Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section 4(c) of Schedule A to the FINRA By-Laws To Increase Qualification Examination Fees, 16713-16716 [2015-07133]
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Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices
management.31 Based on a cost of
$0.0051295 per dollar of assets under
management for small funds,
$0.0005041 per dollar of assets under
management for medium-sized funds
and $0.0000009 per dollar of assets
under management for large funds, the
staff estimates compliance with rule
2–7 for these unregistered money
market funds totals $3.9 million
annually.32
Consistent with estimates made in the
rule 2a–7 submissions, Commission
staff estimates that unregistered money
market funds also incur capital costs to
create computer programs for
maintaining and preserving compliance
records for rule 2a–7 of $0.0000132 per
dollar of assets under management.
Based on the assets under management
figures described above, staff estimates
annual capital costs for all unregistered
money market funds of $1.98 million.33
Commission staff further estimates
that, even absent the requirements of
rule 2a–7, money market funds would
spend at least half of the amounts
described above for record preservation
($2.0 million) and for capital costs
($0.99 million). Commission staff
concludes that the aggregate annual
costs of compliance with the rule are
$2.0 million for record preservation and
$0.99 million for capital costs.
The collections of information
required for unregistered money market
funds by rule 12d1–1 are necessary in
order for acquiring funds to able to
obtain the benefits described above.
Notices to the Commission will not be
kept confidential. An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless it displays a
currently valid control number.
mstockstill on DSK4VPTVN1PROD with NOTICES
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The public may view the background
documentation for this information
collection at the following Web site,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE., Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: March 24, 2015.
Brent J. Fields,
Secretary.
[FR Doc. 2015–07128 Filed 3–27–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74568; File No. SR–FINRA–
2015–006]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Section 4(c) of
Schedule A to the FINRA By-Laws To
Increase Qualification Examination
Fees
March 24, 2015.
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 March 10,
2015, 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. FINRA has
designated the proposed rule change as
‘‘establishing or changing a due, fee or
other charge’’ under Section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder, 4 which renders the
proposal effective upon receipt of this
filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend Section
4(c) of Schedule A to the FINRA ByLaws to increase qualification
examination fees.
Below is the text of the proposed rule
change. Proposed new language is in
italics; proposed deletions are in
brackets.
*
*
*
*
*
SCHEDULE A TO THE BY-LAWS OF
THE CORPORATION
*
*
*
*
*
Section 4—Fees
(a) through (b) No Change.
(c) The following fees shall be
assessed to each individual who
registers to take an examination as
described below. These fees are in
addition to the registration fee described
in paragraph (b) and any other fees that
the owner of an examination that FINRA
administers may assess.
Registered Options Principal .............................................................................................................................................
Investment Company Products/Variable Contracts Representative ................................................................................
General Securities Representative .....................................................................................................................................
General Securities Sales Supervisor—Options Module ...................................................................................................
General Securities Sales Supervisor—General Module ...................................................................................................
Assistant Representative—Order Processing ....................................................................................................................
Compliance Official ...........................................................................................................................................................
Supervisory Analyst ...........................................................................................................................................................
Limited Registered Representative ....................................................................................................................................
Direct Participation Programs Representative ..................................................................................................................
General Securities Principal Sales Supervisor Module ...................................................................................................
General Securities Principal ..............................................................................................................................................
Investment Company Products/Variable Contracts Principal .........................................................................................
Financial and Operations Principal ..................................................................................................................................
31 In the rule 2a–7 submissions, the staff
estimated that 757 registered money market funds
have $3.8 trillion in assets under management, or
$5 billion in assets under management per
registered money market fund. The staff further
estimated that 0.2% of those assets are held in small
money market funds (funds with less than $50
million in assets under management), 3% are held
in medium-sized money market funds (funds with
$50 million to $1 billion in assets under
management), and the remaining assets are held in
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large money market funds (funds with more than
$1 billion in assets under management).
32 This estimate is based on the following
calculations: 30 unregistered money market funds
× $5 billion = $150 billion. ($150 billion × 0.2% ×
$0.0051295) = $1.5 million for small funds. ($150
billion × 3% × 0.0005041) = $2.3 million for
medium-sized funds. ($150 billion × 96.8% ×
0.0000009) = $0.1 million for large funds. $1.5
million + $2.3 million + $0.1 million = $3.9 million.
PO 00000
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[$100] $105
[$95] $100
[$290] $305
[$75] $80
[$120] $125
[$75] $80
[$335] $350
[$230] $240
[$75] $80
[$95] $100
[$95] $100
[$115] $120
[$95] $100
[$115] $120
The estimate of cost per dollar of assets is the same
as that used in the rule 2a–7 submissions. See supra
note 12.
33 This estimate is based on the following
calculation: $150 billion × 0.0000132 = $1.98
million.
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
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Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices
Introducing Broker-Dealer Financial and Operations Principal .....................................................................................
Canada Module of S7 (Options Required) ........................................................................................................................
Canada Module of S7 (No Options Required) ..................................................................................................................
Direct Participation Programs Principal ...........................................................................................................................
Registered Options Representative ....................................................................................................................................
Municipal Fund Securities Limited Principal .................................................................................................................
Municipal Securities Representative ................................................................................................................................
Municipal Securities Principal ..........................................................................................................................................
Limited Representative—Equity Trader ............................................................................................................................
Corporate Securities Limited Representative ...................................................................................................................
Government Securities Representative .............................................................................................................................
Investment Banking Qualification Examination ..............................................................................................................
Limited Representative—Private Securities Offering .......................................................................................................
Research Analyst—Analysis ..............................................................................................................................................
Research Analyst—Regulatory ...........................................................................................................................................
Operations Professional .....................................................................................................................................................
(1) through (4) No Change.
(d) through (i) No Change.
*
*
*
*
*
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.
mstockstill on DSK4VPTVN1PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The proposed rule change amends
Section 4(c) of Schedule A of the FINRA
By-Laws to increase qualification
examination fees. Persons engaged in
the investment banking or securities
business of a FINRA member who
function as principals or representatives
are required to register with FINRA in
each category of registration appropriate
to their functions.5 Such individuals
must pass an appropriate qualification
examination before their registration can
become effective. These mandatory
qualification examinations cover a
broad range of subjects regarding
financial markets and products,
individual responsibilities, securities
industry rules, and regulatory structure.
FINRA develops, maintains, and
delivers all qualification examinations
5 See
NASD Rules 1021(a) and 1031(a), and NASD
Rules 1022 and 1032. See also NASD Rules 1041
and 1050 and FINRA Rule 1230(b)(6) regarding the
qualification and registration requirements for
Order Processing Assistant Representatives,
Research Analysts and Operations Professionals,
respectively.
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for individuals who are registered or
seeking registration with FINRA. FINRA
also administers and delivers
examinations sponsored (i.e.,
developed) by the Municipal Securities
Rulemaking Board (‘‘MSRB’’) and other
self-regulatory organizations, the North
American Securities Administrators
Association, the National Futures
Association, and the Federal Deposit
Insurance Corporation.
FINRA currently administers
examinations electronically through the
PROCTOR® system 6 at testing centers
operated by vendors under contract
with FINRA. FINRA charges an
examination fee to candidates for
FINRA-sponsored and co-sponsored
examinations to cover the development,
maintenance and delivery of these
examinations. For qualification
examinations sponsored by a FINRA
client and administered by FINRA,
FINRA charges a delivery fee that
represents either a portion of or the
entire examination fee for the
examination.7
FINRA regularly conducts a
comprehensive review of the
examination fee structure, including an
analysis of the costs associated with
developing, administering, and
delivering each examination, so that
FINRA may better understand whether
pricing changes are warranted and
evaluate the financial condition of each
qualification examination program.
Based on the results of the review,
FINRA may propose changes to better
align the examination fee structure with
the costs associated with the programs.
6 PROCTOR is a computer system that is
specifically designed for the administration and
delivery of computer-based testing and training.
7 The delivery fee represents a portion of the
entire examination fee when a FINRA client has
established an additional fee for an examination
that it sponsors. For example, the fee to take the
Series 51 (Municipal Fund Securities Limited
Principal) examination is currently $155. Of this
amount, $95 is the FINRA administration and
delivery fee, and $60 is the development fee
determined by the FINRA client, the MSRB. See
MSRB Rule A–16.
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[$95] $100
[$175] $185
[$175] $185
[$90] $95
[$70] $75
[$95] $105
[$120] $130
[$105] $115
[$105] $110
[$90] $95
[$105] $110
[$290] $305
[$90] $95
[$175] $185
[$125] $130
[$125] $130
When changes are warranted, fees are
set at levels that are expected to meet
cost and revenue objectives over a twoto-three year period to provide firms
and examination candidates with a
predictable cost environment.
In this regard, the most recent review
revealed that certain operational costs
have increased and, based on current
information, will continue to increase
over the next few years. In particular,
these increased costs consist of: (1) Fees
that vendors charge FINRA for
delivering qualification examinations
through their networks of test delivery
centers; (2) staff labor associated with
the development and maintenance of
the qualification examinations; and (3)
PROCTOR system maintenance and
enhancement expenses.8 FINRA
believes that the proposed rule change
will help to better align the examination
program fees with these increased costs.
Therefore, FINRA is proposing to amend
Section 4(c) of Schedule A to the FINRA
By-Laws to increase the fees for the
qualification examinations set forth in
Section 4(c).
FINRA has filed the proposed rule
change for immediate effectiveness.
FINRA is proposing that the
implementation date of the proposed
rule change will be April 1, 2015.
Specifically, the proposed qualification
examination fees would become
effective for examination requests made
in the CRD system on or after April 1,
2015.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(5) of the Act,9 which
requires, among other things, that
FINRA rules provide for the equitable
8 While delivery costs for examinations have
increased over the last three years, delivery costs for
qualification examinations are scheduled to
stabilize in 2015 and 2016 based on FINRA’s
recently negotiated agreements with vendors that
deliver the qualification examinations through their
networks of test delivery centers.
9 15 U.S.C. 78o–3(b)(5).
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Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices
allocation of reasonable dues, fees and
other charges among members and
issuers and other persons using any
facility or system that FINRA operates
or controls.
FINRA believes that the proposed rule
change constitutes an equitable
allocation of fees as the qualification
examination fees will be assessed only
on those individuals who take
qualification examinations. In addition,
all candidates who register for a
particular qualification examination
will be charged the same amount.
FINRA further believes that the
proposed qualification examination
changes are reasonable because they
will more closely align the overall
examination program fees with the
overall costs associated with the
programs. In this regard, FINRA notes
that the last time that it increased fees
for any of the qualification examinations
set forth in Schedule A to the FINRA
By-Laws was April 2012.10 Since that
time, FINRA’s examination program
expenses have increased and, based on
current information, will continue to
increase over the next few years.
Specifically, FINRA has experienced
cost increases relating to: (1) Fees that
vendors charge FINRA for delivering
qualification examinations through their
networks of test delivery centers; (2)
staff labor associated with the
development and maintenance of the
qualification examinations; and (3)
PROCTOR system maintenance and
enhancement expenses. 11
To better align the fees and costs
associated with the examination
programs, FINRA is proposing modest
fee increases. In this regard, FINRA
notes that no qualification examination
fee will increase by more than $15 and
the majority of examination fees will
increase by only $5. Accordingly,
FINRA believes that the proposed
qualification examination fee changes
are equitably allocated and reasonable.
mstockstill on DSK4VPTVN1PROD with NOTICES
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. FINRA
believes that the proposed qualification
examination fee changes have limited
economic impacts on the industry.
10 See Securities Exchange Act Release No. 66465
(February 24, 2012), 77 FR 12635 (March 1, 2012)
(Notice of Filing and Immediate Effectiveness of
File No. SR–FINRA–2012–009).
11 See supra note 8.
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Economic Impact Assessment
(a) Need for the Rule
FINRA seeks to set the qualification
examination fees in such a manner as to
meet expected program costs and
revenues over a two-to-three year period
in order to provide firms and
examination candidates with a
predicable cost environment. FINRA has
determined that operational costs for the
program have increased since FINRA
last adjusted the fees in April 2012.
FINRA also projects that these
operational costs will continue to
increase. As a result, FINRA has
determined that a fee increase is needed
to better align the examination program
fees to meet these increased costs.
(b) Economic Baseline
The current examination fee structure
and expected costs associated with the
examination programs serve as an
economic baseline for the proposed rule
change. Qualification examination fees
are charged directly to members that act
as sponsors for individuals seeking to
obtain qualifications through the
examination programs. While some
members may choose to absorb these
costs directly, other members directly
pass on the costs of taking qualification
examinations to the sponsored
individual. FINRA’s qualification
examination program expenses have
increased over the past three years and
are expected to continue to rise in the
next few years. Specifically, the
following expenses have increased and
are expected to further increase in the
next few years: (1) Fees that vendors
charge FINRA for delivering
qualification examinations through their
networks of test delivery centers; (2)
FINRA staff labor expenses associated
with the development and maintenance
of the qualification examinations; and
(3) technology maintenance and
enhancement expenses.12
In 2014, the total volume of
qualification examinations was 130,830,
sponsored by 2,813 member firms. The
average volume per member firm was 47
qualification examinations. The median
volume per member firm was four
qualification examinations, as large
member firms that employed more
representatives contributed to the
majority of the qualification
examination enrollments. For example,
the top 25 member firms with the
highest qualification examination
enrollments accounted for 52% of the
total volume with an average of 2,704
enrollments per firm. In contrast, 70%
of the overall member firms had less
12 See
PO 00000
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16715
than 10 qualification examination
enrollments. Equivalently in 2014, the
number of persons enrolling for
qualification examinations was 95,306,
and the average number of enrollments
per person was 1.4.
Historically, the fees collected by the
qualification examination programs
have provided a limited but stable
contribution to FINRA’s overall
revenue. In the absence of the proposed
rule change, the qualification
examination programs would not be
able to meet the target contribution
margin, in addition to, covering
increased costs in the coming years.
(c) Economic Impacts
Assuming stable qualification
examination delivery volumes (defined
by the number and type of qualification
examinations provided), the
contribution margin of the qualification
examination programs is estimated to
reach the target level in 2015 and 2016
if the proposed fee increases become
effective in April 2015. Compared to
2014, the total increase in qualification
examination fees is estimated to be
$0.94 million in 2015 and $1.25 million
in 2016. At the individual examination
level, no qualification examination fee
will increase by more than $15 and the
majority of qualification examination
fees will increase by $5.
The increases in the qualification
examination fees would impose a
burden on members or individuals that
pay for these examinations. Compared
to the current fee structure, the average
increase in qualification examination
fees per member firm is estimated to be
$334 in 2015 and $446 in 2016. The
median fee increase per member firm is
estimated to be $34 in 2015 and $45 in
2016, as large member firms are
expected to account for the majority of
the examination enrollments. For
example, the top 25 member firms with
the highest enrollments are estimated to
have an average increase of $18,459 in
2015 and $24,612 in 2016. For the
member firms with less than 10
enrollments (which accounted for 70%
of the overall member firms), the
average increase per firm is estimated to
be $26 in 2015 and $35 in 2016. In
contrast with the dollar amount
increases, assuming stable qualification
examination delivery volumes, the
percentage increases in qualification
examination fees for member firms vary
in a narrow range of 3% to 5% with an
average of 4% in 2015 and 4% to 7%
with an average of 5% in 2016. At the
individual level, compared to 2014, the
average qualification examination fee
increase per person is estimated to be
$10 in 2015 and $13 in 2016.
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FINRA does not believe that the
proposed rule change would impact the
competition among member firms, those
who seek qualifications, or to the
provision of member services. Based on
the economic impact assessment, the
proposed increases in qualification
examination fees are limited. Moreover,
they do not impose significantly
different impacts on member firms with
different sizes or business models.
Furthermore, FINRA does not believe
that the proposed rule change will
create any competitive advantage for
any individuals as all candidates who
register for a particular qualification
examination will be charged the same
amount.
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 foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 13 and paragraph (f)(2) of Rule
19b–4 thereunder. 14 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2015–006. 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 (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
10:00 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–
2015–006 and should be submitted on
or before April 20, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority. 15
Brent J. Fields,
Secretary.
[FR Doc. 2015–07133 Filed 3–27–15; 8:45 am]
Electronic Comments
mstockstill on DSK4VPTVN1PROD with NOTICES
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:
[Release No. 34–74570; File No. SR–NYSE–
2015–12]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2015–006 on the subject line.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending Rule
13 Relating to Pegging Interest
Paper Comments
March 24, 2015.
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
13 15
14 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
19:57 Mar 27, 2015
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 13 (Orders and Modifiers) relating
to pegging interest. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
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, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 13 relating to pegging interest to
provide that if the protected best bid or
offer (‘‘PBBO’’) is not within the range
of the pegging interest, the pegging
interest would peg to the ‘‘next bestpriced available displayable interest,’’
rather than the ‘‘next best-priced
available interest.’’ This amendment
would therefore exclude non-displayed
interest from consideration as part of the
‘‘next best-priced available interest’’
under the rule.
Background
Under current Rule 13, pegging
interest pegs to prices based on (i) a
PBBO, which may be available on the
Exchange or an away market, or (ii)
15 17
2 15
1 15
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PO 00000
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on March 17,
2015, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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U.S.C. 78a.
CFR 240.19b–4.
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[Federal Register Volume 80, Number 60 (Monday, March 30, 2015)]
[Notices]
[Pages 16713-16716]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-07133]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74568; File No. SR-FINRA-2015-006]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Section 4(c) of Schedule A to the FINRA
By-Laws To Increase Qualification Examination Fees
March 24, 2015.
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 March 10, 2015, 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. FINRA has
designated the proposed rule change as ``establishing or changing a
due, fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\
and Rule 19b-4(f)(2) thereunder, \4\ which renders the proposal
effective upon receipt of this filing by the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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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 Section 4(c) of Schedule A to the FINRA
By-Laws to increase qualification examination fees.
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
SCHEDULE A TO THE BY-LAWS OF THE CORPORATION
* * * * *
Section 4--Fees
(a) through (b) No Change.
(c) The following fees shall be assessed to each individual who
registers to take an examination as described below. These fees are in
addition to the registration fee described in paragraph (b) and any
other fees that the owner of an examination that FINRA administers may
assess.
Series 4 Registered Options Principal.......... [$100] $105
Series 6 Investment Company Products/Variable [$95] $100
Contracts Representative.
Series 7 General Securities Representative..... [$290] $305
Series 9 General Securities Sales Supervisor-- [$75] $80
Options Module.
Series 10 General Securities Sales Supervisor-- [$120] $125
General Module.
Series 11 Assistant Representative--Order [$75] $80
Processing.
Series 14 Compliance Official.................. [$335] $350
Series 16 Supervisory Analyst.................. [$230] $240
Series 17 Limited Registered Representative.... [$75] $80
Series 22 Direct Participation Programs [$95] $100
Representative.
Series 23 General Securities Principal Sales [$95] $100
Supervisor Module.
Series 24 General Securities Principal......... [$115] $120
Series 26 Investment Company Products/Variable [$95] $100
Contracts Principal.
Series 27 Financial and Operations Principal... [$115] $120
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Series 28 Introducing Broker-Dealer Financial [$95] $100
and Operations Principal.
Series 37 Canada Module of S7 (Options [$175] $185
Required).
Series 38 Canada Module of S7 (No Options [$175] $185
Required).
Series 39 Direct Participation Programs [$90] $95
Principal.
Series 42 Registered Options Representative.... [$70] $75
Series 51 Municipal Fund Securities Limited [$95] $105
Principal.
Series 52 Municipal Securities Representative.. [$120] $130
Series 53 Municipal Securities Principal....... [$105] $115
Series 55 Limited Representative--Equity Trader [$105] $110
Series 62 Corporate Securities Limited [$90] $95
Representative.
Series 72 Government Securities Representative. [$105] $110
Series 79 Investment Banking Qualification [$290] $305
Examination.
Series 82 Limited Representative--Private [$90] $95
Securities Offering.
Series 86 Research Analyst--Analysis........... [$175] $185
Series 87 Research Analyst--Regulatory......... [$125] $130
Series 99 Operations Professional.............. [$125] $130
(1) through (4) No Change.
(d) through (i) No Change.
* * * * *
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 proposed rule change amends Section 4(c) of Schedule A of the
FINRA By-Laws to increase qualification examination fees. Persons
engaged in the investment banking or securities business of a FINRA
member who function as principals or representatives are required to
register with FINRA in each category of registration appropriate to
their functions.\5\ Such individuals must pass an appropriate
qualification examination before their registration can become
effective. These mandatory qualification examinations cover a broad
range of subjects regarding financial markets and products, individual
responsibilities, securities industry rules, and regulatory structure.
FINRA develops, maintains, and delivers all qualification examinations
for individuals who are registered or seeking registration with FINRA.
FINRA also administers and delivers examinations sponsored (i.e.,
developed) by the Municipal Securities Rulemaking Board (``MSRB'') and
other self-regulatory organizations, the North American Securities
Administrators Association, the National Futures Association, and the
Federal Deposit Insurance Corporation.
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\5\ See NASD Rules 1021(a) and 1031(a), and NASD Rules 1022 and
1032. See also NASD Rules 1041 and 1050 and FINRA Rule 1230(b)(6)
regarding the qualification and registration requirements for Order
Processing Assistant Representatives, Research Analysts and
Operations Professionals, respectively.
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FINRA currently administers examinations electronically through the
PROCTOR[supreg] system \6\ at testing centers operated by vendors under
contract with FINRA. FINRA charges an examination fee to candidates for
FINRA-sponsored and co-sponsored examinations to cover the development,
maintenance and delivery of these examinations. For qualification
examinations sponsored by a FINRA client and administered by FINRA,
FINRA charges a delivery fee that represents either a portion of or the
entire examination fee for the examination.\7\
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\6\ PROCTOR is a computer system that is specifically designed
for the administration and delivery of computer-based testing and
training.
\7\ The delivery fee represents a portion of the entire
examination fee when a FINRA client has established an additional
fee for an examination that it sponsors. For example, the fee to
take the Series 51 (Municipal Fund Securities Limited Principal)
examination is currently $155. Of this amount, $95 is the FINRA
administration and delivery fee, and $60 is the development fee
determined by the FINRA client, the MSRB. See MSRB Rule A-16.
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FINRA regularly conducts a comprehensive review of the examination
fee structure, including an analysis of the costs associated with
developing, administering, and delivering each examination, so that
FINRA may better understand whether pricing changes are warranted and
evaluate the financial condition of each qualification examination
program. Based on the results of the review, FINRA may propose changes
to better align the examination fee structure with the costs associated
with the programs. When changes are warranted, fees are set at levels
that are expected to meet cost and revenue objectives over a two-to-
three year period to provide firms and examination candidates with a
predictable cost environment.
In this regard, the most recent review revealed that certain
operational costs have increased and, based on current information,
will continue to increase over the next few years. In particular, these
increased costs consist of: (1) Fees that vendors charge FINRA for
delivering qualification examinations through their networks of test
delivery centers; (2) staff labor associated with the development and
maintenance of the qualification examinations; and (3) PROCTOR system
maintenance and enhancement expenses.\8\ FINRA believes that the
proposed rule change will help to better align the examination program
fees with these increased costs. Therefore, FINRA is proposing to amend
Section 4(c) of Schedule A to the FINRA By-Laws to increase the fees
for the qualification examinations set forth in Section 4(c).
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\8\ While delivery costs for examinations have increased over
the last three years, delivery costs for qualification examinations
are scheduled to stabilize in 2015 and 2016 based on FINRA's
recently negotiated agreements with vendors that deliver the
qualification examinations through their networks of test delivery
centers.
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FINRA has filed the proposed rule change for immediate
effectiveness. FINRA is proposing that the implementation date of the
proposed rule change will be April 1, 2015. Specifically, the proposed
qualification examination fees would become effective for examination
requests made in the CRD system on or after April 1, 2015.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\9\ which requires, among
other things, that FINRA rules provide for the equitable
[[Page 16715]]
allocation of reasonable dues, fees and other charges among members and
issuers and other persons using any facility or system that FINRA
operates or controls.
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\9\ 15 U.S.C. 78o-3(b)(5).
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FINRA believes that the proposed rule change constitutes an
equitable allocation of fees as the qualification examination fees will
be assessed only on those individuals who take qualification
examinations. In addition, all candidates who register for a particular
qualification examination will be charged the same amount.
FINRA further believes that the proposed qualification examination
changes are reasonable because they will more closely align the overall
examination program fees with the overall costs associated with the
programs. In this regard, FINRA notes that the last time that it
increased fees for any of the qualification examinations set forth in
Schedule A to the FINRA By-Laws was April 2012.\10\ Since that time,
FINRA's examination program expenses have increased and, based on
current information, will continue to increase over the next few years.
Specifically, FINRA has experienced cost increases relating to: (1)
Fees that vendors charge FINRA for delivering qualification
examinations through their networks of test delivery centers; (2) staff
labor associated with the development and maintenance of the
qualification examinations; and (3) PROCTOR system maintenance and
enhancement expenses. \11\
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\10\ See Securities Exchange Act Release No. 66465 (February 24,
2012), 77 FR 12635 (March 1, 2012) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2012-009).
\11\ See supra note 8.
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To better align the fees and costs associated with the examination
programs, FINRA is proposing modest fee increases. In this regard,
FINRA notes that no qualification examination fee will increase by more
than $15 and the majority of examination fees will increase by only $5.
Accordingly, FINRA believes that the proposed qualification examination
fee changes are equitably allocated and reasonable.
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. FINRA believes that the
proposed qualification examination fee changes have limited economic
impacts on the industry.
Economic Impact Assessment
(a) Need for the Rule
FINRA seeks to set the qualification examination fees in such a
manner as to meet expected program costs and revenues over a two-to-
three year period in order to provide firms and examination candidates
with a predicable cost environment. FINRA has determined that
operational costs for the program have increased since FINRA last
adjusted the fees in April 2012. FINRA also projects that these
operational costs will continue to increase. As a result, FINRA has
determined that a fee increase is needed to better align the
examination program fees to meet these increased costs.
(b) Economic Baseline
The current examination fee structure and expected costs associated
with the examination programs serve as an economic baseline for the
proposed rule change. Qualification examination fees are charged
directly to members that act as sponsors for individuals seeking to
obtain qualifications through the examination programs. While some
members may choose to absorb these costs directly, other members
directly pass on the costs of taking qualification examinations to the
sponsored individual. FINRA's qualification examination program
expenses have increased over the past three years and are expected to
continue to rise in the next few years. Specifically, the following
expenses have increased and are expected to further increase in the
next few years: (1) Fees that vendors charge FINRA for delivering
qualification examinations through their networks of test delivery
centers; (2) FINRA staff labor expenses associated with the development
and maintenance of the qualification examinations; and (3) technology
maintenance and enhancement expenses.\12\
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\12\ See supra note 8.
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In 2014, the total volume of qualification examinations was
130,830, sponsored by 2,813 member firms. The average volume per member
firm was 47 qualification examinations. The median volume per member
firm was four qualification examinations, as large member firms that
employed more representatives contributed to the majority of the
qualification examination enrollments. For example, the top 25 member
firms with the highest qualification examination enrollments accounted
for 52% of the total volume with an average of 2,704 enrollments per
firm. In contrast, 70% of the overall member firms had less than 10
qualification examination enrollments. Equivalently in 2014, the number
of persons enrolling for qualification examinations was 95,306, and the
average number of enrollments per person was 1.4.
Historically, the fees collected by the qualification examination
programs have provided a limited but stable contribution to FINRA's
overall revenue. In the absence of the proposed rule change, the
qualification examination programs would not be able to meet the target
contribution margin, in addition to, covering increased costs in the
coming years.
(c) Economic Impacts
Assuming stable qualification examination delivery volumes (defined
by the number and type of qualification examinations provided), the
contribution margin of the qualification examination programs is
estimated to reach the target level in 2015 and 2016 if the proposed
fee increases become effective in April 2015. Compared to 2014, the
total increase in qualification examination fees is estimated to be
$0.94 million in 2015 and $1.25 million in 2016. At the individual
examination level, no qualification examination fee will increase by
more than $15 and the majority of qualification examination fees will
increase by $5.
The increases in the qualification examination fees would impose a
burden on members or individuals that pay for these examinations.
Compared to the current fee structure, the average increase in
qualification examination fees per member firm is estimated to be $334
in 2015 and $446 in 2016. The median fee increase per member firm is
estimated to be $34 in 2015 and $45 in 2016, as large member firms are
expected to account for the majority of the examination enrollments.
For example, the top 25 member firms with the highest enrollments are
estimated to have an average increase of $18,459 in 2015 and $24,612 in
2016. For the member firms with less than 10 enrollments (which
accounted for 70% of the overall member firms), the average increase
per firm is estimated to be $26 in 2015 and $35 in 2016. In contrast
with the dollar amount increases, assuming stable qualification
examination delivery volumes, the percentage increases in qualification
examination fees for member firms vary in a narrow range of 3% to 5%
with an average of 4% in 2015 and 4% to 7% with an average of 5% in
2016. At the individual level, compared to 2014, the average
qualification examination fee increase per person is estimated to be
$10 in 2015 and $13 in 2016.
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FINRA does not believe that the proposed rule change would impact
the competition among member firms, those who seek qualifications, or
to the provision of member services. Based on the economic impact
assessment, the proposed increases in qualification examination fees
are limited. Moreover, they do not impose significantly different
impacts on member firms with different sizes or business models.
Furthermore, FINRA does not believe that the proposed rule change will
create any competitive advantage for any individuals as all candidates
who register for a particular qualification examination will be charged
the same amount.
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 foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \13\ and paragraph (f)(2) of Rule 19b-4
thereunder. \14\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(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 email to rule-comments@sec.gov. Please include
File Number SR-FINRA-2015-006 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2015-006. 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 (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
10:00 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-2015-006 and should be
submitted on or before April 20, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority. \15\
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\15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-07133 Filed 3-27-15; 8:45 am]
BILLING CODE 8011-01-P
