
similarly sized peers and presents a high degree of risk to investors;
and that the firm may be subject to a `Restricted Deposit Requirement'
and other conditions or restrictions.'' \127\ FINRA asserted that this
information would be new for investors, as it is not information that
could be ``gather[ed] today from reviewing a firm's BrokerCheck
report.'' \128\
---------------------------------------------------------------------------

    \125\ See FINRA September 15 Letter at 6.
    \126\ Id.
    \127\ Id.
    \128\ Id.
---------------------------------------------------------------------------

    The Commission finds that the proposed rule change requiring the
disclosure of Restricted Firm designations on BrokerCheck would not be
redundant of existing disclosures and would therefore provide
additional information to investors and investor protection benefits.
While the FINRA Rule 4111 metrics are comprised of disclosure events
that are required to be reported on Registration Forms, FINRA's
designation of a member firm or former member firm as a Restricted Firm
follows an extensive FINRA Rule 4111 process that includes FINRA's own
evaluation of the events, a consultation with the member firm in
question, and an independent decision by FINRA's Department of Member
Supervision to

make the designation in question. Further, the disclosure of Restricted
Firm designations also would indicate to investors that the firm may be
subject to a Restricted Deposit Requirement and other conditions or
restrictions. Therefore, this designation would be new and additive to
the array of information currently available to investors. Accordingly,
for the reasons set forth above, the Commission finds that the proposed
rule change is consistent with Section 15A(b)(6) of the Exchange
Act,\129\ 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.
---------------------------------------------------------------------------

    \129\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

IV. Conclusion

    The Commission finds that the proposed rule change is consistent
with the provisions of Section 15A(b)(6) of the Exchange Act, 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.
    As with FINRA's approach to disclosing a member firm's Taping Firm
status, the proposed rule change would provide disclosures to investors
of information concerning the current status of member firms and former
member firms that FINRA believes pose higher risks to the investing
public compared to member firms and former member firms of similar
sizes. This new category of information, provided in a user-friendly
manner, would arm investors with information they could use to more
carefully research the background of such firms. The proposed rule
change could also incentivize member firms with a significant history
of misconduct to change behaviors and activities to reduce risk. As
such, the proposed rule change would enhance the investor-protection
benefits of FINRA Rule 4111.\130\ While the proposed rule change may
negatively impact those firms designated as Restricted Firms, as
described above, the existing regulatory regime would help mitigate
potential harm. Furthermore, FINRA stated that it would revisit the
proposed rule change after gaining experience with disclosing
Restricted Firm designations on BrokerCheck.
---------------------------------------------------------------------------

    \130\ See FINRA Rule 4111 Order.
---------------------------------------------------------------------------

    For these reasons, the Commission finds the proposed rule change is
designed to protect investors and the public interest.
    It is therefore ordered pursuant to Section 19(b)(2) of the
Exchange Act \131\ that the proposed rule change (SR-FINRA-2022-015),
be, and hereby is, approved.
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    \131\ 15 U.S.C. 78s(b)(2).
    \132\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\132\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-02717 Filed 2-8-23; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 28 (Thursday, February 11, 2016)]
[Notices]
[Pages 7405-7406]
[FR Doc No: 2016-02547]

=======================================================================
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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Seventh Meeting: RTCA Special Committee (230) Airborne Weather
Detection Systems (Joint With EUROCAE WG-95)

AGENCY: Federal Aviation Administration (FAA), U.S. Department of
Transportation (DOT).

ACTION: Notice of Seventh RTCA Special Committee 230 meeting.

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SUMMARY: The FAA is issuing this notice to advise the public of the
Seventh RTCA Special Committee 230 meeting.

DATES: The meeting will be held February 16-18, 2016 from 8:30 a.m.- 5
p.m.

ADDRESSES: The meeting will be held at GKN Aerospace, Percival Way,
Luton, Bedforshire, LU2 9PQ, United Kingdom, Tel:<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: The RTCA Secretariat, 1150 18th Street
NW., Suite 910, Washington, DC, 20036, or by telephone at (202) 833-
9339, fax at<PHONE_NUMBER>, or Web site at http://www.rtca.org; or
Karan Hofmann, Program Director, RTCA, Inc<EMAIL_ADDRESS>(202)
330-0680; or Anna von Groote<EMAIL_ADDRESS>+33 1 40 92
79 26; or Tom Richards, local contact,
<EMAIL_ADDRESS>+44 (0)1582 811249, cell +44
(0)7919624190.

SUPPLEMENTARY INFORMATION: Pursuant to section 10(a)(2) of the Federal
Advisory Committee Act (Pub. L. 92-463, 5 U.S.C., App.), notice is
hereby given for a meeting of RTCA Special Committee 230. The agenda
will include the following:

Tuesday, February 16, 2016 (8:30 a.m.-5 p.m.)

1. Plenary Meeting (8:30 a.m.-11 a.m.)
    a. Welcome (WG-95/WG-95 SG)
    b. Introduction--tour de table (WG-95/WG-95 SG)--Logistic & Agenda
    c. Presentation of GKN AEROSPACE
    d. Short presentation (WG-95)--TOR--Work Plan--Remaining work
    e. Short presentation (WG-95 SG)--TOR--Work Plan
    f. Future Meetings--April 2016
    g. Summary of progress through WG-95 SG Webex--Camille
    h. Summary of Dec 11th WG-95 Webex
    i. Review of common Actions between WG-95 and the subgroup WG-95 SG
2. WG-95 Meeting (11 a.m.-5 p.m.)
3. WG-95 SG Meeting (11 a.m.-5 p.m.)
    a. Review of WG-95 SG Actions
    b. Review of the EUROCAE document folder
    c. List of the documentation material for each part of the
feasibility study
    d. Presentation of HAIC 2016 Flight test campaign (preliminary
results) (Honeywell & Airbus)
    e. Review of the draft Section 0: Introduction/Context
    f. Review of the draft Section 1: Bibliography

Wednesday, February 17, 2016 (9 a.m.-5 p.m.)

1. WG-95 Meeting (9 a.m.-5 p.m.)
    a. Continue Review of WG-95 Actions
    b. Review & Finalize Chapter 6
2. WG-95 SG Meeting (9 a.m.-5 p.m.)
    a. Review of the draft Section 0: Introduction/Context
    b. Review of the draft Section 1: Bibliography
    c. Review of the draft Section 2: Definition of Intended function
    d. Presentation of Airbus HMI evaluation for HAIC function
(C.CARUHEL--Airbus)
    e. Review of the draft Section 2: Definition of Intended function
    f. Review of the draft Section 3: Operational performance goal

Thursday, February 18, 2016 (9 a.m.- 4 p.m.)

1. WG-95 Meeting (9 a.m.-2 p.m.)
    a. Review & Finalize Chapter 6
    b. Review the entire document, actions for improvements
    c. Meeting Wrap-up, review of Actions
2. WG-95 SG Meeting (9 a.m.-2 p.m.)
    a. Review of the draft Section 2: Definition of Intended function
    b. Review of the draft Section 3: Operational performance goal
    c. Presentation of the outline of Section 4: Discussion on Radar
compliance with operational performance goal (J.FINLEY--Rockwell-
Collins)

    d. Meeting wrap-up (update of action list, next meeting scheduling
. . .)
    e. Conclusion
3. Plenary Meeting (2 p.m.-4 p.m.)
    a. Presentation of WG-95 SG progress report to WG-95
    b. Q&A sessions

    Attendance is open to the interested public but limited to space
availability. All visitors to GKN Aerospace Luton must complete an ITAR
visitor's form. A scanned copy of the signed form must be returned to
Tom Richards prior to your visit. Also, all visitors from outside the
UK must bring their passport as a suitable photo ID. With the approval
of the chairman, members of the public may present oral statements at
the meeting. Plenary information will be provided upon request. Persons
who wish to present statements or obtain information should contact the
person listed in the FOR FURTHER INFORMATION CONTACT section. Members
of the public may present a written statement to the committee at any
time.

    Issued in Washington, DC, on February 8, 2016.
Latasha Robinson,
Management & Program Analyst, NextGen, Enterprise Support Services
Division, Federal Aviation Administration.
[FR Doc. 2016-02547 Filed 2-8-16; 11:15 am]
 BILLING CODE 4910-13-P


[Federal Register Volume 76, Number 115 (Wednesday, June 15, 2011)]
[Notices]
[Page 34975]
[FR Doc No: 2011-14756]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. PR10-139-000]

Kinder Morgan Texas Pipeline, LLC; Notice of Petition for Rate
Approval

    Take notice that on March 24, 2010, Kinder Morgan Texas Pipeline,
LLC, (KMTP) filed a petition pursuant to section 284.123(b)(1) of the
Commission's regulations a rate election for transportation service.
KMTP states the rate election is a continuation of one of its effective
cost-based transportation component for city-gate services on file with
the Railroad Commission of Texas, a more fully detailed in the
petition.
    Any person desiring to participate in this rate filing must file in
accordance with Rules 211 and 214 of the Commission's Rules of Practice
and Procedure (18 CFR 385.211 and 385.214). Protests will be considered
by the Commission in determining the appropriate action to be taken,
but will not serve to make protestants parties to the proceeding. Any
person wishing to become a party must file a notice of intervention or
motion to intervene, as appropriate. Such notices, motions, or protests
must be filed on or before the date as indicated below. Anyone filing
an intervention or protest must serve a copy of that document on the
Applicant. Anyone filing an intervention or protest on or before the
intervention or protest date need not serve motions to intervene or
protests on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper using the ``eFiling'' link at http://www.ferc.gov. Persons unable to file electronically should submit an
original and 7 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426.
    This filing is accessible on-line at http://www.ferc.gov, using the
``eLibrary'' link and is available for review in the Commission's
Public Reference Room in Washington, DC. There is an ``eSubscription''
link on the Web site that enables subscribers to receive e-mail
notification when a document is added to a subscribed docket(s). For
assistance with any FERC Online service, please e-mail
<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For
TTY, call<PHONE_NUMBER>.
    Comment Date: 5 p.m. Eastern Time on Friday, June 17, 2011.

    Dated: June 8, 2011.
Kimberly D. Bose,
Secretary.
[FR Doc. 2011-14756 Filed 6-14-11; 8:45 am]
BILLING CODE 6717-01-P