[Federal Register Volume 78, Number 240 (Friday, December 13, 2013)]
[Notices]
[Pages 75954-75958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29739]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71027; File No. SR-FINRA-2013-051]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend
the Uniform Branch Office Registration Form (Form BR)
December 9, 2013.
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 25, 2013, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend the Uniform Branch Office Registration
Form (``Form BR'') to (1) eliminate Section 6 (NYSE Branch
Information), which is currently applicable only to NYSE-registered
firms; (2) add questions relating to space sharing arrangements and the
location of books and records that are currently only in Section 6 and
make them applicable to all members; (3) modify existing questions and
instructions to provide more detailed selections for describing the
types of activities conducted at the branch office; (4) add an optional
question to identify a branch office as an ``Office of Municipal
Supervisory Jurisdiction,'' as defined under the rules of the Municipal
Securities Rulemaking Board (MSRB); and (5) make other technical
changes to adopt uniform terminology and clarify questions and
instructions (collectively, the proposed amendments to Form BR are
hereinafter referred to as the ``Updated Form BR'').
[[Page 75955]]
The text of the proposed rule change is available on FINRA's Web
site 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
The purpose of the proposed rule change is to amend Form BR, which
is used by firms to register their branch offices with FINRA, the New
York Stock Exchange (``NYSE''), and participating states via the
Central Registration Depository (``CRD[supreg]''). Form BR enables a
firm to register a branch office \3\ (either by notice filing or
approval) as required by the relevant jurisdiction or self-regulatory
organization (``SRO''), amend a registration, close or terminate a
registration, or withdraw a filing in the appropriate participating
jurisdiction and SRO.
---------------------------------------------------------------------------
\3\ See NASD Rule 3010(g)(2) for a definition of the term
``branch office.'' Certain states participating in the use of Form
BR via CRD have adopted a similar definition. See also Securities
Exchange Act Release No. 69902 (July 1, 2013), 78 FR 40792 (July 8,
2013) (Notice of Filing File No. SR-FINRA-2013-025).
---------------------------------------------------------------------------
In concert with a committee of regulatory and industry
representatives, FINRA recently undertook a review of Form BR. As a
result of this review, FINRA is proposing to amend Form BR to (1)
eliminate Section 6 (NYSE Branch Information), which is currently
applicable only to NYSE-registered firms; (2) add questions relating to
space sharing arrangements and the location of books and records that
are currently only in Section 6 and make them applicable to all
members; (3) modify existing questions and instructions to provide more
detailed selections for describing the types of activities conducted at
the branch office; (4) add an optional question to identify a branch
office as an ``Office of Municipal Supervisory Jurisdiction,'' as
defined under MSRB rules; and (5) make other technical changes to adopt
uniform terminology and clarify questions and instructions.
FINRA believes the proposed Updated Form BR will provide a more
comprehensive profile of each firm's registered branch offices, which
will allow regulators and firms to better understand the activities
occurring at each registered branch office. This understanding should
enable firms to strengthen their own compliance and regulators to
conduct more focused and effective examinations.
FINRA further believes that the proposal will have a minimal impact
on firms based principally upon FINRA's experience with Form BR,
discussions with industry representatives who participated in the
working group that developed the proposed amendments, and the approach
to implementation that FINRA is proposing for the Updated Form BR.
In that regard, and as discussed in more detail below, firms with
existing registered branch offices will not be required to complete the
proposed new information items on the Updated Form BR by a date certain
after implementation, but rather when the firm is otherwise required,
in the ordinary course, to amend the form to update existing
information items that have become inaccurate or incomplete.\4\ FINRA
believes that this more flexible approach accomplishes the important
regulatory objective of collecting the proposed new information items
from those members that have not previously reported it,\5\ while
limiting the associated burden on firms.
---------------------------------------------------------------------------
\4\ Member firms have a continuing obligation to promptly update
Form BR whenever the information becomes inaccurate or incomplete.
Amendments require updating only the appropriate section of Form BR.
FINRA and most participating jurisdictions require that an amendment
be filed not later than 30 days after the firm learns of facts and
circumstances giving rise to the amendment.
\5\ FINRA notes that members that also are registered with the
NYSE currently report information related to space sharing
arrangements and the location of books and records for each
registered branch office on Section 6 (NYSE Branch Information) on
Form BR.
---------------------------------------------------------------------------
Background
Form BR was developed jointly in 2005 by a working group consisting
of representatives of FINRA (then the National Association of
Securities Dealers, Inc. (``NASD'')), the NYSE, the North American
Securities Administrators Association (``NASAA'') and states to
establish a uniform electronic process via the CRD system for
registering branch offices with various jurisdictions. Form BR replaced
Schedule E of the SEC's Form BD (Broker-Dealer Registration Form), the
NYSE Branch Office Application Form and state branch office forms, and
enabled firms to register branch offices electronically with FINRA, the
NYSE and participating states via a single filing through the CRD
system.\6\ Form BR enables firms to file, for notice or approval, Form
BR as required by the applicable jurisdiction or SRO.
---------------------------------------------------------------------------
\6\ Currently, 24 states utilize Form BR; of those, 16 states
have a notice-filing requirement and eight have a pre-approval
process.
---------------------------------------------------------------------------
Since its implementation in 2005, Form BR has not been
substantively updated.\7\ Based on a recent review of the form and
experience with the form to date, FINRA and a committee of
representatives from industry, NASAA and participating states (the
``Form BR Working Group'') believe that the proposed changes are
appropriate and will result in efficiencies for firms and regulators.
In particular, FINRA believes the proposed amendments to Form BR will
make the branch office registration process more efficient by
eliminating duplicative provisions, eliciting certain information items
from all filers, and clarifying existing questions so that regulators
and firms can better understand the activities of each registered
branch office.
---------------------------------------------------------------------------
\7\ In 2007, Form BR was amended to change references of
``NASD'' to ``FINRA'' and to make other technical amendments. See
Securities Exchange Act Release No. 57033 (December 21, 2007), 72 FR
74382 (December 31, 2007) (Notice of Filing File No. SR-FINRA-2007-
036).
---------------------------------------------------------------------------
Proposed Amendments
Current Form BR consists of the following nine sections: (1)
General Information; (2) Registration/Notice Filing/Type of Office; (3)
Types of Activities/Other Business Names/Web sites; (4) Branch Office
Arrangements; (5) Associated Individuals; (6) NYSE Branch Information;
(7) Branch Closing; (8) Branch Withdrawal (Pending Application); and
(9) Signature.
FINRA is proposing to amend Form BR to consist of eight sections
with the following section titles: (1) General Information; (2)
Registration/Notice Filing/Type of Office/Activities; (3) Other
Business Activities/Names/Web sites; (4) Branch Office Arrangements;
(5) Associated Individuals; (6) Branch Office Closing; (7) Branch
Office Withdrawal (Pending Application); and (8) Signature. In addition
to this reorganization of sections, FINRA is proposing the amendments
to Form BR described below.
Delete Section 6 (NYSE Branch Information). Currently only NYSE-
registered firms can view Section 6
[[Page 75956]]
(NYSE Branch Information) on the CRD system and only NYSE-registered
firms are required to complete and update Section 6. Section 6 of Form
BR allowed NYSE to administer a pre-approval process for registration
of certain branch offices that was in place at the time Form BR was
implemented.\8\ However, following the NASD/NYSE regulatory
consolidation, the NYSE amended NYSE Rule 342 to change its branch
office registration requirement from a pre-approval process to a
notice-filing requirement in an effort to eliminate disparate
regulatory standards.\9\ As a result, FINRA and the Form BR Working
Group believe this separate NYSE-registered firm section of Form BR is
no longer necessary and should be deleted in the Updated Form BR. The
proposed revisions also will remove references to the NYSE-specific
terms from the form such as ``regular branch'' and ``small branch.''
FINRA believes the proposed changes will create efficiencies for firms
that are members of both FINRA and the NYSE by eliminating nine
questions from the current Form BR and for regulators by eliminating
those questions deemed redundant or of limited regulatory value. In
addition, FINRA believes that all members will benefit from having one,
uniform form.
---------------------------------------------------------------------------
\8\ In 2005 when Form BR was initially launched, NYSE Rule 342
(Offices--Approval, Supervision and Control) required approval of
new branch office registrations, and NYSE Rule 343 (Offices--Sole
Tenancy, Hours, Display of Membership Certificates) required
approval of space sharing arrangements, before the branch office was
able to conduct business.
\9\ See Securities Exchange Act Release No. 56143 (July 26,
2007), 72 FR 42453 (August 2, 2007) (Notice of Filing and Immediate
Effectiveness of File No. SR-NYSE-2007-59).
---------------------------------------------------------------------------
Add Questions on Space Sharing Arrangements and Location of Books
and Records. As described above, FINRA is proposing to eliminate
Section 6 (NYSE Branch Information) from the current Form BR because
pre-approval of certain branch offices of NYSE-registered firms is no
longer required. However, FINRA is proposing to retain questions from
that section relating to space sharing arrangements and the location of
books and records and add them to proposed Section 4 (Branch Office
Arrangements) of the Updated Form BR. FINRA and the Form BR Working
Group determined to retain these questions because they provide
valuable regulatory information and also will allow continued
monitoring for compliance with Incorporated NYSE Rule 343.\10\
---------------------------------------------------------------------------
\10\ Incorporated NYSE Rule 343 (Supervision) is still in effect
and applicable to NYSE-registered firms. As part of the effort to
develop the consolidated FINRA rulebook, FINRA is proposing to adopt
FINRA Rule 3110 (Supervision) and delete NYSE Rule 343. In 2007, the
NYSE amended its branch office registration process from a prior
consent requirement to a notice requirement (but retained the
approval standard for space sharing arrangements). Under NYSE Rule
343, space sharing arrangements must be evaluated by the NYSE and
FINRA (who has assumed by contract regulatory responsibility to
review for NYSE member firm compliance). See SR-NYSE-2007-59 and
NYSE Information Memo 07-81 (August 1, 2007). See also Securities
Exchange Act Release No. 69902 (July 1, 2013), 78 FR 40792 (July 8,
2013) (Notice of Filing File No. SR-FINRA-2013-025).
---------------------------------------------------------------------------
Specifically, FINRA is proposing to add a new question to proposed
Section 4 (Branch Office Arrangements) of the Updated Form BR that will
ask members to disclose if the branch office occupies, shares space
with or jointly markets with any other investment-related entity, and
if the answer is yes, to provide the name of such entity.\11\ FINRA
believes applying the space sharing arrangement question to all members
will allow regulators to better understand the specific activities
occurring at each registered branch office and monitor that such
arrangements are structured in a manner that allow [sic] public
customers to identify the entity with which they are conducting
business.
---------------------------------------------------------------------------
\11\ The term ``investment-related'' is defined in Form BR as
``[p]ertains to securities, commodities, banking, insurance, or real
estate (including, but not limited to, acting as or being associated
with a Broker-Dealer, issuer, investment company, Investment
Adviser, futures sponsor, bank, or savings association).''
---------------------------------------------------------------------------
FINRA also is proposing to add a question to proposed Section 4
(Branch Office Arrangements) that will ask members if books and records
pertaining to the registered branch office are maintained at any
location other than that branch office, the main office or office of
supervisory jurisdiction (OSJ) (if applicable). If the answer is yes, a
member will need to provide the address of such location and the name
and telephone number of a contact person. FINRA believes many firms
elect to keep books and records in a centralized office rather than at
the branch office; therefore, eliciting whether books and records are
maintained offsite will enable regulators to conduct more effective and
efficient branch office examinations.
Modify Existing Question on ``Types of Activities''. FINRA is
proposing to relocate questions relating to ``Types of Activities''
occurring at the branch office from Section 3 (Other Business/Names/Web
sites) to proposed Section 2 (Registration/Notice Filing/Type of
Office/Activities) of the Updated Form BR and to expand the list of
activity types that may be selected to (1) include Retail and
Institutional (as types of Sales Activity), Public Finance, and Other;
(2) add ``Trading'' to the existing Market Making activity; and (3)
combine Investment Banking and Underwriting, which are now listed
separately. FINRA and the Form BR Working Group believe that clarifying
and expanding the list of activity types will enhance regulators'
understanding of the types of activities that occur at each registered
branch office and assist regulators and members in conducting risk-
based branch office reviews. For example, a member that selects
``Sales'' can then identify if that activity relates to ``Retail'' or
``Institutional'' customers. In addition, based on feedback from firms,
FINRA is proposing to add ``Public Finance'' as an option to enable
members and regulators to identify via the Form BR office locations
that require a principal to be registered as a Series 53 (Municipal
Securities Principal).
Modify Supervisor/Person-in-Charge Details. FINRA is proposing to
expand the supervisor and person-in-charge details provided by firms in
Section 2 (Registration/Notice Filing/Type of Office/Activities) of the
Updated Form BR, to enable firms (at their option) to provide the
``type of activity'' associated with each on-site supervisor or person-
in-charge listed. FINRA is proposing to add this option based on
feedback from firms to date. Firms have requested the ability to link
each supervisor or person-in-charge listed for a registered branch
office to identified lines of business to better reflect their
supervisory structures.
Add Optional MSRB Branch Office of Municipal Supervisory
Jurisdiction Question. The MSRB regulates brokers, dealers and
municipal securities dealers that engage in municipal securities
activities. Under MSRB rules, certain of these participants are
required to identify whether a branch is designated as an Office of
Municipal Supervisory Jurisdiction (``OMSJ''), as defined under MSRB
rules.\12\ To assist those participants that use Form BR in complying
with that MSRB requirement, FINRA is proposing to add an optional
question to Section 2 (Registration/Notice Filing/Type of Office/
Activities) to the Updated Form BR to provide FINRA members that also
are registered with the MSRB a means to track their OMSJs through a
standard CRD report that FINRA expects to develop following the
deployment of the Updated Form BR.
---------------------------------------------------------------------------
\12\ See MSRB Rule G-27 (Supervision).
---------------------------------------------------------------------------
Technical and Clarifying Changes. Based on feedback from the Form
BR Working Group, FINRA is proposing technical and clarifying changes
to General and Specific Instructions,
[[Page 75957]]
Explanation of Terms and Sections of the Updated Form BR. These include
global changes to adopt uniform terminology for terms such as ``CRD
number'' and ``branch office,'' to capitalize ``Broker-Dealer'' and
``Investment Adviser,'' and to replace ``person'' with ``individual''
when referring to associated individuals. The use of the word
``individual'' is intended to make the terminology in the Updated Form
BR consistent with terminology currently used in Section 5 of the Form
BR, which elicits information with respect to all registered
individuals who are associated with the branch office. In addition, the
Instructions of the Updated Form BR will be amended to clarify that
checking the ``Private Residence Check Box'' when providing the address
of the branch office does not act to prevent public disclosure of the
branch address.\13\ FINRA will continue to disclose the full address of
registered branch offices through BrokerCheck even if the registered
branch is a private residence, consistent with its existing policy.\14\
---------------------------------------------------------------------------
\13\ Some states elect to withhold disclosing to the public, in
whole or in part, the address for a branch office of an investment
adviser if the branch office also is a private residence.
\14\ FINRA believes that disclosure of the full address is
appropriate where a member has registered the home office as a
registered branch office and not relied on the primary residence
exemption from branch office registration.
---------------------------------------------------------------------------
No Requirement to Submit Amended Forms BR by a Date Certain.
Members with existing registered branch offices will not be required to
file an Updated Form BR for such existing offices immediately upon
deployment of the amended form, but will be required to provide the
proposed new information items on the Updated Form BR when the member
is otherwise required, in the ordinary course, to amend the form to
update existing information items that have become inaccurate or
incomplete.\15\ FINRA expects to evaluate the number of registered
branch offices of FINRA members for which an Updated Form BR has not
been filed (and, therefore, for which FINRA and other regulators do not
have the proposed new information items) one year after deployment of
the Form. Based on that evaluation, FINRA may consider imposing a
future deadline for providing that proposed new information items [sic]
in the Updated Form BR if a significant number of registered branch
offices have not filed the information through an amendment in the
ordinary course.
---------------------------------------------------------------------------
\15\ Member firms have a continuing obligation to promptly
update Form BR whenever the information becomes inaccurate or
incomplete. See supra note 4.
---------------------------------------------------------------------------
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,\16\ 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. FINRA believes the Updated Form BR is necessary at
this time to ensure that the form remains current and accurate by
reflecting changes to applicable rules and regulations of the relevant
participating jurisdictions, including specifically the regulatory
consolidation of the NYSE and NASD (e.g., deletion of current Section 6
(NYSE Branch Information)). Further, the Updated Form BR will provide a
more comprehensive profile of each firm's registered branch offices and
thereby allow regulators to better prioritize and plan examinations.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------
(B) Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed changes to Form BR will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. FINRA is
proposing to amend Form BR to reflect changes to applicable rules and
regulations of the relevant participating jurisdictions, including
specifically the regulatory consolidation of the NYSE and NASD, making
the form more current and accurate. FINRA believes the operational
burden associated with completion of the proposed Updated Form BR will
be minimal for NYSE-registered firms because such firms already report
space sharing arrangements and the location of books and records for
each registered branch office on Form BR.\17\ FINRA believes all other
firms should have this information readily available, as the questions
are consistent with the types of information that members typically
track for purposes of conducting their supervisory reviews and
inspections of branch offices.
---------------------------------------------------------------------------
\17\ To the extent possible, FINRA will identify information
relating to space sharing arrangements and the location of books and
records previously reported by NYSE-registered firms on Form BR that
will be responsive to the questions being retained on the Updated
Form BR (i.e., in proposed new Section 4--Branch Office
Arrangements) and will transfer that information to the appropriate
data fields. However, firms will be required to verify the accuracy
of the information that has been transferred to the Updated Form BR.
---------------------------------------------------------------------------
Further, FINRA believes the proposed Updated Form BR will provide a
more comprehensive profile of each firm's registered branch offices,
which will create efficiencies by allowing regulators and firms to
better understand the activities occurring at each registered branch
office and conduct more focused and effective examinations.
In addition, FINRA believes that the proposed rule change presents
a modest burden upon firms because the proposed Updated Form BR does
not impose an affirmative duty for members to immediately submit the
amended form upon deployment, but only requires members to provide the
proposed new information items on the Updated Form BR at the time the
member otherwise is required, in the ordinary course, to update
existing information items that have become inaccurate or incomplete on
the Form BR.
Therefore, FINRA believes the incremental compliance costs of
providing the proposed new information items on the Updated Form BR
should not impose a burden on competition not necessary or appropriate
in furtherance of the Act and in light of the benefits described above.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
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
[[Page 75958]]
(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 protected]. Please include File Number
SR-FINRA-2013-051 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2013-051. 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 Web site (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 Web site 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
10:00 a.m. and 3:00 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2013-051 and should be
submitted on or before January 3, 2014.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------
\18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29739 Filed 12-12-13; 8:45 am]
BILLING CODE 8011-01-P