Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Amend the Implementation Provision in FINRA Rule 1230(b)(6) (Operations Professional), 65546-65549 [2011-27262]
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65546
Federal Register / Vol. 76, No. 204 / Friday, October 21, 2011 / Notices
posted on the Commission’s Web site, if
provided in electronic format or
amenable to conversion, and not subject
to a valid protective order. Information
on how to use the Commission’s Web
site is available online or by contacting
the Commission’s webmaster via
telephone at 202–789–6873 or via
electronic mail at prcwebWebmaster@prc.gov.
The appeal and all related documents
are also available for public inspection
in the Commission’s docket section.
Docket section hours are 8 a.m. to 4:30
p.m., Eastern Time, Monday through
Friday, except on Federal government
holidays. Docket section personnel may
be contacted via electronic mail at prcdockets@prc.gov or via telephone at
202–789–6846.
Filing of Documents
All filings of documents in this case
shall be made using the Internet (Filing
Online) pursuant to Commission rules
9(a) and 10(a) at the Commission’s Web
site, https://www.prc.gov, unless a waiver
is obtained. See 39 CFR 3001.9(a) and
3001.10(a). Instructions for obtaining an
account to file documents online may be
found on the Commission’s Web site or
by contacting the Commission’s docket
section at prc-dockets@prc.gov or via
telephone at 202–789–6846.
The Commission reserves the right to
redact personal information which may
infringe on an individual’s privacy
rights from documents filed in this
proceeding.
decision schedule, the Commission may
request the Postal Service or other
participants to submit information or
memoranda of law on any appropriate
issue. As required by the Commission
rules, if any motions are filed, responses
are due 7 days after any such motion is
filed. See 39 CFR 3001.21.
Intervention
It is ordered:
Persons, other than Petitioner and
respondent, wishing to be heard in this
matter are directed to file a notice of
intervention. See 39 CFR 3001.111(b).
Notices of intervention in this case are
to be filed on or before November 8,
2011. A notice of intervention shall be
filed using the Internet (Filing Online)
at the Commission’s Web site unless a
waiver is obtained for hardcopy filing.
See 39 CFR 3001.9(a) and 3001.10(a).
1. The Postal Service shall file the
applicable administrative record
regarding this appeal no later than
October 27, 2011.
2. Any responsive pleading by the
Postal Service to this notice is due no
later than October 27, 2011.
3. The procedural schedule listed
below is hereby adopted.
4. Pursuant to 39 U.S.C. 505, Pamela
A. Thompson is designated officer of the
Commission (Public Representative) to
represent the interests of the general
public.
5. The Secretary shall arrange for
publication of this notice and order in
the Federal Register.
Further Procedures
By statute, the Commission is
required to issue its decision within 120
days from the date it receives the
appeal. See 39 U.S.C. 404(d)(5). A
procedural schedule has been
developed to accommodate this
statutory deadline. In the interest of
expedition, in light of the 120-day
By the Commission.
Shoshana M. Grove,
Secretary.
PROCEDURAL SCHEDULE
October 12, 2011 .................
October 27, 2011 .................
October 27, 2011 .................
November 8, 2011 ...............
November 16, 2011 .............
December 6, 2011 ...............
December 21, 2011 .............
December 28, 2011 .............
February 9, 2012 ..................
Filing of Appeal.
Deadline for the Postal Service to file the applicable administrative record in this appeal.
Deadline for the Postal Service to file any responsive pleading.
Deadline for notices to intervene (see 39 CFR 3001.111(b)).
Deadline for Petitioners’ Form 61 or initial brief in support of petition (see 39 CFR 3001.115(a) and (b)).
Deadline for answering brief in support of the Postal Service (see 39 CFR 3001.115(c)).
Deadline for reply briefs in response to answering briefs (see 39 CFR 3001.115(d)).
Deadline for motions by any party requesting oral argument; the Commission will schedule oral argument only
when it is a necessary addition to the written filings (see 39 CFR 3001.116).
Expiration of the Commission’s 120-day decisional schedule (see 39 U.S.C. 404(d)(5)).
[FR Doc. 2011–27247 Filed 10–20–11; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
sroberts on DSK5SPTVN1PROD with NOTICES
[Release No. 34–65580; File No. SR–FINRA–
2011–060]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of Proposed Rule Change To Amend
the Implementation Provision in FINRA
Rule 1230(b)(6) (Operations
Professional)
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
14, 2011, 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, and
II, which Items have been substantially
prepared by FINRA. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons. For the reasons
discussed below, the Commission is
granting accelerated approval of the
proposed rule change.
3 FINRA Rule 1230(b)(6)(D) sets forth an
exception to the Operations Professional
qualification examination requirement for persons
who currently hold certain registrations (each an
‘‘eligible registration’’) or have held one during the
two years immediately prior to registering as an
Operations Professional. The exception also applies
to persons who do not hold an eligible registration,
but prefer an alternative to taking the Operations
October 17, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
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1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00054
Fmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend FINRA
Rule 1230(b)(6) (Operations
Professional) to provide persons who
are required to register as an Operations
Professional from October 18, 2011
through December 16, 2011 and must
pass a qualification examination to
qualify as an Operations Professional
until April 14, 2012 to pass the
Operations Professional qualification
examination (or an eligible qualification
examination),3 during which time such
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Federal Register / Vol. 76, No. 204 / Friday, October 21, 2011 / Notices
persons may function as an Operations
Professional.
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA, on the Commission’s
Web site at https://www.sec.gov, 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
sroberts on DSK5SPTVN1PROD with NOTICES
On June 16, 2011, the Commission
approved FINRA Rule 1230(b)(6), which
establishes a registration category and
qualification examination requirement
for certain operations personnel—
Operations Professionals.4 FINRA is
expanding its registration provisions to
require registration of certain
individuals (‘‘covered persons’’) who
are engaged in, responsible for or
supervising certain member operations
functions (‘‘covered functions’’) to
enhance the regulatory structure
surrounding these areas.5
Professional examination. Such persons may
register in an eligible registration category (subject
to passing the corresponding ‘‘eligible qualification
examination’’ or obtaining a waiver) and use such
registration to qualify for Operations Professional
registration.
4 See Securities Exchange Act Release No. 64687
(June 16, 2011), 76 FR 36586 (June 22, 2011) (Order
Approving File No. SR–FINRA–2011–013). In
addition to adopting FINRA Rule 1230(b)(6), the
rule change adopted NASD Rule 1120 (Continuing
Education Requirements) as new FINRA Rule 1250
(Continuing Education Requirements) with certain
changes, including expanding the scope of ‘‘covered
registered persons’’ subject to the Firm Element to
include persons registered as Operations
Professionals. See also Securities Exchange Act
Release No. 65222 (August 30, 2011), 76 FR 55443
(September 7, 2011) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change;
File No. SR–FINRA–2011–041) and Securities
Exchange Act Release No. 65221 (August 30, 2011),
76 FR 55441 (September 7, 2011) (Notice of Filing
and Immediate Effectiveness of Proposed Rule
Change; File No. SR–FINRA–2011–042).
5 See Regulatory Notice 11–33 (July 2011) and
Regulatory Notice 11–42 (September 2011).
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FINRA Rule 1230(b)(6)(E)(i) provides
that any person who is required to
register as an Operations Professional as
of October 17, 2011 (a ‘‘Day-One
Professional,’’ i.e., a person who meets
the depth of personnel criteria as a
covered person and is engaged in one or
more covered functions as of October
17, 2011) must request registration as an
Operations Professional via Form U4 in
the Central Registration Depository
(‘‘CRD® ’’) within 60 days after October
17, 2011 (i.e., on or before December 16,
2011). Any Day-One Professional who
must pass the Operations Professional
qualification examination 6 (or an
eligible qualification examination) to
qualify for Operations Professional
registration is allowed a period of 12
months beginning on October 17, 2011
to pass such qualifying examination,
during which time such person may
function as an Operations Professional.
FINRA Rule 1230(b)(6)(E)(ii) provides
that any person who is required to
register as an Operations Professional
after October 17, 2011 (a ‘‘non-Day-One
Professional,’’ i.e., a person who does
not meet the depth of personnel criteria
as a covered person and/or is not
engaged in one or more covered
functions as of October 17, 2011, or
persons hired after October 17, 2011,
who will be subject to the registration
requirements) must register as an
Operations Professional and, if
applicable, pass the Operations
Professional qualification examination
(or an eligible qualification
examination) prior to engaging in any
activities that would require such
registration. However, any non-Day-One
Professional who must pass the
Operations Professional qualification
examination (or an eligible qualification
examination) to qualify for Operations
Professional registration is allowed a
period of 120 days beginning on the
date such person requests Operations
Professional registration to pass such
qualifying examination, during which
6 Candidates for the Series 99 examination will be
able to schedule and take the examination starting
on October 17, 2011. Because this is a new
examination for a new registration category, FINRA
will be assessing the effectiveness of the
examination by, in part, evaluating the candidates’
performance during the first 60 days of the
administration of the examination. Therefore,
candidates who take the examination within the
first 60 days (between October 17, 2011 and
December 16, 2011) will not receive their test
results on the day that they take the examination.
Instead, such candidates’ firms will be notified of
test results (i.e., the candidate’s score and whether
the candidate has passed or failed the examination)
on or shortly after December 16, 2011. The test
results will be posted to the CRD system at that
time. Candidates who fail the examination during
the initial 60-day rollout will be provided an
opportunity to retake the examination at no
additional cost.
PO 00000
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Fmt 4703
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65547
time such person may function as an
Operations Professional.
The proposed rule change would
amend FINRA Rule 1230(b)(6)(E) to
afford non-Day-One Professionals who
must register as an Operations
Professional within the first 60 days of
the effective date of FINRA Rule
1230(b)(6), and must pass a qualification
examination to qualify, additional time
to pass the Operations Professional
qualification examination (or an eligible
qualification examination). Under
FINRA Rule 1230(b)(6)(E)(ii), as nonDay-One Professionals, such persons are
required to pass a qualification
examination within 120 days of
requesting registration as an Operations
Professional and do not get the benefit
of the 12-month period to pass a
qualification examination available only
to Day-One Professionals.
The content outline for the Operations
Professional examination was posted on
FINRA’s Web site on August 23, 2011.
Given the short time period between
August 23, 2011 and October 17, 2011,
the effective date of FINRA Rule
1230(b)(6), test preparation and firm
training materials may not be readily
available for candidates who must
register within the first 60 days of the
effective date of the rule and do not
have the benefit of the 12-month period
to pass an examination for Day-One
Professionals. Accordingly, non-DayOne Professionals who must register as
an Operations Professional on or before
December 16, 2011 may have difficulty
preparing for and passing the
Operations Professional examination
within 120 days of requesting
registration as an Operations
Professional.7
The proposed rule change would
provide that any person who is required
to register as an Operations Professional
from October 18, 2011 through
December 16, 2011 must register as an
Operations Professional and, if
applicable, pass the Operations
Professional qualification examination
(or an eligible qualification
examination) prior to engaging in any
activities that would require such
registration. However, any such person
who must pass the Operations
Professional qualification examination
(or an eligible qualification
examination) to qualify for Operations
Professional registration would be
allowed until April 14, 2012 to pass
7 See letter from John Polanin and Claire
Santaniello, Co-Chairs, Compliance and Regulatory
Policy Committee 2011, Securities Industry and
Financial Markets Association, to Elizabeth M.
Murphy, Secretary, SEC, dated September 30, 2011
(Re: Release No. 34–65222; File No. SR–FINRA–
2011–041).
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Federal Register / Vol. 76, No. 204 / Friday, October 21, 2011 / Notices
such qualifying examination, during
which time such person may function as
an Operations Professional.
Any person who is required to register
as an Operations Professional on or after
December 17, 2011 would be required to
register as an Operations Professional
and, if applicable, pass the Operations
Professional qualification examination
(or an eligible qualification
examination) prior to engaging in any
activities that would require such
registration. However, any such person
who must pass the Operations
Professional qualification examination
(or an eligible qualification
examination) to qualify for Operations
Professional registration would be
allowed a period of 120 days beginning
on the date such person requests
Operations Professional registration to
pass such qualifying examination,
during which time such person may
function as an Operations Professional.
FINRA notes that members are
responsible for tracking and monitoring
their associated persons to ensure that
they are registered, and conducting their
activities, in compliance with the time
frames described in FINRA Rule
1230(b)(6)(E).
The effective date of the proposed
rule change will be October 17, 2011,
the effective date of FINRA Rule
1230(b)(6) (Operations Professional).
sroberts on DSK5SPTVN1PROD with NOTICES
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,8 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. Given the short time
period between the posting of the
content outline for the Operations
Professional examination on FINRA’s
Web site on August 23, 2011 and
October 17, 2011, the effective date of
FINRA Rule 1230(b)(6), non-Day-One
Professionals who must register as an
Operations Professional within the first
60 days of the effective date of FINRA
Rule 1230(b)(6), and pass the Operations
Professional examination (or an eligible
qualification examination) to qualify,
may have difficulty preparing for and
passing such examination within 120
days of requesting registration as an
Operations Professional. FINRA believes
it is appropriate to provide such persons
until April 14, 2012 to pass the
Operations Professional qualification
8 15
U.S.C. 78o–3(b)(6).
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18:11 Oct 20, 2011
Jkt 226001
examination (or an eligible
examination).
B. Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
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
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to FINRA and, in particular,
the requirements of Section 15A of the
Act,9 and the rules and regulations
thereunder. Specifically, the
Commission finds that the proposed
rule change is consistent with Section
15A(b)(6) of the Act which requires,
among other things, that the rules of a
registered national securities association
be designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and to protect investors and the
public interest, because, by providing
additional time for non-Day-One
Professionals who must register as an
Operations Professional within the first
60 days of the effective date of FINRA
Rule 1230(b)(6) to pass the qualification
examination, the proposed rule change
will provide additional time for
improvements in examination
preparation resources for the new
registrants, enhancing registrants’
abilities in their roles, and will improve
FINRA members’ ability to comply with
the rule.
The Commission also finds good
cause, pursuant to Section 19(b)(2) of
the Act,10 for approving the proposed
rule change prior to the 30th day after
the date of publication of notice in the
Federal Register. The Commission finds
good cause for approving the proposed
rule on an accelerated basis because the
proposed rule will assist member firms
in transitioning to the new requirement
for registration of Operations
Professionals and provide needed
9 15 U.S.C. 78o–3. In approving this proposed
rule change, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
10 15 U.S.C. 78s(b)(2).
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
clarification in response to concerns
regarding the ability of non-Day-One
Professionals who must register as an
Operations Professional within the first
60 days of the effective date of FINRA
Rule 1230(b)(6), and pass a qualification
examination to qualify, to prepare for
and pass the Operations Professional
qualification examination (or an eligible
qualification examination) within 120 of
requesting registration as an Operations
Professional. Accelerating the approval
of this proposed rule to coincide with
the effective date of the registration
requirements will permit these non-DayOne Professionals to take the extended
examination window into account when
they schedule their examinations.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–FINRA–2011–060 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–2011–060. This file
number should be included on the
subject line if e-mail 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 (https://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
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Federal Register / Vol. 76, No. 204 / Friday, October 21, 2011 / Notices
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; 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–2011–060 and
should be submitted on or before
November 14, 2011.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,11 that the
proposed rule change (SR–FINRA–
2011–060) be, and it hereby is, approved
on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–27262 Filed 10–20–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65579; File No. SR–FINRA–
2011–052]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing of
Proposed Rule Change to Adopt NASD
Rule 2320 (Best Execution and
Interpositioning) and Interpretive
Material (‘‘IM’’) 2320 as FINRA Rule
5310 in the Consolidated Rulebook
sroberts on DSK5SPTVN1PROD with NOTICES
October 17, 2011.
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 October
4, 2011, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’)
(f/k/a National Association of Securities
Dealers, Inc. (‘‘NASD’’)) 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.
11 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
12 17
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18:11 Oct 20, 2011
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to adopt NASD
Rule 2320 (Best Execution and
Interpositioning) and Interpretive
Material (‘‘IM’’) 2320 (Interpretive
Guidance with Respect to Best
Execution Requirements) as a FINRA
rule in the consolidated FINRA
rulebook with four notable changes. The
proposed rule change would combine
and renumber NASD Rule 2320 and IM–
2320 as FINRA Rule 5310 in the
consolidated FINRA rulebook.
The text of the proposed rule change
is available on FINRA’s Web site at
https://www.finra.org, at the principal
office of FINRA, at the Commission’s
Public Reference Room, and at the
Commission’s Web site at https://
www.sec.gov.
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
As part of the process of developing
a new consolidated rulebook
(‘‘Consolidated FINRA Rulebook’’),3
FINRA is proposing to adopt NASD
Rule 2320 (Best Execution and
Interpositioning) and IM–2320
(Interpretive Guidance with Respect to
Best Execution Requirements) as a
FINRA rule in the Consolidated FINRA
3 The current FINRA rulebook consists of (1)
FINRA Rules; (2) NASD Rules; and (3) rules
incorporated from NYSE (‘‘Incorporated NYSE
Rules’’) (together, the NASD Rules and Incorporated
NYSE Rules are referred to as the ‘‘Transitional
Rulebook’’). While the NASD Rules generally apply
to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that
are also members of the NYSE (‘‘Dual Members’’).
The FINRA Rules apply to all FINRA members,
unless such rules have a more limited application
by their terms. For more information about the
rulebook consolidation process, see Information
Notice, March 12, 2008 (Rulebook Consolidation
Process).
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65549
Rulebook with several changes, which
are described below.
NASD Rule 2320 requires a member,
in any transaction for or with a
customer or a customer of another
broker-dealer, to use ‘‘reasonable
diligence’’ to ascertain the best market
for a security and to buy or sell in such
market so that the resultant price to the
customer is as favorable as possible
under prevailing market conditions. The
rule identifies five factors that are
among those to be considered in
determining whether the member has
used reasonable diligence: (1) The
character of the market for the security;
(2) the size and type of transaction; (3)
the number of markets checked; (4) the
accessibility of the quotation; and (5)
the terms and conditions of the order as
communicated to the member. The rule
also includes provisions related to
interpositioning (i.e., interjecting a third
party between the member and the best
available market), the use of a broker’s
broker,4 the staffing of order rooms, and
the application of the best execution
requirements to other parties.
In addition to these provisions, NASD
Rule 2320(f) (commonly referred to as
the ‘‘Three Quote Rule’’) generally
requires members that execute
transactions in non-exchange-listed
securities on behalf of customers to
contact a minimum of three dealers (or
all dealers if three or fewer) and obtain
quotations from those dealers if there
are fewer than two quotations displayed
on an inter-dealer quotation system that
permits quotation updates on a real-time
basis. The Three Quote Rule was
adopted in 1988 to further define a
firm’s best execution obligation to
customers by setting forth additional
requirements for transactions in nonexchange-listed securities, particularly
transactions involving securities with
non-transparent prices.5 Since that time,
the Three Quote Rule has been amended
on multiple occasions to exclude certain
securities and transactions.6 The Three
Quote Rule establishes a minimum
standard, and compliance with the
Three Quote Rule, in and of itself, does
not mean that a member has met its best
4 The proposed rule change moves part of the
provision concerning the use of a broker’s broker
from paragraph (b) of the rule to Supplementary
Material .05.
5 See Securities Exchange Act Release No. 25637
(May 2, 1988), 53 FR 16488 (May 9, 1988).
6 See NASD Rule 2320(f)(3)(B), (C). See also
Securities Exchange Act Release No. 56004 (July 2,
2007), 72 FR 37285 (July 9, 2007); Securities
Exchange Act Release No. 43319 (September 21,
2000), 65 FR 58589 (September 29, 2000).
E:\FR\FM\21OCN1.SGM
21OCN1
]]>Agencies
[Federal Register Volume 76, Number 204 (Friday, October 21, 2011)]
[Notices]
[Pages 65546-65549]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27262]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65580; File No. SR-FINRA-2011-060]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Order Granting Accelerated
Approval of Proposed Rule Change To Amend the Implementation Provision
in FINRA Rule 1230(b)(6) (Operations Professional)
October 17, 2011.
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 October 14, 2011, 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,
and II, which Items have been substantially prepared by FINRA. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons. For the reasons discussed
below, the Commission is granting accelerated approval of the proposed
rule change.
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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 Rule 1230(b)(6) (Operations
Professional) to provide persons who are required to register as an
Operations Professional from October 18, 2011 through December 16, 2011
and must pass a qualification examination to qualify as an Operations
Professional until April 14, 2012 to pass the Operations Professional
qualification examination (or an eligible qualification
examination),\3\ during which time such
[[Page 65547]]
persons may function as an Operations Professional.
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\3\ FINRA Rule 1230(b)(6)(D) sets forth an exception to the
Operations Professional qualification examination requirement for
persons who currently hold certain registrations (each an ``eligible
registration'') or have held one during the two years immediately
prior to registering as an Operations Professional. The exception
also applies to persons who do not hold an eligible registration,
but prefer an alternative to taking the Operations Professional
examination. Such persons may register in an eligible registration
category (subject to passing the corresponding ``eligible
qualification examination'' or obtaining a waiver) and use such
registration to qualify for Operations Professional registration.
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The text of the proposed rule change is available on FINRA's Web
site at https://www.finra.org, at the principal office of FINRA, on the
Commission's Web site at https://www.sec.gov, 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
On June 16, 2011, the Commission approved FINRA Rule 1230(b)(6),
which establishes a registration category and qualification examination
requirement for certain operations personnel--Operations
Professionals.\4\ FINRA is expanding its registration provisions to
require registration of certain individuals (``covered persons'') who
are engaged in, responsible for or supervising certain member
operations functions (``covered functions'') to enhance the regulatory
structure surrounding these areas.\5\
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\4\ See Securities Exchange Act Release No. 64687 (June 16,
2011), 76 FR 36586 (June 22, 2011) (Order Approving File No. SR-
FINRA-2011-013). In addition to adopting FINRA Rule 1230(b)(6), the
rule change adopted NASD Rule 1120 (Continuing Education
Requirements) as new FINRA Rule 1250 (Continuing Education
Requirements) with certain changes, including expanding the scope of
``covered registered persons'' subject to the Firm Element to
include persons registered as Operations Professionals. See also
Securities Exchange Act Release No. 65222 (August 30, 2011), 76 FR
55443 (September 7, 2011) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-041)
and Securities Exchange Act Release No. 65221 (August 30, 2011), 76
FR 55441 (September 7, 2011) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-042).
\5\ See Regulatory Notice 11-33 (July 2011) and Regulatory
Notice 11-42 (September 2011).
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FINRA Rule 1230(b)(6)(E)(i) provides that any person who is
required to register as an Operations Professional as of October 17,
2011 (a ``Day-One Professional,'' i.e., a person who meets the depth of
personnel criteria as a covered person and is engaged in one or more
covered functions as of October 17, 2011) must request registration as
an Operations Professional via Form U4 in the Central Registration
Depository (``CRD[supreg] '') within 60 days after October 17, 2011
(i.e., on or before December 16, 2011). Any Day-One Professional who
must pass the Operations Professional qualification examination \6\ (or
an eligible qualification examination) to qualify for Operations
Professional registration is allowed a period of 12 months beginning on
October 17, 2011 to pass such qualifying examination, during which time
such person may function as an Operations Professional.
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\6\ Candidates for the Series 99 examination will be able to
schedule and take the examination starting on October 17, 2011.
Because this is a new examination for a new registration category,
FINRA will be assessing the effectiveness of the examination by, in
part, evaluating the candidates' performance during the first 60
days of the administration of the examination. Therefore, candidates
who take the examination within the first 60 days (between October
17, 2011 and December 16, 2011) will not receive their test results
on the day that they take the examination. Instead, such candidates'
firms will be notified of test results (i.e., the candidate's score
and whether the candidate has passed or failed the examination) on
or shortly after December 16, 2011. The test results will be posted
to the CRD system at that time. Candidates who fail the examination
during the initial 60-day rollout will be provided an opportunity to
retake the examination at no additional cost.
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FINRA Rule 1230(b)(6)(E)(ii) provides that any person who is
required to register as an Operations Professional after October 17,
2011 (a ``non-Day-One Professional,'' i.e., a person who does not meet
the depth of personnel criteria as a covered person and/or is not
engaged in one or more covered functions as of October 17, 2011, or
persons hired after October 17, 2011, who will be subject to the
registration requirements) must register as an Operations Professional
and, if applicable, pass the Operations Professional qualification
examination (or an eligible qualification examination) prior to
engaging in any activities that would require such registration.
However, any non-Day-One Professional who must pass the Operations
Professional qualification examination (or an eligible qualification
examination) to qualify for Operations Professional registration is
allowed a period of 120 days beginning on the date such person requests
Operations Professional registration to pass such qualifying
examination, during which time such person may function as an
Operations Professional.
The proposed rule change would amend FINRA Rule 1230(b)(6)(E) to
afford non-Day-One Professionals who must register as an Operations
Professional within the first 60 days of the effective date of FINRA
Rule 1230(b)(6), and must pass a qualification examination to qualify,
additional time to pass the Operations Professional qualification
examination (or an eligible qualification examination). Under FINRA
Rule 1230(b)(6)(E)(ii), as non-Day-One Professionals, such persons are
required to pass a qualification examination within 120 days of
requesting registration as an Operations Professional and do not get
the benefit of the 12-month period to pass a qualification examination
available only to Day-One Professionals.
The content outline for the Operations Professional examination was
posted on FINRA's Web site on August 23, 2011. Given the short time
period between August 23, 2011 and October 17, 2011, the effective date
of FINRA Rule 1230(b)(6), test preparation and firm training materials
may not be readily available for candidates who must register within
the first 60 days of the effective date of the rule and do not have the
benefit of the 12-month period to pass an examination for Day-One
Professionals. Accordingly, non-Day-One Professionals who must register
as an Operations Professional on or before December 16, 2011 may have
difficulty preparing for and passing the Operations Professional
examination within 120 days of requesting registration as an Operations
Professional.\7\
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\7\ See letter from John Polanin and Claire Santaniello, Co-
Chairs, Compliance and Regulatory Policy Committee 2011, Securities
Industry and Financial Markets Association, to Elizabeth M. Murphy,
Secretary, SEC, dated September 30, 2011 (Re: Release No. 34-65222;
File No. SR-FINRA-2011-041).
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The proposed rule change would provide that any person who is
required to register as an Operations Professional from October 18,
2011 through December 16, 2011 must register as an Operations
Professional and, if applicable, pass the Operations Professional
qualification examination (or an eligible qualification examination)
prior to engaging in any activities that would require such
registration. However, any such person who must pass the Operations
Professional qualification examination (or an eligible qualification
examination) to qualify for Operations Professional registration would
be allowed until April 14, 2012 to pass
[[Page 65548]]
such qualifying examination, during which time such person may function
as an Operations Professional.
Any person who is required to register as an Operations
Professional on or after December 17, 2011 would be required to
register as an Operations Professional and, if applicable, pass the
Operations Professional qualification examination (or an eligible
qualification examination) prior to engaging in any activities that
would require such registration. However, any such person who must pass
the Operations Professional qualification examination (or an eligible
qualification examination) to qualify for Operations Professional
registration would be allowed a period of 120 days beginning on the
date such person requests Operations Professional registration to pass
such qualifying examination, during which time such person may function
as an Operations Professional.
FINRA notes that members are responsible for tracking and
monitoring their associated persons to ensure that they are registered,
and conducting their activities, in compliance with the time frames
described in FINRA Rule 1230(b)(6)(E).
The effective date of the proposed rule change will be October 17,
2011, the effective date of FINRA Rule 1230(b)(6) (Operations
Professional).
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\8\ 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. Given the short time period between the posting of the
content outline for the Operations Professional examination on FINRA's
Web site on August 23, 2011 and October 17, 2011, the effective date of
FINRA Rule 1230(b)(6), non-Day-One Professionals who must register as
an Operations Professional within the first 60 days of the effective
date of FINRA Rule 1230(b)(6), and pass the Operations Professional
examination (or an eligible qualification examination) to qualify, may
have difficulty preparing for and passing such examination within 120
days of requesting registration as an Operations Professional. FINRA
believes it is appropriate to provide such persons until April 14, 2012
to pass the Operations Professional qualification examination (or an
eligible examination).
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\8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
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
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to FINRA and, in particular, the requirements of
Section 15A of the Act,\9\ and the rules and regulations thereunder.
Specifically, the Commission finds that the proposed rule change is
consistent with Section 15A(b)(6) of the Act which requires, among
other things, that the rules of a registered national securities
association be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, and to
protect investors and the public interest, because, by providing
additional time for non-Day-One Professionals who must register as an
Operations Professional within the first 60 days of the effective date
of FINRA Rule 1230(b)(6) to pass the qualification examination, the
proposed rule change will provide additional time for improvements in
examination preparation resources for the new registrants, enhancing
registrants' abilities in their roles, and will improve FINRA members'
ability to comply with the rule.
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\9\ 15 U.S.C. 78o-3. In approving this proposed rule change, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
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The Commission also finds good cause, pursuant to Section 19(b)(2)
of the Act,\10\ for approving the proposed rule change prior to the
30th day after the date of publication of notice in the Federal
Register. The Commission finds good cause for approving the proposed
rule on an accelerated basis because the proposed rule will assist
member firms in transitioning to the new requirement for registration
of Operations Professionals and provide needed clarification in
response to concerns regarding the ability of non-Day-One Professionals
who must register as an Operations Professional within the first 60
days of the effective date of FINRA Rule 1230(b)(6), and pass a
qualification examination to qualify, to prepare for and pass the
Operations Professional qualification examination (or an eligible
qualification examination) within 120 of requesting registration as an
Operations Professional. Accelerating the approval of this proposed
rule to coincide with the effective date of the registration
requirements will permit these non-Day-One Professionals to take the
extended examination window into account when they schedule their
examinations.
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\10\ 15 U.S.C. 78s(b)(2).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-FINRA-2011-060 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-2011-060. This
file number should be included on the subject line if e-mail 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 (https://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
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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; 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-2011-060 and should be
submitted on or before November 14, 2011.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (SR-FINRA-2011-060) be, and it
hereby is, approved on an accelerated basis.
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\11\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27262 Filed 10-20-11; 8:45 am]
BILLING CODE 8011-01-P
