[Federal Register Volume 84, Number 226 (Friday, November 22, 2019)]
[Notices]
[Pages 64581-64589]
[FR Doc No: 2019-25324]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87557; File No. SR-FINRA-2019-027]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend
FINRA Rule 12000 Series To Expand Options Available to Customers if a
Firm or Associated Person Is or Becomes Inactive

November 18, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 5, 2019, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rules 12100, 12202, 12214, 12309,
12400, 12601, 12702, 12801, and 12900 of the Code of Arbitration
Procedure for Customer Disputes (``Customer Code'' or ``Code'') to
expand a customer's options to withdraw an arbitration claim if a
member or an associated person becomes inactive before a claim is filed
or during a pending arbitration. In addition, the proposed amendments
would allow customers to amend pleadings, postpone hearings, request
default proceedings and receive a refund of filing fees in these
situations.
    The text of the proposed rule change is available on FINRA's
website at http://www.finra.org, at the principal office of FINRA and
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    Most unpaid customer arbitration awards are rendered against firms
or individuals whose FINRA registration has been terminated, suspended,
cancelled, or revoked, or who have been expelled from FINRA. These
firms and individuals are generally referred to as ``inactive,'' and
are no longer FINRA members or associated with a FINRA member, although
they may continue to operate in another area of the financial services
industry where FINRA registration is not required. Firms and
individuals can become inactive prior to an arbitration claim being
filed, during an arbitration proceeding, or subsequent to an
arbitration award, and this status can be caused by FINRA's action,
such as when a firm or individual is suspended for failing to pay an
award, or by the firm's or individual's own voluntary action.
    FINRA has implemented a number of changes to its arbitration
program that expand the options available to a customer when dealing
with those members or associated persons that are inactive either at
the time the claim is filed or at the time of the award. For example,
when a customer claimant first files an arbitration claim, FINRA
alerts, by letter, the customer claimant if the respondent, whether a
member or an associated person, is inactive. FINRA also informs the
claimant that awards against such members or associated persons have a
much higher incidence of non-payment and that FINRA has limited
disciplinary leverage over inactive members or associated persons that
fail to pay arbitration awards. Thus, the customer knows before
pursuing the claim in arbitration that collection of an award may be
more difficult. In addition, upon learning that the member or
associated person is inactive, a customer may determine to amend his or
her claim to add other respondents from whom the customer may be able
to collect should the claim go to award.
Proposed Rule Change
    FINRA is proposing to amend the Customer Code \3\ to expand further
the options available to customers in situations where a firm becomes
inactive during a pending arbitration, or where an associated person
becomes inactive either before a claim is filed or during a pending
arbitration. FINRA is also proposing to amend the Code to allow
customers to amend pleadings, postpone hearings, request default
proceedings and receive a refund of filing fees if the customer
withdraws the claim under these situations.\4\
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    \3\ While unpaid awards occur in intra-industry cases (i.e.,
disputes between or among members and associated persons), the
proposed amendments would apply to customer cases only.
    \4\ FINRA is also proposing to amend the Code to update cross-
references and make other non-substantive, technical changes to
rules impacted by the proposed rule change.
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A. Arbitrating Claims Against Inactive Members and Associated Persons
    Currently, under FINRA Rule 12202 (Claims Against Inactive
Members), a customer's claim against a firm whose membership is
terminated, suspended, cancelled or revoked, or that has been expelled
from FINRA, or that is

otherwise defunct, is ineligible for arbitration unless the customer
agrees in writing to arbitrate after the claim arises. In these
situations, the customer is able to evaluate the likelihood of
collecting on an award and make an informed decision whether to proceed
in arbitration, to file the claim in court or to take no action,
regardless of whether the customer signed a predispute arbitration
agreement.\5\ Accordingly, claims against inactive firms proceed in
arbitration only at the customer's option.
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    \5\ If the customer notifies FINRA in writing that he or she
does not want to proceed against the inactive member in FINRA's
forum, FINRA deems the customer's agreement to submit to arbitration
rescinded and sends the customer a full refund of any filing fee
remitted.
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    The Code does not address situations, however, where a member firm
becomes inactive during a pending arbitration. In addition, the Code
does not provide specific procedures for a customer to withdraw, and
file in court, a claim against an associated person who becomes
inactive before the customer files a claim or during a pending
arbitration.
    Accordingly, FINRA is proposing to amend FINRA Rule 12202 to expand
a customer's option to withdraw a claim to situations where a member
becomes inactive during a pending arbitration, or where an associated
person becomes inactive either before a claim is filed or during a
pending arbitration. Under the proposal, FINRA Rule 12202 would specify
that a customer's claim against an associated person who is inactive at
the time the claim is filed is ineligible for arbitration unless the
customer agrees in writing to arbitrate after the claim arises. In
addition, FINRA Rule 12202 would specify that if a member or an
associated person becomes inactive during a pending arbitration, FINRA
would notify the customer of the status change, and provide the
customer with 60 days to withdraw the claim(s) with or without
prejudice.\6\
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    \6\ FINRA Rule 12702 (Withdrawal of Claims) provides that before
a party answers a statement of claim, the claimant can withdraw the
claim with or without prejudice. However, after a party submits an
answer, the claimant can only withdraw the claim with prejudice
unless the panel or the parties agree otherwise. FINRA is proposing
to make a conforming change to FINRA Rule 12702 to provide that a
customer can withdraw a claim without prejudice if the party that
submitted an answer is an inactive member or inactive associated
person. Withdrawal without prejudice would allow the customer to re-
file the arbitration at a later date.
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    Similar to the current rules and procedures relating to claims
filed against inactive members, the proposed amendments would allow the
customer to evaluate the likelihood of collecting on an award and make
an informed decision whether to proceed in arbitration, to file the
claim in court or to take no action, regardless of whether the customer
signed a predispute arbitration agreement.
    In addition, FINRA is proposing to amend FINRA Rule 12100
(Definitions) to add definitions of ``inactive member'' and ``inactive
associated person.'' Consistent with current Rule 12202, FINRA is
proposing to define an ``inactive member'' as a member whose membership
is terminated, suspended, cancelled or revoked; that has been expelled
or barred \7\ from FINRA, or that is otherwise defunct.\8\
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    \7\ FINRA is adding ``or barred'' to the definition of an
``inactive member'' to capture that a member may be inactive due to
a bar.
    \8\ The proposed rule change would amend the definition of
``member'' under the Customer Code, the Code of Arbitration
Procedure for Industry Disputes (``Industry Code''), and in Article
I of the By-Laws of FINRA Regulation, Inc. to conform the definition
to the proposed definition of an ``inactive member'' as discussed
below. The proposed changes would make the definition of ``member''
consistent in the FINRA rules that apply to FINRA's arbitration
forum.
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    An ``inactive associated person'' would be defined as a person
associated with a member whose registration is revoked, cancelled, or
suspended, who has been expelled or barred from FINRA,\9\ or whose
registration has been terminated for a minimum of 365 days. Thus, if an
associated person's registration is not revoked, cancelled, or
suspended, the person has not been expelled or barred from FINRA, and
the individual's registration has been terminated for less than one
year, the individual would not be classified as terminated and,
therefore, would not be deemed inactive.
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    \9\ In Regulatory Notice 17-33 (October 2017), discussed infra,
FINRA proposed to define an ``inactive associated person'' as a
person associated with a member whose registration is revoked or
suspended, or whose registration has been terminated for a minimum
of 365 days. FINRA is proposing to add ``expelled or barred from
FINRA'' and ``whose registration is cancelled'' to this definition
to capture other ways in which an individual could be categorized as
inactive.
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    FINRA believes the 365-day minimum termination \10\ requirement for
associated persons would help ensure that enough time has elapsed to
assume reasonably that the associated person has permanently left the
securities industry. The requirement would allow enough time for those
associated persons who may have temporarily left the industry to return
before the arbitration closes.\11\
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    \10\ Termination, in some cases, may be a voluntary action that
can be of short duration.
    \11\ In its analysis of 2,054 customer cases closed by hearing,
on the papers, or by stipulated award from 2014 to 2018, FINRA
identified 78 cases where an associated person was not in the
industry while the arbitration was pending but returned to the
industry in fewer than 365 days.
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B. Amending Pleadings
    FINRA Rule 12309 (Amending Pleadings) limits a party's ability to
amend a statement of claim, among other pleadings, after FINRA has
appointed a panel to the case. Specifically, once FINRA appoints a
panel to a case, a party can amend a pleading only if the arbitrators
grant a party's motion to do so. FINRA Rule 12309 also provides that a
party cannot add a new party to the case after arbitrator ranking lists
are due to the Director of Arbitration until FINRA appoints the panel
and the arbitrators grant a party's motion to add the new party.
    FINRA believes that a customer should be able to change his or her
litigation strategy during a pending case once the customer learns that
a firm or an associated person has become inactive. Accordingly, FINRA
is proposing to amend FINRA Rule 12309 to provide that if FINRA
notifies a customer that a firm or an associated person has become
inactive during a pending arbitration, the customer may amend a
pleading, including adding a new party, within 60 days of receiving
such notice.\12\
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    \12\ FINRA Rule 12309(d) would permit any party to file a
response to an amended pleading, provided the response is filed and
served within 20 days of receipt of the amended pleading, unless the
panel determines otherwise. Thus, the newly-added party could file a
response to the amended pleading for the panel or arbitrator to
consider.
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C. Postponing Hearings
    FINRA Rule 12601 (Postponement of Hearings) addresses when a
scheduled hearing date can be postponed. The parties can agree to
postpone a hearing. Absent an agreed upon postponement, a hearing can
be postponed by FINRA in extraordinary circumstances, by the
arbitrators at their discretion, or by the arbitrators upon a party's
motion. FINRA is proposing to amend FINRA Rule 12601 to provide that if
FINRA notifies a customer that a firm or an associated person has
become inactive and the scheduled hearing date is within 60 days of the
date the customer receives the notice from FINRA, the customer may
postpone the hearing date. Since the proposed amendment would provide a
customer with 60 days to determine how to proceed after FINRA notifies
the customer of the status change to inactive, it would be appropriate
to allow the customer to postpone a scheduled hearing that falls within
that time period.
    In addition, FINRA assesses postponement fees against the parties
for each postponement agreed to by the parties, or granted upon the
request of

one or more parties. FINRA also charges an additional fee of $600 per
arbitrator if a postponement takes place within 10 days of a scheduled
hearing date. The additional $600 per arbitrator fee is paid to the
arbitrators to compensate them for the late adjournment.\13\ FINRA is
proposing to amend FINRA Rule 12601 to provide that if FINRA notifies a
customer that a firm or an associated person has become inactive and
the scheduled hearing date is within 60 days of the date the customer
receives the notice from FINRA, FINRA would not charge the customer a
postponement fee or an additional fee of $600 per arbitrator if a
customer chooses to postpone a scheduled hearing.
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    \13\ See FINRA Rule 12214 (Payment of Arbitrators).
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    FINRA is also proposing to amend FINRA Rule 12214 to make it clear
that it would continue to pay the $600 honoraria to the arbitrators to
compensate them for their time if a customer chooses to postpone a
scheduled hearing within 10 days before it is scheduled because the
customer learns that the firm or associated person has become inactive.
D. Default Proceedings
    FINRA Rule 12801 (Default Proceedings) permits a claimant to
request default proceedings against any respondent whose registration
is terminated, revoked or suspended, and who failed to file an answer
\14\ to a claim within the time provided in the Code. A single
arbitrator will decide the case based on the claimant's pleadings and
other documentation.\15\ The claimants must present a sufficient basis
to support the making of an award.\16\ The arbitrator may not issue an
award based solely on the nonappearance of a party.\17\
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    \14\ A respondent must serve each party with a signed and dated
Submission Agreement and answer specifying the relevant facts and
available defenses to the statement of claim within 45 days of
receipt of the statement of claim. See FINRA Rule 12303(a).
    \15\ See FINRA Rule 12801(b)(2)(B). No hearings are held in
default proceedings unless the customer requests one. See FINRA Rule
12801(c).
    \16\ See FINRA Rule 12801(e)(1).
    \17\ Id. If the defaulting respondent files an answer before an
award has been issued, the proceedings against this respondent will
be terminated and the claim will proceed under the regular
provisions of the Code. See FINRA Rule 12801(f).
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    As noted, the proposed amendments would define an inactive
associated person as a person associated with a member whose
registration is revoked, cancelled, or suspended, who has been expelled
or barred from FINRA, or whose registration has been terminated for a
minimum of 365 days. In the context of a default proceeding, FINRA
believes that it would be appropriate to continue to allow a customer
to request default proceedings against any terminated associated person
who fails to answer a claim, regardless of how long the associated
person has been terminated, consistent with the existing rule.
Accordingly, FINRA is proposing to amend FINRA Rule 12801(a) to specify
that a claimant may request a default proceeding against a terminated
associated person who fails to file an answer within the time provided
in the Code regardless of the number of days since termination.\18\
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    \18\ See supra note 10.
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E. Refunding Filing Fees
    FINRA Rule 12900 (Fees Due When a Claim is Filed) specifies that if
a claim is settled or withdrawn more than 10 days before the date that
the hearing is scheduled to begin, a party paying a filing fee will
receive a partial refund of the filing fee. The rule also provides that
FINRA will not refund any portion of the filing fee if a claim is
settled or withdrawn within 10 days of the date that the hearing is
scheduled to begin.
    FINRA is proposing to amend FINRA Rule 12900 to provide that FINRA
would refund a customer's full filing fee if FINRA notifies a customer
that a firm or an associated person has become inactive during a
pending arbitration, and the customer withdraws the case against all
parties within 60 days of the notification. FINRA would refund the
filing fee even if the customer withdraws the case within 10 days of
the date that the hearing is scheduled to begin.
F. Non-Substantive Changes
    In addition to amending FINRA Rules 12100, 12202, 12214, 12309,
12400, 12601, 12702, 12801, and 12900 to expand a customer's options to
withdraw an arbitration claim if a member or an associated person
becomes inactive before a claim is filed or during a pending
arbitration, FINRA is also proposing to amend the Code to update cross-
references and make other non-substantive, technical changes to the
rules impacted by the proposal.
    If the Commission approves the proposed rule change, FINRA will
announce the effective date of the proposed rule change in a Regulatory
Notice to be published no later than 60 days following Commission
approval. The effective date will be no later than 90 days following
publication of the Regulatory Notice announcing Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\19\ 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.
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    \19\ 15 U.S.C. 78o-3(b)(6).
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    FINRA believes that the proposed rule change would protect
investors and the public interest by expanding the options available to
customers with claims against respondents who are unlikely to be able
to pay. The proposed rule change would extend the concept of what it
means to be inactive to expressly include associated persons, so that
customers would have the same options during a case against inactive
associated persons as they would against inactive members. The proposed
change, therefore, would add consistency to FINRA rules.
    Further, FINRA believes that the proposed amendments would provide
customers with expanded options and flexibility to change case strategy
if FINRA notifies them that a member or associated person has become
inactive during a pending arbitration. In particular, the proposed rule
change would permit a customer to amend his or her pleading or to add
parties without arbitrator intervention. FINRA rules, however, permit
the newly-added party to respond to the amended pleading and to have
the panel or arbitrator consider any objections.
    The proposed rule change would also clarify the default rule to
include an inactive associated person who does not answer a claim,
regardless of the number of days since termination. FINRA believes that
the proposed rule change would add consistency to FINRA's default rule
so that the procedures would apply to inactive members and inactive
associated persons equally. As a result, investors would know that they
have the same options and rights in default proceedings against any
inactive respondent under the Customer Code. FINRA believes this could
help expedite these arbitration cases, as any ambiguity about how the
rule should be applied would be removed. Moreover, FINRA believes that
exempting the minimum-day termination requirement would prevent an
associated person from using the 365-day requirement as a shield to
delay the arbitration case.

    FINRA believes that the proposed amendments provide customers with
more options and flexibility in how they choose to resolve claims
against respondents who are unlikely to pay, and, thus, give them more
control over the arbitration case when they are notified that a member
or associated person has become inactive. Moreover, by eliminating the
postponement fees and refunding filing fees in certain circumstances,
the proposed amendments eliminate these costs as a potential barrier
for customers who may opt to pursue their claims in other forums. For
these reasons, FINRA believes that the proposed rule change protects
investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed amendments will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. A discussion of the economic
impacts of the proposed amendments follows.
Economic Impact Assessment
(a) Regulatory Need
    The Code addresses situations where customers bring claims against
inactive members. The Code does not address situations, however, where
a member firm becomes inactive during a pending arbitration or where an
associated person becomes inactive before a claim is filed or during a
pending arbitration. This may limit the options available to customers
to seek redress, as well as their ability to collect an award.
(b) Economic Baseline
    The economic baseline for the proposed amendments is the current
rules under the Code that address customer disputes in arbitration. The
proposed amendments are expected to affect the parties to an
arbitration, including customers, member firms, associated persons, and
arbitrators.
    FINRA is able to identify 2,054 customer cases closed by hearing,
on the papers, or by stipulated award from 2014 to 2018. Among these
cases, FINRA is able to identify 128 cases (six percent) where a member
firm would have been defined as inactive (under the proposed
amendments) before an arbitration. In these instances, the current
rules under the Code provide customers the option to proceed in
arbitration, to file the claim in court, or to take no action
regardless of whether the customer signed a pre-dispute arbitration
agreement. Customers are therefore able to evaluate the likelihood of
collecting on an award and to choose the forum in which to proceed.
    FINRA is also able to identify 427 cases (21 percent of 2,054)
where a firm became inactive during a pending arbitration, or where an
associated person would have been identified as inactive (under the
proposed amendments) either before or during a pending arbitration. The
current rules do not provide similar options to customers in these
instances, and customers may be less able to choose the forum in which
to proceed or to change their litigation strategy during a pending
case.\20\
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    \20\ In the 427 cases, the total amount of compensatory damages
sought by customers was $580.3 million, and customers were awarded
compensatory damages of $96.0 million. For the 347 cases that closed
from 2014 through 2017, 126 relate to an award that went unpaid, and
the member firms or associated persons responsible for the unpaid
awards would have been identified as inactive under the proposed
amendments. The total amount of awards relating to these cases that
went unpaid was $55.9 million. The respondents that would have been
identified as inactive were responsible for nearly all of the awards
that went unpaid.
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(c) Economic Impact
    The proposed amendments would expand customers' options under the
Code where a member becomes inactive during a pending arbitration or
where an associated person becomes inactive before a claim is filed or
during a pending arbitration. The benefits and costs of the proposed
amendments are discussed below.
    In general, the benefits of the proposed amendments arise from the
expansion of customer options under the Code when a member becomes
inactive during a pending arbitration, or when an associated person
becomes inactive before a claim is filed or during a pending
arbitration. In these instances, the proposed amendments would increase
the flexibility of customers to determine whether and how to proceed in
arbitration. Customers would exercise the options under the proposed
amendments if they believe it would increase their ability to seek
redress, and may increase the amount of monetary compensation they
expect to receive.
    The expansion of customer options under the Code would arise from
the reduction of the restrictions and penalties to alter their
litigation strategy in arbitration or to withdraw their claims from
arbitration. For example, customers who proceed in arbitration may
amend a pleading without arbitrators granting the motion. This includes
the addition of a new respondent from whom the customer may be able to
collect should the claim go to award. Customers who proceed in
arbitration may also postpone a scheduled hearing without penalty to
assess the options and gain additional time to prepare.\21\ Customers
may also withdraw their claim without prejudice if the party that
submitted an answer is an inactive member or inactive associated
person. Customers who withdraw their claims against all parties within
the allotted time would also receive a full refund of the filing fee.
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    \21\ Among the 2,054 customer cases in the baseline sample,
FINRA is able to identify 240 (12 percent) cases where a member or
an associated person would have been identified as inactive after
arbitrator ranking lists were due or FINRA appointed a panel. FINRA
is also able to identify 119 (six percent) cases where a member or
an associated person would have been identified as inactive within
60 days of a scheduled hearing.
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    Customers who exercise the options under the proposed amendments,
and the member firms and associated persons who are also parties to the
arbitration, may incur additional costs. For example, if customers
withdraw their claims from arbitration and restart the case in another
venue, then the parties may incur additional legal expense and time to
resolve the dispute. If instead customers amend their pleadings but
remain in arbitration, the parties (including member firms and
associated persons who are newly-named in the amended pleadings) may
also incur additional legal expense to alter their litigation strategy,
time to resolve the dispute, and forum fees (e.g., hearing session
fees).\22\ Parties may also incur additional time to resolve the
dispute if customers postpone scheduled hearings. Customers have the
option to incur these additional expenses, and would likely incur them
only if they believe the costs would increase the amount of monetary
compensation they may expect to receive.
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    \22\ FINRA does not believe, however, that the proposed
amendments would cause member firms and associated persons to be
named without having a connection to the case. See discussion in
Section II.C.
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    The proposed amendments would provide no significant benefits and
impose no material costs on customers who would not change their
behavior when notified of an associated person's or firm's change of
status during arbitration in the presence of the amendments, nor on the
members and associated persons who are party to their claims. In
FINRA's experience, customers typically proceed in arbitration when
notified that a member is inactive at the time of filing, and typically
remain in arbitration when a member or an associated person leaves

the industry while the arbitration is pending.\23\ One reason customers
remain in arbitration when a member or an associated person leaves the
industry may be the additional costs of restarting a case in another
venue. Another reason may be the expectation that another forum would
not result in a higher likelihood of redress.
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    \23\ Among the 2,054 customer cases in the baseline sample,
FINRA is able to identify 297 (14 percent) cases where a member firm
or an associated person would have been identified as inactive
during a pending arbitration.
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    Based on this experience, FINRA believes that few customers would
withdraw claims from the forum in the presence of the proposed rules,
but would instead remain in arbitration. Customers are, therefore, more
likely to exercise their new options under the proposed amendments to
amend pleadings or to postpone hearings. The benefits and costs of the
proposed amendments, therefore, may result more from the amendment of
pleadings or the rescheduling of hearings than the withdrawal of
claims.
(d) Alternatives Considered
    FINRA exercised discretion in setting the minimum number of days
for a terminated associated person to be considered inactive (365).
FINRA also exercised discretion when setting the maximum number of days
for customers to exercise the options under the proposed amendments
after they receive notification of the inactive status of a member or
an associated person (60).
    The minimum-day requirement for a terminated associated person to
be considered inactive affects the length of time that customers must
wait before being able to exercise the options under the proposed
amendments. A longer minimum-day requirement decreases the number of
customers who may have access to the options under the proposed
amendments, and therefore decreases their ability to seek redress.\24\
A longer minimum-day requirement, however, also decreases the
likelihood that an associated person returns to the industry after
being identified as inactive.\25\ Customers may therefore be less
likely to exercise the options under the proposed amendments only for
the inactive associated person to return to the industry, and parties
may be less likely to incur the associated costs unnecessarily. A
shorter minimum-day requirement, on the other hand, may increase the
ability of customers to seek redress, but also may increase the costs
parties may incur unnecessarily. FINRA believes that the 365-day
minimum requirement would provide customers access to the options under
the proposed amendments and help ensure that the associated person had
permanently left the securities industry.
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    \24\ For example, a longer minimum-day requirement would
increase the number of associated persons who left the industry as
of the close of the arbitration but not considered inactive. In
these instances, customers would not have access to the options
because the associated persons would not have been considered
inactive while the arbitration is pending. Among the 2,054 customer
cases in the baseline sample, FINRA is able to identify 23 cases
where an associated person had left the industry as of the close of
the arbitration but for 60 days or fewer. The number of cases
increases to 36 for 120 days, 58 for 180 days, and 129 for 365 days.
    \25\ With a longer minimum-day requirement, fewer associated
persons would be deemed inactive as defined under the proposed
amendments and then return to the industry. Fewer customers would
therefore exercise the options under the proposed amendments only
for the associated person to return to the industry. For example,
among the 2,054 customer cases in the baseline sample, FINRA is able
to identify 59 cases where an associated person was not in the
industry while the arbitration was pending but returned to the
industry in 60 days or fewer. The number of cases increases to 66
cases for 120 days, 69 cases for 180 days, and 78 cases for 365
days.
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    The 60-day maximum requirement for customers after receiving notice
that a firm or an associated person has become inactive to withdraw
their claims without prejudice or to amend a pleading would also limit
their ability to exercise the options and decrease its associated
benefits. The requirement, however, would also limit the effect of an
inactive member or associated person on a pending arbitration, and
provide certainty that the arbitration would continue after the time
period had elapsed. FINRA believes that the 60-day maximum requirement
would reduce the potential number of disruptions to the arbitration
process, while still providing customers access to the proposed
options.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    On October 18, 2017, FINRA published Regulatory Notice 17-33
(``Notice'') to solicit comment on the proposed amendments to the Code
that would expand a customer's options to withdraw an arbitration claim
if a member or an associated person becomes inactive before a claim is
filed or during a pending arbitration as well as allow customers to
amend pleadings, postpone hearings and receive a refund of filing fees
in these situations.\26\ FINRA received eight comments on the
Notice.\27\ While all of the commenters supported the proposed rule
change discussed in the Notice, some stated that the proposed
amendments did not go far enough,\28\ and six commenters suggested
modifications.\29\ Commenters who supported the proposed rule change,
in general, described it as ``a good faith effort to partially address
some of the predicates that cause unpaid awards'' \30\ as well as a
proposal that would provide customers with additional options and
flexibility to alter their litigation strategy.\31\ Several commenters
specifically noted their support for the proposed amendments to FINRA
Rule 12100 (Definitions of Inactive Member and Inactive Associated
Person),\32\ FINRA Rule 12202 (Claims Against Inactive Members and
Inactive Associated Persons),\33\ FINRA Rule 12309 (Amending
Pleadings),\34\ FINRA Rule

12601 (Postponement of Hearings),\35\ FINRA Rule 12801 (Default
Proceedings) \36\ and FINRA Rule 12900 (Fees Due When a Claim Is
Filed).\37\
---------------------------------------------------------------------------

    \26\ Available at http://www.finra.org/industry/notices/17-33.
    \27\ See letters to Marcia E. Asquith including: Steven B.
Caruso, Attorney, Maddox Hargett & Caruso, P.C., dated November 20,
2017 (``Caruso''); Gregory M. Curley, Senior Litigation Counsel,
Advisor Group, dated December 1, 2017 (``Advisor Group''); William
A. Jacobson, Clinical Professor of Law and Tina Davis, Law School
Student, Cornell University School of Law, dated December 7, 2017
(``Cornell''); Kevin M. Carroll, Managing Director and Associate
General Counsel, Securities Industry and Financial Markets
Association, dated December 15, 2017 (``SIFMA''); Andrew Stoltmann,
President, Public Investors Arbitration Bar Association, dated
December 18, 2017 (``PIABA''); Justin M. Daley, Legal Intern, St.
John's University School of Law, dated December 18, 2017 (``SJU'');
Robin M. Traxler, Vice President, Regulatory Affairs & Associate
General Counsel, Financial Services Institute, dated December 18,
2017 (``FSI''); and Joseph Borg, President, North American
Securities Administrators Association, Inc., dated December 20, 2017
(``NASAA'').
    \28\ See Caruso, FSI, NASAA, and PIABA.
    \29\ See Advisor Group, Cornell, FSI, PIABA, SIFMA, and SJU.
    \30\ See Caruso.
    \31\ See Cornell and NASAA.
    \32\ See FSI and SJU. FSI noted that ``the proposed amendments
address a scenario that is not currently addressed in FINRA rules
and, as such, brings important clarity to the arbitration process.''
SJU suggested that the proposed changes ``offer an important
protection to customers . . . by providing them with ``the same
options available with respect to individuals who are unregistered
associated persons which they now have with respect to firms that
are unregistered members.''
    \33\ See Cornell, FSI, PIABA, and SJU. FSI suggested that
requiring FINRA to notify customers when a member or an associated
person becomes inactive during a pending arbitration would ensure
that customers are promptly informed of the change in the firm's or
the associated person's status. PIABA supported this change as it
``would allow a customer to withdraw filed claims without prejudice
(or in the case of inactive associated persons, never submit the
claim to FINRA Arbitration in the first place), and file a claim in
court, regardless of whether the customer signed a predispute
arbitration agreement.'' SJU supported ``requiring the written
consent of a customer in proceeding with an arbitration claim with a
member or an associated person who is no longer registered . . .
because it is essential that customers be given a fair opportunity
to reconsider their arbitration strategies.''
    \34\ See Caruso, Cornell and PIABA.
    \35\ See Caruso, Cornell, and SJU. SJU stated that ``any
additional costs involving arbitration could persuade customers to
drop otherwise justifiable claims,'' thus, ``the rules should not
put undue financial burdens on customers.''
    \36\ See Cornell, PIABA, and SJU.
    \37\ See Caruso and Cornell.
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Effectiveness of the Proposed Amendments
    Four commenters stated that the proposed rule change is not as
effective as it could be.\38\ FSI suggested that instead of directly
addressing the issue of unpaid awards, the proposed rule change amends
the arbitration process in ways that would bias the process in favor of
one party's subsequent recovery efforts. FINRA's primary role in the
arbitration process is to administer cases brought to the forum in a
neutral, efficient and fair manner. In its capacity as a neutral
administrator of the forum, FINRA must also ensure that its rules are
not used to hinder a party's recovery efforts. Moreover, once customers
are notified of a member's or associated person's status change during
the arbitration case, they should be permitted to assess the
collectability of their claims and change strategy during the case
without penalty. FINRA believes that, rather than creating bias in the
process against a particular group, the proposed rule change instead
would provide customers with options under the rules to pursue claims
against inactive respondents.
---------------------------------------------------------------------------

    \38\ See supra note 30.
---------------------------------------------------------------------------

    NASAA stated that when awards go unpaid, members and associated
persons are not held responsible for their misconduct and investors are
left without recourse. Under the Code, a respondent must pay a monetary
award within 30 days of receipt.\39\ In order to incentivize member
firms or associated persons to pay customer awards, and restrict those
who do not, FINRA expels or suspends from the brokerage industry any
member firm or associated person who fails to pay an arbitration award.
If a member firm or associated person fails to comply with an
arbitration award or a settlement agreement related to an arbitration,
FINRA notifies such firm or associated person in writing that the
failure to comply within 21 days of service of the notice will result
in a suspension or cancellation of membership or a suspension from
associating with any member.\40\ If the threat of suspension is not
effective in compelling payment of an award or settlement, FINRA notes
that an investor-claimant may take an award to court and have it
converted to a judgment. The claimant may then attempt to collect on
the judgment using the court's collection procedures.\41\
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    \39\ See FINRA Rule 12904(j). An associated person or firm has
four available defenses to FINRA disciplinary measures for non-
payment in customer cases: (1) The firm or associated person paid
the award in full; (2) the parties have agreed to installment
payments or have otherwise settled the matter; (3) the firm or
associated person has filed a timely motion to vacate or modify the
award and such motion has not been denied; and (4) the firm or
associated person has filed a petition in bankruptcy and the
bankruptcy proceeding is pending or the award has been discharged by
the bankruptcy court. See Notice to Members 00-55 (August 2000). In
July 2010, FINRA eliminated the ``bona fide inability to pay''
defense in the expedited suspension proceedings it initiates when a
firm or associated person fails to pay an arbitration award to a
customer. See Regulatory Notice 10-31 (June 2010).
    \40\ See FINRA Rule 9554(a).
    \41\ An investor-claimant in the FINRA arbitration forum would
be in a similar position as a claimant who had brought an action in
court and had been awarded the same amount of damages.
---------------------------------------------------------------------------

    The remaining two commenters in this group advocated for FINRA to
create a monetary solution to address unpaid awards. PIABA stated that
FINRA should establish a national investor recovery pool. Caruso
suggested a ``viable economic solution,'' stating ``very few investors
would be able to actually recover their losses'' under the proposed
amendments.\42\ Although these comments are outside the scope of the
proposed rule change, FINRA notes that in its Discussion Paper on
Customer Recovery,\43\ FINRA has identified a number of alternative
approaches that could be taken to further address the issue of unpaid
customer arbitration awards, and FINRA continues to focus on this
important issue.\44\
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    \42\ Caruso also suggested that FINRA convene a group to
consider the extent of the unpaid awards problem and develop
solutions to address it.
    \43\ See Discussion Paper, FINRA Perspectives on Customer
Recovery (February 8, 2018), http://www.finra.org/sites/default/files/finra_perspectives_on_customer_recovery.pdf.
    \44\ See Discussion Paper at 16-18.
---------------------------------------------------------------------------

    As noted above, six commenters suggested modifications to the
proposed amendments.\45\ FINRA addresses these suggestions in the
following discussion.
---------------------------------------------------------------------------

    \45\ See supra note 26.
---------------------------------------------------------------------------

Amendment To Add a Party
    Three commenters stated that FINRA should revise the proposed
amendment to FINRA Rule 12309(c) to require that a customer's right to
add parties to an arbitration case should be subject to the arbitration
panel's approval.\46\ Advisor Group suggested that the proposed
amendment would prejudice the rights of member firms to participate in
the arbitrator selection process \47\ by requiring them to enter the
arbitration case after the parties had selected an arbitrator or a
panel. FSI suggested that allowing a claimant to add a new party
without prior arbitrator or panel approval could cause a party to incur
costs in defending against potentially meritless claims. SIFMA stated
that allowing a customer claimant to amend his or her pleading after
learning that a respondent firm or associated person has become
inactive could prejudice the other active respondents remaining in the
case by eliminating their right to review the proposed amended
pleading, respond in writing, and if there is a claim of prejudice,
obtain a ruling on the amended pleading from the panel.
---------------------------------------------------------------------------

    \46\ See Advisor Group, FSI, and SIFMA.
    \47\ Arbitrator selection is the process in which the parties
receive lists of potential arbitrators and select the panel to hear
their case. The number of arbitrators who hear a case is determined
by the amount of the claim. See generally Part IV (Appointment,
Disqualification, and Authority of Arbitrators) of the Code. See
also Arbitrator Selection, http://www.finra.org/arbitration-and-mediation/arbitrator-selection.
---------------------------------------------------------------------------

    Currently, FINRA Rule 12309 permits a party to amend a pleading any
time before the panel is appointed.\48\ Once a panel is appointed,
however, the party must receive the panel's approval prior to amending
a pleading.\49\ The rule also requires that, if a panel has been
selected, a party must request approval from the panel prior to adding
a new party.\50\ Under the proposed amendments, if FINRA notifies a
customer that a member or associated person has become inactive,
proposed FINRA Rules 12309(b) and (c) would make it easier to amend
pleadings to add a claim or party by eliminating the need for pre-
approval by an arbitrator or panel. If the amended pleading to add a
party occurs after panel appointment, the newly-added party would not
be able to participate in the arbitration selection process.
---------------------------------------------------------------------------

    \48\ See FINRA Rule 12309(a).
    \49\ See FINRA Rule 12309(b).
    \50\ See FINRA Rule 12309(c).
---------------------------------------------------------------------------

    In this scenario, FINRA would provide the arbitrator disclosure
reports \51\ of the sitting panelists to the parties and permit the
parties to raise any conflicts they find with the panel.\52\

If a party discovers a conflict, the party may file a motion to recuse
the arbitrator.\53\ The arbitrator who is the subject of the motion to
recuse would consider whether to withdraw \54\ from the case and rule
on the motion.\55\ The party may also request removal of the arbitrator
by the Director, under certain circumstances.\56\
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    \51\ An arbitrator disclosure report is a summary of the
arbitrator's background and is provided to the parties to help them
make informed decisions during the arbitrator selection process.
    \52\ Arbitrators must make a reasonable effort to learn of, and
must disclose to the Director, any circumstances which might
preclude the arbitrator from rendering an objective and impartial
determination in the proceeding, including, for example, any
existing or past financial, business, professional, family, social,
or other relationships or circumstances with any party, any party's
representative, or anyone who the arbitrator is told may be a
witness in the proceeding, that are likely to affect impartiality or
might reasonably create an appearance of partiality or bias. See
FINRA Rule 12405(a). The duty to disclose any relationship,
experience and background information that may affect, or even
appear to affect, the arbitrator's ability to be impartial and the
parties' belief that the arbitrator will be able to render a fair
decision, is an ongoing duty. See FINRA Rule 12405(b). Thus, if a
party is added under proposed FINRA Rule 12309(c)(2), the panelists
must update their disclosures or review them to ensure that further
updates are not warranted.
    \53\ See FINRA Rule 12406.
    \54\ The Code of Ethics for Arbitrators in Commercial Disputes
(``Canon of Ethics'') applies to arbitrators on FINRA's arbitrator
rosters. See Canon of Ethics, http://www.finra.org/arbitration-and-mediation/code-ethics-arbitrators-commercial-disputes. Canon II
provides that if an arbitrator is requested to withdraw by less than
all of the parties because of alleged partiality, the arbitrator
should withdraw except in two circumstances. In one such
circumstance, the arbitrator could consider the matter, determine
that the reason for the challenge is not substantial, and that he or
she can nevertheless act and decide the case impartially and fairly.
See Canon II (An Arbitrator Should Disclose Any Interest Or
Relationship Likely To Affect Impartiality Or Which Might Create An
Appearance Of Partiality), Section G.
    \55\ See FINRA Rule 12406.
    \56\ The rule states, in relevant part, that before the first
hearing session begins, the Director will grant a party's request to
remove an arbitrator if it is reasonable to infer, based on
information known at the time of the request, that the arbitrator is
biased, lacks impartiality, or has a direct or indirect interest in
the outcome of the arbitration. The interest or bias must be
definite and capable of reasonable demonstration, rather than remote
or speculative. See FINRA Rule 12407(a)(1). After the first hearing
session begins, the Director may remove an arbitrator based only on
information required to be disclosed under Rule 12405 that was not
previously known by the parties. See FINRA Rule 12407(b).
---------------------------------------------------------------------------

    FINRA does not believe that the proposed amendments would encourage
claimants to add members or associated persons who have no nexus to the
arbitration case as some commenters fear. While the proposed amendments
to FINRA Rule 12309 would remove the requirement for arbitrator or
panel approval prior to adding a claim or party, FINRA Rule 12309(d)
permits any party, whether existing or newly-added, to respond to an
amended pleading after it is filed by filing an answer and raising any
available defenses.\57\ Thus, if the claim or party to be added has no
connection to the arbitration case, the respondents would have an
opportunity to make that argument to the arbitrator or panel.\58\ It
would not be in the claimant's interest, therefore, to add frivolous
claims or unnecessary parties, as doing so would likely increase a
claimant's costs in supporting the amended pleading and would delay the
outcome of the case.
---------------------------------------------------------------------------

    \57\ See FINRA Rule 12303(a).
    \58\ After the newly-added party files an answer, the party
could seek to have the claim dismissed prior to the conclusion of
the case in chief, on the basis that the moving party was not
associated with the account(s), security(ies), or conduct at issue.
See FINRA Rules 12504(a)(2) and (a)(6).
---------------------------------------------------------------------------

    FSI suggested that if the arbitrator or panel no longer has the
right to approve adding a new claim or new parties, the proposed
amendments could result in orphaned accounts. FSI commented that FSI's
members may no longer accept customer accounts from inactive firms to
minimize service interruptions because the proposed amendments would
``make it easier for, and likely encourage, customers to pursue claims
against the firm that accepts the customer accounts.''
    FINRA believes it is unlikely that a customer would add the firm
that accepted his or her accounts from an inactive firm as a party to
an arbitration case against the inactive firm because the rules permit
the customer to add new parties without pre-approval of the arbitrator
or panel. If the customer's new firm has no connection to the dispute
involving the inactive firm, yet the customer adds the new firm to the
case, the customer risks jeopardizing the business relationship with
the new firm, increasing his or her costs to support a frivolous claim,
and alienating the panel by adding a member that was not associated
with the account or conduct at issue \59\ until after the named
respondent had gone out of business. FINRA believes, therefore, that
these risks outweigh any benefit to the customer who might consider
adding a party that has no connection to the arbitration case.
---------------------------------------------------------------------------

    \59\ After the member responds to the amended claim, the member
could then file a motion to dismiss prior to the conclusion of the
customer's case on the ground that the member was not associated
with the account(s), security(ies), or conduct at issue. See FINRA
Rule 12504(a)(6)(B).
---------------------------------------------------------------------------

Length of Termination Period for Associated Persons
    In the Notice, FINRA proposed to define an ``inactive associated
person'' as a person associated with a member whose registration is
revoked or suspended, or whose registration has been terminated for a
minimum of 365 days. Three commenters stated that the timeframe should
be shortened to 6 months,\60\ 120 days,\61\ or 60 days.\62\
---------------------------------------------------------------------------

    \60\ See SJU.
    \61\ See Cornell, stating that ``FINRA should consider the
average time it takes to find new employment, and the economic costs
to parties having to pursue a claim when the associated person has
left the industry permanently but has not yet hit the 365-day
minimum requirement.''
    \62\ See PIABA, stating that ``a shorter window simply provides
the customer with more options regarding amendment and/or withdrawal
of the claims without prejudice.''
---------------------------------------------------------------------------

    FINRA recognizes the commenters' concerns, but believes that the
365-day minimum termination requirement for associated persons would
help ensure that enough time has elapsed to assume reasonably that the
associated person has permanently left the securities industry. FINRA
believes the requirement would benefit those customers who would
exercise the option to withdraw the case from the arbitration forum and
move it to an alternate venue, because they would have more certainty
that the associated person would not return to the securities industry
to exercise his or her rights under the predispute arbitration
agreement. Further, the 365-day requirement could reduce potential
costs to these customers, as they would save money on filing fees and
avoid procedural delays, such as staying the case in an alternate venue
and re-starting it in FINRA's arbitration forum, which could result if
the associated person is only temporarily out of the industry.
Length of Time To Decide Whether To Withdraw Claim
    Under the proposed amendments to FINRA Rule 12202(b), if a member
or an associated person becomes inactive during a pending arbitration,
FINRA would notify the customer about the status change. The customer
would be permitted to withdraw the claim against the inactive member or
inactive associated person with or without prejudice within 60 days of
receiving notice of a status change.\63\ SJU suggested that the 60-day
period should be increased to 90 days to provide the customer with
additional time to decide whether to pursue the claim in court (and
consult with and secure appropriate counsel), to continue with the
arbitration, and to amend pleadings. FINRA believes that once a
customer is notified of a member's or associated person's inactive
status, the proposed 60-day timeframe is a reasonable amount of time
for the customer to

decide whether to withdraw the claim, amend the claim or add a party.
FINRA believes the 60-day timeframe provides customers with enough time
to make informed decisions on how to proceed in the case, while still
keeping the case on track for timely resolution, which could improve
the customer's chances at recovery, if an arbitrator or panel issued an
award.
---------------------------------------------------------------------------

    \63\ Within the same 60-day period, the customer would also be
permitted to amend a pleading or add a party without pre-approval
from the arbitrator or panel, under the proposed amendments to FINRA
Rules 12309(b)(2) and (c)(2).
---------------------------------------------------------------------------

Extend the Proposed Amendments to Intra-Industry Cases
    The proposed amendments would apply to customer cases only. SIFMA
contended that the proposed amendments should apply also to intra-
industry cases (i.e., disputes between or among members and associated
persons).\64\ SIFMA stated that ``all of the arguments and
justifications that FINRA makes in favor of expanding the options
available to a customer claimant when dealing with those member firms
or associated persons who are responsible for most unpaid awards apply
equally to industry claimants when dealing with those same member firms
and associated persons.''
---------------------------------------------------------------------------

    \64\ See FINRA Rule 13000 Series.
---------------------------------------------------------------------------

    FINRA acknowledges SIFMA's concerns. At this time, however, FINRA
has decided to apply the proposed amendments to customer cases only
because providing customers with more control over the arbitration
process when faced with a respondent that likely will not be able to
pay an award furthers FINRA's goal of investor protection.
Related Claims Should Be Litigated in Same Forum
    Under the proposed amendments to FINRA Rule 12202, claims against
inactive firms or inactive associated persons would not be eligible for
arbitration, unless the customer agrees in writing to arbitrate after
the claim arises. FSI expressed concern that, under the proposed rule
change, customers could proceed against a member in arbitration and an
associated person in court. In this scenario, FSI stated that the
discovery in the customer's case against the associated person in court
could reveal additional facts that the customer could use against the
firm in its arbitration case. FSI suggested that the member would not
have the opportunity to seek comparable information from the customer
during the arbitration case. FSI requested, therefore, that FINRA
clarify in the proposed amendments that customers be required to pursue
related claims (i.e., a claim against the firm and a claim against the
associated person that arise from the same facts and alleged
misconduct) in the same forum.
    FINRA notes that the goal of the proposed amendments is to provide
customers with the same options against an associated person who is
inactive at the time of filing as those that currently exist against an
inactive member. By providing a customer with the option to pursue his
or her claim in court against an inactive associated person, the
proposed amendments could result in customers filing claims based on
the same facts and circumstances in FINRA arbitration and in court at
the same time. FINRA notes that this approach would increase the
parties' costs, but would have little effect on a member's access to
information during its case with the customer.
    FINRA provides the Discovery Guide for customer cases only, which
outlines documents that the parties should exchange without arbitrator
intervention. The Discovery Guide contains two document production
lists of presumptively discoverable documents: one for the firm/
associated persons to produce and one for the customer to produce.\65\
Thus, at the outset of the arbitration, the member would be permitted
to seek information from the customer that is in the customer's
possession or control and is relevant to the member's case. In
addition, under the Customer Code, the member would be permitted to
request additional documents or information from any party in
arbitration,\66\ and arbitrators have the authority to issue subpoenas
\67\ or orders \68\ compelling discovery if the subject of the request
fails to comply with a request. If the customer learns of information
during the court proceeding that he or she intends to use during the
arbitration proceeding, the customer must provide copies of all
documents and materials in customer's possession or control that have
not already been produced at the 20-day exchange deadline.\69\ For
these reasons, FINRA declines to amend the proposed rule change as
suggested.
---------------------------------------------------------------------------

    \65\ See Discovery Guide, http://www.finra.org/arbitration-and-mediation/discovery-guide.
    \66\ See FINRA Rule 12507.
    \67\ See FINRA Rule 12512.
    \68\ See FINRA Rule 12513.
    \69\ See FINRA Rule 12514.
---------------------------------------------------------------------------

Request for Additional FINRA Data
    PIABA requested that FINRA release the data and other statistical
information FINRA used to support the proposed amendments. FINRA has
made available data on which it relied in its discussion of the
economic impacts of the proposed amendments.
Minimize Delays and Postponements From Newly-Added Party
    PIABA expressed concern that newly[hyphen]named respondents may
demand extended delays and postponements of scheduled hearing dates.
PIABA urged FINRA to consider adopting arbitrator training and
guidelines to instruct arbitrators to balance carefully the interests
of all the parties to the arbitration when considering
newly[hyphen]added respondent requests to extend deadlines or hearings.
    When FINRA receives approval of proposed rule changes that involve
arbitration practices and procedures, FINRA's Office of Dispute
Resolution (``ODR'') will include articles on the new rules in The
Neutral Corner, an ODR newsletter for arbitrators and other neutrals
that includes updates on rules affecting dispute resolution and tips on
how to be a better arbitrator or mediator.\70\ In addition, ODR will
develop arbitrator training to explain how the new rules would work and
provide guidance to arbitrators on their roles and responsibilities
under the new rules. These informational and training materials will
provide examples of best practices that arbitrators could use as guides
to assist them when they are deciding a newly-added respondent's
request for an extension or postponement. As is current practice under
the Code, arbitrators would have the authority under the proposed
amendments to exercise their judgment when addressing these matters,
based on the facts and circumstances of the case.
---------------------------------------------------------------------------

    \70\ The Neutral Corner, Volume 1--2019, http://www.finra.org/arbitration-and-mediation/neutral-corner-volume-1-2019-0319. See
also the previous editions at http://www.finra.org/arbitration-and-mediation/previous-editions-neutral-corner.
---------------------------------------------------------------------------

Reporting Mechanisms Should Be Accurate and Made Available to the
Public
    Under the proposed amendments, an ``inactive member'' would be
defined as a member whose membership has been terminated, suspended,
cancelled, revoked, the member has been expelled from FINRA, or the
member is otherwise defunct. An ``inactive associated person'' would be
defined as a person whose registration is revoked or suspended, who has
been expelled or barred from FINRA, or has been terminated for a
minimum of 365 days. NASAA suggested that the withdrawal statistic that
ODR publishes \71\ should be broken down to reflect the appropriate
subcategory (e.g., terminated,

suspended, canceled, etc.) that customers use to withdraw their claims.
FINRA cannot commit to publishing subcategories of withdrawals as
requested, because the programming costs required to capture that level
of detail would likely be significant. FINRA agrees, however, that its
withdrawal statistics should distinguish between a claim (or case)
withdrawn because a claimant exercised rights under the rules after a
respondent became inactive and claims withdrawn for other reasons. If
the SEC approves the proposed rule change, FINRA would assess its
technology platforms to determine what programming changes would be
needed to capture the data relating to claims or cases withdrawn due to
an inactive respondent.
---------------------------------------------------------------------------

    \71\ Dispute Resolution Statistics, https://www.finra.org/arbitration-and-mediation/dispute-resolution-statistics.
---------------------------------------------------------------------------

    NASAA also suggested that FINRA create and make public a separate
report to capture the members and associated persons who become
inactive due to unpaid arbitration awards or judgments in favor of
customers. NASAA stated that such a report would provide transparency
on industry participants that leave the industry due to customer
complaints and would provide customers with additional information when
making a decision about whether to work with a specific FINRA member or
associated person.
    FINRA is committed to providing customers with information on the
state of unpaid customer arbitration awards in the forum, so that they
may make informed decisions about whom to entrust with their money and,
therefore, has made data on unpaid customer arbitration awards
available on its website.\72\ Moreover, FINRA has published a list of
member firms and associated persons with unpaid customer arbitration
awards.\73\ This information will continue to appear on the firm's or
individual's BrokerCheck[supreg] \74\ report.
---------------------------------------------------------------------------

    \72\ See Statistics on Unpaid Customer Awards in FINRA
Arbitration, http://www.finra.org/arbitration-and-mediation/statistics-unpaid-customer-awards-finra-arbitration. FINRA updates
these data periodically.
    \73\ See Member Firms and Associated Persons with Unpaid
Customer Arbitration Awards, http://www.finra.org/arbitration-and-mediation/members-firms-and-associated-persons-unpaid-customer-arbitration-awards. FINRA updates these data periodically.
    \74\ FINRA developed and operates this free tool under the
oversight of the SEC to provide investors with information regarding
a broker's employment history, regulatory actions, investment-
related licensing information, arbitrations and complaints. See
BrokerCheck[supreg], https://brokercheck.finra.org.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-FINRA-2019-027 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2019-027. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of FINRA. All comments received will be
posted without change. Persons submitting comments are cautioned that
we do not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
FINRA-2019-027 and should be submitted on or before December 13, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\75\
---------------------------------------------------------------------------

    \75\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25324 Filed 11-21-19; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 212 (Monday, November 2, 2020)]
[Notices]
[Page 69340]
[FR Doc No: 2020-24239]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Docket ID FEMA-2020-0001]

Notice of Adjustment of Minimum Project Worksheet Amount

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: FEMA gives notice that the minimum Project Worksheet Amount
under the Public Assistance program for disasters and emergencies
declared on or after October 1, 2020, will be increased.

DATES: This adjustment applies to major disasters and emergencies
declared on or after October 1, 2020.

FOR FURTHER INFORMATION CONTACT: Tod Wells, Recovery Directorate,
Federal Emergency Management Agency, 500 C Street SW, Washington, DC
20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: 44 CFR 206.202(d)(2) provides that FEMA will
annually adjust the minimum Project Worksheet amount under the Public
Assistance program to reflect changes in the Consumer Price Index for
All Urban Consumers published by the Department of Labor.
    FEMA gives notice of an increase to $3,320 for the minimum amount
that will be approved for any Project Worksheet under the Public
Assistance program for all major disasters and emergencies declared on
or after October 1, 2020.
    FEMA bases the adjustment on an increase in the Consumer Price
Index for All Urban Consumers of 1.3 percent for the 12-month period
that ended in August 2020. This is based on information released by the
Bureau of Labor Statistics at the U.S. Department of Labor on September
11, 2020.

Catalog of Federal Domestic Assistance No. 97.036, Disaster Grants--
Public Assistance (Presidentially Declared Disasters).

Pete Gaynor,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2020-24239 Filed 10-30-20; 8:45 am]
BILLING CODE 9111-23-P


[Federal Register Volume 88, Number 14 (Monday, January 23, 2023)]
[Notices]
[Pages 3995-3997]
[FR Doc No: 2023-01180]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2020-N-1584]

Authorization of Emergency Use of Certain Medical Devices During
COVID-19; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA or Agency) is announcing
the issuance of Emergency Use Authorizations (EUAs) (the
Authorizations) for certain medical devices related to the Coronavirus
Disease 2019 (COVID-19) public health emergency. FDA has issued the
Authorizations listed in this document under the Federal Food, Drug,
and Cosmetic Act (FD&C Act). These Authorizations contain, among other
things, conditions on the emergency use of the authorized products. The
Authorizations follow the February 4, 2020, determination by the
Secretary of Health and Human Services (HHS) that there is a public
health emergency that has a significant potential to affect national
security or the health and security of U.S. citizens living abroad and
that involves the virus that causes

COVID-19, and the subsequent declarations on February 4, 2020, March 2,
2020, and March 24, 2020, that circumstances exist justifying the
authorization of emergency use of in vitro diagnostics for detection
and/or diagnosis of the virus that causes COVID-19, personal
respiratory protective devices, and medical devices, including
alternative products used as medical devices, respectively, subject to
the terms of any authorization issued under the FD&C Act. These
Authorizations, which include an explanation of the reasons for
issuance, are listed in this document, and can be accessed on FDA's
website from the links indicated.

DATES: These Authorizations are effective on their date of issuance.

ADDRESSES: Submit written requests for single copies of an EUA to the
Office of Counterterrorism and Emerging Threats, Food and Drug
Administration, 10903 New Hampshire Ave., Bldg. 1, Rm. 4338, Silver
Spring, MD 20993-0002. Send one self-addressed adhesive label to assist
that office in processing your request or include a fax number to which
the Authorization may be sent. See the SUPPLEMENTARY INFORMATION
section for electronic access to the Authorization.

FOR FURTHER INFORMATION CONTACT: Jennifer Ross, Office of
Counterterrorism and Emerging Threats, Food and Drug Administration,
10903 New Hampshire Ave., Bldg. 1, Rm. 4332, Silver Spring, MD 20993-
0002,<PHONE_NUMBER> (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    Section 564 of the FD&C Act (21 U.S.C. 360bbb-3) allows FDA to
strengthen the public health protections against biological, chemical,
radiological, or nuclear agent or agents. Among other things, section
564 of the FD&C Act allows FDA to authorize the use of an unapproved
medical product or an unapproved use of an approved medical product in
certain situations. With this EUA authority, FDA can help ensure that
medical countermeasures may be used in emergencies to diagnose, treat,
or prevent serious or life-threatening diseases or conditions caused by
a biological, chemical, radiological, or nuclear agent or agents when
there are no adequate, approved, and available alternatives.
    Section 564(b)(1) of the FD&C Act provides that, before an EUA may
be issued, the Secretary of HHS must declare that circumstances exist
justifying the authorization based on one of the following grounds: (1)
a determination by the Secretary of Homeland Security that there is a
domestic emergency, or a significant potential for a domestic
emergency, involving a heightened risk of attack with a biological,
chemical, radiological, or nuclear agent or agents; (2) a determination
by the Secretary of Defense that there is a military emergency, or a
significant potential for a military emergency, involving a heightened
risk to U.S. military forces, including personnel operating under the
authority of title 10 or title 50 of the U.S. Code, of attack with (A)
a biological, chemical, radiological, or nuclear agent or agents; or
(B) an agent or agents that may cause, or are otherwise associated
with, an imminently life-threatening and specific risk to U.S. military
forces; \1\ (3) a determination by the Secretary of HHS that there is a
public health emergency, or a significant potential for a public health
emergency, that affects, or has a significant potential to affect,
national security or the health and security of U.S. citizens living
abroad, and that involves a biological, chemical, radiological, or
nuclear agent or agents, or a disease or condition that may be
attributable to such agent or agents; or (4) the identification of a
material threat by the Secretary of Homeland Security pursuant to
section 319F-2 of the Public Health Service (PHS) Act (42 U.S.C. 247d-
6b) sufficient to affect national security or the health and security
of U.S. citizens living abroad.
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    \1\ In the case of a determination by the Secretary of Defense,
the Secretary of HHS shall determine within 45 calendar days of such
determination, whether to make a declaration under section 564(b)(1)
of the FD&C Act, and, if appropriate, shall promptly make such a
declaration.
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    Once the Secretary of HHS has declared that circumstances exist
justifying an authorization under section 564 of the FD&C Act, FDA may
authorize the emergency use of a drug, device, or biological product if
the Agency concludes that the statutory criteria are satisfied. Under
section 564(h)(1) of the FD&C Act, FDA is required to publish in the
Federal Register a notice of each authorization, and each termination
or revocation of an authorization, and an explanation of the reasons
for the action. Under section 564(h)(1) of the FD&C Act, revisions to
an authorization shall be made available on the internet website of
FDA. Section 564 of the FD&C Act permits FDA to authorize the
introduction into interstate commerce of a drug, device, or biological
product intended for use when the Secretary of HHS has declared that
circumstances exist justifying the authorization of emergency use.
Products appropriate for emergency use may include products and uses
that are not approved, cleared, or licensed under section 505, 510(k),
512, or 515 of the FD&C Act (21 U.S.C. 355, 360(k), 360b, or 360e) or
section 351 of the PHS Act (42 U.S.C. 262), or conditionally approved
under section 571 of the FD&C Act (21 U.S.C. 360ccc). FDA may issue an
EUA only if, after consultation with the HHS Assistant Secretary for
Preparedness and Response, the Director of the National Institutes of
Health, and the Director of the Centers for Disease Control and
Prevention (to the extent feasible and appropriate given the applicable
circumstances), FDA \2\ concludes: (1) that an agent referred to in a
declaration of emergency or threat can cause a serious or life-
threatening disease or condition; (2) that, based on the totality of
scientific evidence available to FDA, including data from adequate and
well-controlled clinical trials, if available, it is reasonable to
believe that (A) the product may be effective in diagnosing, treating,
or preventing (i) such disease or condition; or (ii) a serious or life-
threatening disease or condition caused by a product authorized under
section 564, approved or cleared under the FD&C Act, or licensed under
section 351 of the PHS Act, for diagnosing, treating, or preventing
such a disease or condition caused by such an agent; and (B) the known
and potential benefits of the product, when used to diagnose, prevent,
or treat such disease or condition, outweigh the known and potential
risks of the product, taking into consideration the material threat
posed by the agent or agents identified in a declaration under section
564(b)(1)(D) of the FD&C Act, if applicable; (3) that there is no
adequate, approved, and available alternative to the product for
diagnosing, preventing, or treating such disease or condition; (4) in
the case of a determination described in section 564(b)(1)(B)(ii), that
the request for emergency use is made by the Secretary of Defense; and
(5) that such other criteria as may be prescribed by regulation are
satisfied. No other criteria for issuance have been prescribed by
regulation under section 564(c)(4) of the FD&C Act.
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    \2\ The Secretary of HHS has delegated the authority to issue an
EUA under section 564 of the FD&C Act to the Commissioner of Food
and Drugs.
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II. Electronic Access

    An electronic version of this document and the full text of the
Authorizations are available on the internet and can be accessed from
https://www.fda.gov/emergency-

preparedness-and-response/mcm-legal-regulatory-and-policy-framework/
emergency-use-authorization.

III. The Authorizations

    Having concluded that the criteria for the issuance of the
following Authorizations under section 564(c) of the FD&C Act are met,
FDA has authorized the emergency use of the following products for
diagnosing, treating, or preventing COVID-19 subject to the terms of
each Authorization. The Authorizations in their entirety, including any
authorized fact sheets and other written materials, can be accessed
from the FDA web page entitled ``Emergency Use Authorization,''
available at https://www.fda.gov/emergency-preparedness-and-response/mcm-legal-regulatory-and-policy-framework/emergency-use-authorization.
The lists that follow include Authorizations issued from June 16, 2022,
through December 6, 2022, and we have included explanations of the
reasons for their issuance, as required by section 564(h)(1) of the
FD&C Act. In addition, the EUAs that have been reissued can be accessed
from FDA's web page: https://www.fda.gov/emergency-preparedness-and-response/mcm-legal-regulatory-and-policy-framework/emergency-use-authorization.
    FDA is hereby announcing the following Authorizations for molecular
diagnostic and antigen tests for COVID-19, excluding multianalyte
tests: \3\
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    \3\ As set forth in the EUAs for these products, FDA has
concluded that: (1) SARS-CoV-2 can cause a serious or life-
threatening disease or condition, including severe respiratory
illness, to humans infected by this virus; (2) based on the totality
of scientific evidence available to FDA, it is reasonable to believe
that the products may be effective in diagnosing COVID-19, and that
the known and potential benefits of the products, when used for
diagnosing COVID-19, outweigh the known and potential risks of such
products; and (3) there is no adequate, approved, and available
alternative to the emergency use of the products.

 Genabio Diagnostics Inc.'s Genabio COVID-19 Rapid Self-Test
Kit, issued July 8, 2022;
 Watmind USA's Speedy Swab Rapid COVID-19 Antigen Self-Test,
issued July 8, 2022;
 Predicine, Inc.'s Predicine SARS-CoV-2 RT-PCR Test, issued
July 19, 2022;
 Aptitude Medical Systems Inc.'s Metrix COVID-19 Test, issued
October 18, 2022;
 Nanobiosym Precision Testing Services's The Nano Test for
COVID-19, issued November 8, 2022;
 ANP Technologies, Inc.'s NIDS COVID-19 Antigen Home Test,
issued November 17, 2022;
 Beijing Hotgen Biotech Co., Ltd.'s Hotgen COVID-19 Antigen
Home Test, issued November 17, 2022;
 Premier Medical Laboratory Services's Diversified Medical
Healthcare SARS-CoV-2 Assay, issued November 18, 2022;
 CorDx, Inc.'s CorDx COVID-19 Ag Test, issued November 21,
2022;
 Azure Biotech Inc.'s Fastep COVID-19 Antigen Home Test, issued
November 21, 2022;
 ACON Laboratories, Inc.'s Flowflex COVID-19 Antigen Rapid
Test, issued December 6, 2022.

    FDA is hereby announcing the following Authorization for a
multianalyte test:

 Lucira Health, Inc.'s Lucira COVID-19 and Flu Test, issued
November 22, 2022.\4\
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    \4\ As set forth in the EUA for this product, FDA has concluded
that: (1) SARS-CoV-2 can cause a serious or life-threatening disease
or condition, including severe respiratory illness, to humans
infected by this virus; (2) based on the totality of scientific
evidence available to FDA, it is reasonable to believe that the
product may be effective in diagnosing COVID-19, through the
simultaneous qualitative detection and differentiation of SARS-CoV-
2, influenza A virus, and/or influenza B virus RNA, and that the
known and potential benefits of the product, when used for
diagnosing COVID-19, outweigh the known and potential risks of such
product; and (3) there is no adequate, approved, and available
alternative to the emergency use of the product.

    FDA is hereby announcing the following Authorization for a serology
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test:

 Diazyme Laboratories, Inc.'s Diazyme SARS-CoV-2 Neutralizing
Antibody CLIA Kit, issued December 6, 2022.\5\
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    \5\ As set forth in the EUA for this product, FDA has concluded
that: (1) SARS-CoV-2 can cause a serious or life-threatening disease
or condition, including severe respiratory illness, to humans
infected by this virus; (2) based on the totality of scientific
evidence available to FDA, it is reasonable to believe that the
product may be effective in diagnosing recent or prior infection
with SARS-CoV-2 by identifying individuals with an adaptive immune
response to the virus that causes COVID-19, and that the known and
potential benefits of the product, when used for such use, outweigh
the known and potential risks of the product; and (3) there is no
adequate, approved, and available alternative to the emergency use
of the product.

    In addition, on November 1, 2022, FDA issued a letter to Developers
of Antigen In Vitro Diagnostics (IVDs) Authorized for Emergency Use for
Coronavirus Disease 2019 (COVID-19) as of Today's Date (November 1,
2022) for Revisions Related to Serial (Repeat) Testing for the EUAs of
Antigen IVDs.\6\
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    \6\ FDA concluded revisions to the EUAs of the tests that are
within the scope of the November 1, 2022, letter is appropriate to
protect the public health or safety and revised all such EUAs
pursuant to section 564(g)(2)(C) of the FD&C Act, including to
revise the authorized use and to establish the additional condition
set forth in the letter, as permitted by section 564(e) of the FD&C
Act. The action is based on the available scientific evidence on the
impact of serial testing on the performance of SARS-CoV-2 antigen
tests. (Refer to: ``Performance of Screening for SARS-CoV-2 using
Rapid Antigen Tests to Detect Incidence of Symptomatic and
Asymptomatic SARS-CoV-2 Infection: findings from the Test Us at Home
prospective cohort study'' at https://www.medrxiv.org/content/10.1101/2<IP_ADDRESS>78466v1.) The letter revised all current EUAs
for antigen SARS-CoV-2 IVD devices as of November 1, 2022, by: (1)
revising the authorized use to be for serial testing at least twice
over 3 days for individuals with symptoms of COVID-19 and, for tests
previously authorized for testing individuals without symptoms,
revising the authorized use to be for serial testing at least thrice
over 5 days for individuals without symptoms of COVID-19, (2)
establishing a new condition of authorization regarding updating
authorized labeling, and (3) eliminating a condition of
authorization regarding evaluating clinical performance to support
the serial screening claim.

    Dated: January 17, 2023.
Lauren K. Roth,
Associate Commissioner for Policy.
[FR Doc. 2023-01180 Filed 1-20-23; 8:45 am]
BILLING CODE 4164-01-P


[Federal Register Volume 86, Number 97 (Friday, May 21, 2021)]
[Notices]
[Pages 27671-27672]
[FR Doc No: 2021-10725]

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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

[Docket Number FRA-2021-0054]

Petition for Waiver of Compliance

    Under part 211 of title 49 Code of Federal Regulations (CFR), this
document provides the public notice that on May 4, 2021, Durbin &
Greenbrier Valley Railroad, Inc. (DGVR) petitioned the Federal Railroad
Administration (FRA) for a waiver of compliance from certain provisions
of the Federal railroad safety regulations contained at 49 CFR part
215, Railroad Freight Car Safety Standards. FRA assigned the petition
Docket Number FRA-2021-0054.
    Specifically, DGVR requests relief from 49 CFR 215.203, Restricted
cars, and 215.303, Stenciling of maintenance-of-way equipment, for 37
overage cars: Seven box cars, six flat cars, five skeleton log cars,
seven hopper cars, six tank cars, three refrigerator cars, and three
gondola cars. The relief is requested as the cars will be operated on
the Cass Subdivision and the soon-to-be-reopened Greenbrier Subdivision
and used to re-create historical scenes. DGVR states they will not be
used in commercial freight or interchange service.
    A copy of the petition, as well as any written communications
concerning the petition, is available for review online at
www.regulations.gov.
    Interested parties are invited to participate in these proceedings
by submitting written views, data, or comments. FRA does not anticipate
scheduling a public hearing in connection with these proceedings since
the facts do not appear to warrant a hearing. If any interested party
desires an opportunity for oral comment and a public hearing, they
should notify FRA, in writing, before the end of the comment period and
specify the basis for their request.
    All communications concerning these proceedings should identify the
appropriate docket number and may be submitted by any of the following
methods:
     Website: http://www.regulations.gov. Follow the online
instructions for submitting comments.
     Fax:<PHONE_NUMBER>.
     Mail: Docket Operations Facility, U.S. Department of
Transportation (DOT), 1200 New Jersey Ave. SE, W12-140, Washington, DC
20590.
    Communications received by July 6, 2021 will be considered by FRA
before final action is taken. Comments received after that date will be
considered if practicable.
    Anyone can search the electronic form of any written communications
and comments received into any of our dockets by the name of the
individual submitting the comment (or signing the document, if
submitted on behalf of an association, business, labor union, etc.).
Under 5 U.S.C. 553(c), DOT solicits comments from the public to better

inform its processes. DOT posts these comments, without edit, including
any personal information the commenter provides, to
www.regulations.gov, as described in the system of records notice (DOT/
ALL-14 FDMS), which can be reviewed at https://www.transportation.gov/privacy. See also https://www.regulations.gov/privacy-notice for the
privacy notice of regulations.gov.

    Issued in Washington, DC.
John Karl Alexy,
Associate Administrator for Railroad Safety, Chief Safety Officer.
[FR Doc. 2021-10725 Filed 5-20-21; 8:45 am]
BILLING CODE 4910-06-P


                      REPORT OF THE TASK 89 WORKING GROUP
                             September 29-30, 2015
 The working group requests that MERPAC accept the recommended changes to the following Modules
 MSC Circ  1014 Module 1 Fatigue Causes and Consequences 22092015 Australia - US Comments
 MSC Circ 1014 Australia Module 3 Fatigue and the Seafarer Revised - US Comments
 MSC Circ 1014 Module 4- Fatigue and Training Australia draft<PHONE_NUMBER>0930
 MSC Circ. 1014 Module 5 - Fatigue and Ship Design Australia Draft 290915 MERPAC 20150930
      MERPAC should note that the recommended changes to Modules 4 & 5 are minimal.  It was felt that there was insufficient representation by the relevant sectors of the maritime industry to provide more detailed input on these modules.
MERPAC recommends that these modules be forwarded to Australia in order to provide initial input into their paper on this subject.
 The working group upon review of Australia's second draft of Module 2 that again suggests that ship owner/operators development a Formal Risk Management System(FRMS) is the only option available to them, determined that MERPAC's response to the first draft by Australia should stand and be submitted to the IMO as an alternative to the Australian submission. Therefore;
 MERPAC recommends that the U.S. submit the MERPAC approved Module 2 to HTW as a separate paper and include the following points for HTW to consider regarding the revision of MSC 1014.
 A FRMS is not the only option for Companies to address fatigue in a risk based manner, as illustrated in our version of module 2.
 A FRMS would be difficult to implement for many operators
 Must avoid any additional administrative burdens for the seafarer and the company(e.g. formal FRMS)
 Must avoid any additional PSC burden on seafarers
 Must protect the privacy of seafarers
 Guidance should be written for intended audience (not technical experts).  (written at the reading level of general seafarers, KISS keep it short and simple, etc.)
 Avoid confrontational tones and language in writing (e.g. insidious)
 Reference all referred to research as per IMO guidelines
 Measures should be scalable to all modes of maritime transportation.
 If HTW accepts the US version of module 2 then module 3(seafarer) must be amended to delete the seafarer's obligations under the FRMS