Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Series 4 Examination Program, 36388-36391 [2015-15454]

Download as PDF 36388 Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices opportunity to make an oral presentation.32 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by July 15, 2015. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by July 29, 2015. In light of the concerns raised by the proposed rule change, as discussed above, the Commission invites additional comment on the proposed rule change as the Commission continues its analysis of the proposed rule change’s consistency with sections 6(b)(5) and 6(b)(8),33 or any other provision of the Act, or the rules and regulations thereunder. The Commission asks that commenters address the sufficiency and merit of the Exchange’s statements in support of the proposed rule change, in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission invites comment on the following: 1. What are commenters’ views on how CBOE’s proposal could impact the quality of the Auctions, internalization rates, liquidity, and competition, within or outside of the Auctions? 2. What are commenters’ views on the potential impact of CBOE’s proposal on the quoting behavior of Market-Makers? 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– CBOE–2015–026 on the subject line. tkelley on DSK3SPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–CBOE–2015–026. 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 32 Section 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Pub. L. 94–29 (June 4, 1975), grants to the Commission flexibility to determine what type of proceeding—either oral or notice and opportunity for written comments— is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 33 15 U.S.C. 78f(b)(5), (b)(8). VerDate Sep<11>2014 16:43 Jun 23, 2015 Jkt 235001 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 the filing also will be available for inspection and copying at the principal office of the Exchange. 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–CBOE– 2015–026 and should be submitted by July 15, 2015. Rebuttal comments should be submitted by July 29, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Brent J. Fields, Secretary. [FR Doc. 2015–15453 Filed 6–23–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75246; File No. SR–FINRA– 2015–018] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Series 4 Examination Program June 18, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘SEA’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 12, 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 34 17 CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 has designated the proposed rule change as ‘‘constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule’’ under Section 19(b)(3)(A)(i) of the Act 3 and Rule 19b–4(f)(1) 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 the Substance of the Proposed Rule Change FINRA is filing revisions to the content outline and selection specifications for the Registered Options Principal (Series 4) examination program.5 The proposed revisions update the material to reflect changes to the laws, rules and regulations covered by the examination and to incorporate the functions and associated tasks currently performed by a Registered Options Principal. In addition, FINRA is proposing to make changes to the format of the content outline. FINRA is not proposing any textual changes to the ByLaws, Schedules to the By-Laws or Rules of FINRA. The revised content outline is attached.6 The Series 4 selection specifications have been submitted to the Commission under separate cover with a request for confidential treatment pursuant to SEA Rule 24b–2.7 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 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 3 15 U.S.C. 78s(b)(3)(A)(i). CFR 240.19b–4(f)(1). 5 FINRA also is proposing corresponding revisions to the Series 4 question bank. Based on instruction from SEC staff, FINRA is submitting this filing for immediate effectiveness pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(1) thereunder, and is not filing the question bank for review. See Letter to Alden S. Adkins, Senior Vice President and General Counsel, NASD Regulation, from Belinda Blaine, Associate Director, Division of Market Regulation, SEC, dated July 24, 2000. The question bank is available for SEC review. 6 The Commission notes that the revised content outline is attached to the filing, not to this Notice. The content outline is available as part of the filing on FINRA’s Web site. 7 17 CFR 240.24b–2. 4 17 E:\FR\FM\24JNN1.SGM 24JNN1 Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices 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 Section 15A(g)(3) of the Act 8 authorizes FINRA to prescribe standards of training, experience, and competence for persons associated with FINRA members. In accordance with that provision, FINRA has developed examinations that are designed to establish that persons associated with FINRA members have attained specified levels of competence and knowledge, consistent with applicable registration requirements under FINRA rules. FINRA periodically reviews the content of the examinations to determine whether revisions are necessary or appropriate in view of changes pertaining to the subject matter covered by the examinations. NASD Rule 1022(f) requires members that engage in, or that intend to engage in transactions in options with the public to have at least one Registered Options Principal. Further, every person engaged in the supervision of options sales practices with the public, including a person designated pursuant to FINRA Rule 3110(a)(2) must be registered as a Registered Options Principal.9 A person registered solely as a Registered Options Principal is not qualified to function in a principal 10 capacity with responsibility over any area of business activity that is not stated above. A Registered Options Principal must, prior to or concurrent with such registration, be or become qualified pursuant to the NASD Rule 1030 Series, as either a General Securities Representative (Series 7) 11 or a 8 15 U.S.C. 78o–3(g)(3). Rule 1022(f) also includes additional requirements applicable to Registered Options Principals engaged in securities futures activities. The rule generally provides that prior to the introduction of an appropriate qualification examination that addresses security futures products, a Registered Options Principal is required to complete a firm-element continuing education program that addresses security futures products and a principal’s responsibilities for security futures before such person can supervise security futures activities. 10 The term principal is defined in NASD Rule 1021(b) (Definition of a Principal). 11 Registration as a United Kingdom Securities Representative or Canada Securities Representative tkelley on DSK3SPTVN1PROD with NOTICES 9 NASD VerDate Sep<11>2014 16:43 Jun 23, 2015 Jkt 235001 Corporate Securities Representative (Series 62) and an Options Representative (Series 42). In consultation with a committee of industry representatives, FINRA recently undertook a review of the Series 4 examination program. As a result of this review, FINRA is proposing to make revisions to the content outline to reflect changes to the laws, rules and regulations covered by the examination and to incorporate the functions and associated tasks currently performed by a Registered Options Principal. FINRA also is proposing to make changes to the format of the content outline. Current Content Outline The current content outline is divided into three sections. The following are the three sections and the number of questions associated with each of the sections, denoted Section 1 through Section 3: 1. Options Investment Strategies, 34 questions; 2. Supervision of Sales Activities and Trading Practices, 75 questions; and 3. Supervision of Employees, Business Conduct, and Recordkeeping and Reporting Requirements, 16 questions. Each section also includes the applicable laws, rules and regulations associated with that section. The current content outline also includes a preface (addressing, among other things, the purpose, administration and scoring of the examination), sample questions and reference materials. Proposed Revisions FINRA is proposing to divide the content outline into six major job functions that are performed by a Registered Options Principal. The following are the six major job functions, denoted Function 1 through Function 6, with the associated number of questions: Function 1: Supervise the Opening of New Options Accounts, 21 questions; Function 2: Supervise Options Account Activities, 25 questions; Function 3: Supervise General Options Trading, 30 questions; Function 4: Supervise Options Communications, 9 questions; Function 5: Implement Practices and Adhere to Regulatory Requirements, 12 questions; and Function 6: Supervise Associated Persons and Personnel Management Activities, 28 questions. FINRA is proposing to adjust the number of questions assigned to each is an acceptable alternative prerequisite to the General Securities Representative prerequisite. PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 36389 major job function to ensure that the overall examination better reflects the key tasks performed by a Registered Options Principal. The questions on the revised Series 4 examination will place greater emphasis on key tasks such as supervision of registered persons, sales practices and compliance. Each function also includes specific tasks describing activities associated with performing that function. There are four tasks (1.1–1.4) associated with Function 1; four tasks (2.1–2.4) associated with Function 2; four tasks (3.1–3.4) associated with Function 3; four tasks (4.1–4.4) associated with Function 4; two tasks (5.1–5.2) associated with Function 5; and four tasks (6.1–6.4) associated with Function 6.12 By way of example, one such task (Task 4.2) is review options retail communications and determine appropriate approval.13 Further, the content outline lists the knowledge required to perform each function and associated tasks (e.g., types of retail communications, required approvals).14 In addition, where applicable, the content outline lists the laws, rules and regulations a candidate is expected to know to perform each function and associated tasks. These include the applicable FINRA Rules (e.g., FINRA Rule 2220), NASD Rules (e.g., NASD Rule 2711(i)) and SEC rules (e.g., Rule 135a under the Securities Act of 1933).15 FINRA conducted a job analysis study of Registered Options Principals, which included the use of a survey, in developing each function and associated tasks and updating the required knowledge set forth in the revised content outline. The functions and associated tasks, which appear in the revised content outline for the first time, reflect the day-to-day activities of a Registered Options Principal. As noted above, FINRA also is proposing to revise the content outline to reflect changes to the laws, rules and regulations covered by the examination. Among other revisions, FINRA is proposing to revise the content outline to reflect the adoption of rules in the consolidated FINRA rulebook (e.g., NASD Rule 2310 (Recommendations to Customers (Suitability)), NASD Rule 2212 (Telemarketing) and NASD Rule 3110 (Books and Records) were adopted as FINRA Rule 2111 (Suitability), FINRA Rule 3230 (Telemarketing) and 12 See Exhibit 3a, Outline Pages 6–22. See footnote 6 regarding availability of the content outline. 13 See Exhibit 3a, Outline Page 15. 14 See Exhibit 3a, Outline Page 15. 15 See Exhibit 3a, Outline Page 15. E:\FR\FM\24JNN1.SGM 24JNN1 36390 Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices FINRA Rule 4510 Series (Books and Records Requirements), respectively).16 FINRA is proposing similar changes to the Series 4 selection specifications and question bank. Finally, FINRA is proposing to make changes to the format of the content outline, including the preface, sample questions and reference materials. Among other changes, FINRA is proposing to: (1) Add a table of contents; 17 (2) provide more details regarding the purpose of the examination; 18 (3) provide more details on the application procedures; 19 (4) provide more details on the development and maintenance of the content outline and examination; 20 (5) explain that the passing scores are established by FINRA staff, in consultation with a committee of industry representatives, using a standard setting procedure, and that a statistical adjustment process known as equating is used in scoring exams; 21 and (6) note that each candidate will receive a score report at the end of the test session, which will indicate a pass or fail status and include a score profile listing the candidate’s performance on each major content area covered on the examination.22 The number of questions on the Series 4 examination will remain at 125 multiple-choice questions,23 and candidates will have 195 minutes to complete the examination. The test time will change from 180 minutes to 195 minutes because pretest items increased from 5 items to 10 items. Currently, a score of 70 percent is required to pass the examination. The passing score will change to 72 percent with the revised Series 4 examination program. Availability of Content Outline tkelley on DSK3SPTVN1PROD with NOTICES The current Series 4 content outline is available on FINRA’s Web site, at www.finra.org/brokerqualifications/ exams. The revised Series 4 content 16 See Rule Conversion Chart, available at https://www.finra.org/industry/finra-ruleconsolidation. 17 See Exhibit 3a, Outline Page 2. 18 See Exhibit 3a, Outline Page 3. 19 See Exhibit 3a, Outline Page 3. 20 See Exhibit 3a, Outline Page 4. 21 See Exhibit 3a, Outline Page 5. 22 See Exhibit 3a, Outline Page 5. 23 Consistent with FINRA’s practice of including ‘‘pretest’’ items on certain qualification examinations, which is designed to ensure that new examination items meet acceptable testing standards prior to use for scoring purposes, the examination includes 10 additional, unidentified pretest items that do not contribute towards the candidate’s score. Therefore, the examination actually consists of 135 items, 125 of which are scored. The 10 pretest items are randomly distributed throughout the examination. VerDate Sep<11>2014 16:43 Jun 23, 2015 Jkt 235001 outline will replace the current content outline on FINRA’s Web site. FINRA is filing the proposed rule change for immediate effectiveness. FINRA proposes to implement the revised Series 4 examination program on September 28, 2015. FINRA will announce the proposed rule change and the implementation date in a Regulatory Notice. 2. Statutory Basis FINRA believes that the proposed revisions to the Series 4 examination program are consistent with the provisions of Section 15A(b)(6) of the Act,24 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, and Section 15A(g)(3) of the Act,25 which authorizes FINRA to prescribe standards of training, experience, and competence for persons associated with FINRA members. FINRA believes that the proposed revisions will further these purposes by updating the examination program to reflect changes to the laws, rules and regulations covered by the examination and to incorporate the functions and associated tasks currently performed by a Registered Options Principal. 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. The updated examination aligns with the functions and associated tasks currently performed by a Registered Options Principal and tests knowledge of the most current laws, rules, regulations and skills relevant to those functions and associated tasks. As such, the proposed revisions would make the examination more efficient and effective. 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. 24 15 25 15 PO 00000 U.S.C. 78o–3(b)(6). U.S.C. 78o–3(g)(3). Frm 00075 Fmt 4703 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 26 and paragraph (f)(1) of Rule 19b–4 thereunder.27 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 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 rulecomments@sec.gov. Please include File Number SR–FINRA–2015–018 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–FINRA–2015–018. 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 26 15 27 17 Sfmt 4703 E:\FR\FM\24JNN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(1). 24JNN1 Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal offices 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–2015–018, and should be submitted on or before July 15, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Brent J. Fields, Secretary. [FR Doc. 2015–15454 Filed 6–23–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75243; File No. SR–BATS– 2015–45] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc. tkelley on DSK3SPTVN1PROD with NOTICES June 18, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 9, 2015, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 28 17 CFR 200.30–3(a)(12). 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). 1 15 VerDate Sep<11>2014 16:43 Jun 23, 2015 Jkt 235001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend its fees and rebates applicable to Members 5 of the Exchange pursuant to Rule 15.1(a) and (c) (‘‘Fee Schedule’’) to adopt fees applicable to Members of the Exchange’s equity options platform (‘‘BATS Options’’) for the use of a communication and routing service known as BATS Connect. Changes to the fee schedule pursuant to this proposal are effective upon filing. The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 36391 1. Purpose The Exchange proposes to adopt fees applicable to Members of BATS Options for the use of a communication and routing service known as BATS Connect. On May 26 [sic], 2015, the Exchange filed a proposed rule change with the Commission to adopt a communication and routing service known as BATS Connect.6 The Exchange now proposes to adopt fees related to the use of BATS Connect that are equal to the fees charged for an identical service, also called BATS Connect, offered by the Exchange’s affiliate, EDGX.7 The Exchange notes that BATS Connect will be offered by all of the Exchange’s affiliated equity exchanges but that the fees are also appropriately set forth on the fee schedule of BATS Options because BATS Connect will be offered to all Exchange Members, including Members that participate primarily or exclusively on BATS Options. BATS Connect is offered by the Exchange on a voluntary basis in a capacity similar to a vendor. In sum, BATS Connect is a communication service that provides subscribers an additional means to receive market data from and route orders to any destination connected to the Exchange’s network. BATS Connect does not provide any advantage to subscribers for connecting to the Exchange’s affiliates 8 as compared to other method of connectivity available to subscribers. The servers of the subscriber need not be located in the same facilities as the Exchange in order to subscribe to BATS Connect. Subscribers may also seek to utilize BATS Connect in the event of a market disruption where other alternative connection methods become unavailable. The Exchange will charge a monthly connectivity fee to subscribers utilizing BATS Connect to route orders to other exchanges and broker-dealers that are connected to the Exchange’s network. The amount of the connectivity fee varies based solely on the bandwidth selected by the subscriber. Specifically, the Exchange proposes to charge $350 for 1 Mb, $700 for 5 Mb, $950 for 10 Mb, $1,500 for 25 Mb, $2,500 for 50 Mb, and $3,500 for 100 Mb. BATS Connect would also allow subscribers to receive market data feeds from the exchanges connected to the Exchange’s network. In such case, the subscriber would pay the Exchange a connectivity fee, which varies and is based solely on the amount of bandwidth required to transmit the selected data product to the subscriber. The proposed connectivity fees are set forth in the Exhibit 5 attached hereto and range from no charge to $11,500 based on the market data product the subscriber selects. The Exchange also proposes to adopt a discounted fee of $4,160 per month for subscribers who purchase connectivity to a bundle of select market data products. The following market data 5 A Member is defined as ‘‘any registered broker or dealer that has been admitted to membership in the Exchange.’’ See Exchange Rule 1.5(n). 6 See file no. SR–BATS–2015–40. 7 See the EDGX fee schedule available at https:// batstrading.com/support/fee_schedule/edgx/. See also Securities Exchange Act Release No. 73780 (December 8, 2014), 79 FR 73942 (December 12, 2014) (SR–EDGX–2014–28) and file no. SR–EDGX– 2015–27. 8 The Exchange’s affiliated exchanges are EDGX, EDGA Exchange, Inc. (‘‘EDGA’’), and BATS YExchange, Inc. (‘‘BYX’’). The Exchange understands that its affiliated exchanges intend to file identical proposed rule changes to adopt the fees for the BATS Connect service with the Commission. The Exchange also notes that its affiliated exchanges have also filed proposed rule changes with the Commission to adopt rules describing the BATS Connect service. 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 Exchange 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. 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 Statutory Basis for, the Proposed Rule Change PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 E:\FR\FM\24JNN1.SGM 24JNN1

Agencies

[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)]
[Notices]
[Pages 36388-36391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15454]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75246; File No. SR-FINRA-2015-018]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to the Series 4 Examination Program

June 18, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``SEA'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on June 12, 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 ``constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule'' under Section 
19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is filing revisions to the content outline and selection 
specifications for the Registered Options Principal (Series 4) 
examination program.\5\ The proposed revisions update the material to 
reflect changes to the laws, rules and regulations covered by the 
examination and to incorporate the functions and associated tasks 
currently performed by a Registered Options Principal. In addition, 
FINRA is proposing to make changes to the format of the content 
outline. FINRA is not proposing any textual changes to the By-Laws, 
Schedules to the By-Laws or Rules of FINRA.
---------------------------------------------------------------------------

    \5\ FINRA also is proposing corresponding revisions to the 
Series 4 question bank. Based on instruction from SEC staff, FINRA 
is submitting this filing for immediate effectiveness pursuant to 
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(1) thereunder, and 
is not filing the question bank for review. See Letter to Alden S. 
Adkins, Senior Vice President and General Counsel, NASD Regulation, 
from Belinda Blaine, Associate Director, Division of Market 
Regulation, SEC, dated July 24, 2000. The question bank is available 
for SEC review.
---------------------------------------------------------------------------

    The revised content outline is attached.\6\ The Series 4 selection 
specifications have been submitted to the Commission under separate 
cover with a request for confidential treatment pursuant to SEA Rule 
24b-2.\7\
---------------------------------------------------------------------------

    \6\ The Commission notes that the revised content outline is 
attached to the filing, not to this Notice. The content outline is 
available as part of the filing on FINRA's Web site.
    \7\ 17 CFR 240.24b-2.
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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 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

[[Page 36389]]

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
    Section 15A(g)(3) of the Act \8\ authorizes FINRA to prescribe 
standards of training, experience, and competence for persons 
associated with FINRA members. In accordance with that provision, FINRA 
has developed examinations that are designed to establish that persons 
associated with FINRA members have attained specified levels of 
competence and knowledge, consistent with applicable registration 
requirements under FINRA rules. FINRA periodically reviews the content 
of the examinations to determine whether revisions are necessary or 
appropriate in view of changes pertaining to the subject matter covered 
by the examinations.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(g)(3).
---------------------------------------------------------------------------

    NASD Rule 1022(f) requires members that engage in, or that intend 
to engage in transactions in options with the public to have at least 
one Registered Options Principal. Further, every person engaged in the 
supervision of options sales practices with the public, including a 
person designated pursuant to FINRA Rule 3110(a)(2) must be registered 
as a Registered Options Principal.\9\ A person registered solely as a 
Registered Options Principal is not qualified to function in a 
principal \10\ capacity with responsibility over any area of business 
activity that is not stated above.
---------------------------------------------------------------------------

    \9\ NASD Rule 1022(f) also includes additional requirements 
applicable to Registered Options Principals engaged in securities 
futures activities. The rule generally provides that prior to the 
introduction of an appropriate qualification examination that 
addresses security futures products, a Registered Options Principal 
is required to complete a firm-element continuing education program 
that addresses security futures products and a principal's 
responsibilities for security futures before such person can 
supervise security futures activities.
    \10\ The term principal is defined in NASD Rule 1021(b) 
(Definition of a Principal).
---------------------------------------------------------------------------

    A Registered Options Principal must, prior to or concurrent with 
such registration, be or become qualified pursuant to the NASD Rule 
1030 Series, as either a General Securities Representative (Series 7) 
\11\ or a Corporate Securities Representative (Series 62) and an 
Options Representative (Series 42).
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    \11\ Registration as a United Kingdom Securities Representative 
or Canada Securities Representative is an acceptable alternative 
prerequisite to the General Securities Representative prerequisite.
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    In consultation with a committee of industry representatives, FINRA 
recently undertook a review of the Series 4 examination program. As a 
result of this review, FINRA is proposing to make revisions to the 
content outline to reflect changes to the laws, rules and regulations 
covered by the examination and to incorporate the functions and 
associated tasks currently performed by a Registered Options Principal. 
FINRA also is proposing to make changes to the format of the content 
outline.
Current Content Outline
    The current content outline is divided into three sections. The 
following are the three sections and the number of questions associated 
with each of the sections, denoted Section 1 through Section 3:
    1. Options Investment Strategies, 34 questions;
    2. Supervision of Sales Activities and Trading Practices, 75 
questions; and
    3. Supervision of Employees, Business Conduct, and Recordkeeping 
and Reporting Requirements, 16 questions.
    Each section also includes the applicable laws, rules and 
regulations associated with that section. The current content outline 
also includes a preface (addressing, among other things, the purpose, 
administration and scoring of the examination), sample questions and 
reference materials.
Proposed Revisions
    FINRA is proposing to divide the content outline into six major job 
functions that are performed by a Registered Options Principal. The 
following are the six major job functions, denoted Function 1 through 
Function 6, with the associated number of questions:
    Function 1: Supervise the Opening of New Options Accounts, 21 
questions;
    Function 2: Supervise Options Account Activities, 25 questions;
    Function 3: Supervise General Options Trading, 30 questions;
    Function 4: Supervise Options Communications, 9 questions;
    Function 5: Implement Practices and Adhere to Regulatory 
Requirements, 12 questions; and
    Function 6: Supervise Associated Persons and Personnel Management 
Activities, 28 questions.
    FINRA is proposing to adjust the number of questions assigned to 
each major job function to ensure that the overall examination better 
reflects the key tasks performed by a Registered Options Principal. The 
questions on the revised Series 4 examination will place greater 
emphasis on key tasks such as supervision of registered persons, sales 
practices and compliance.
    Each function also includes specific tasks describing activities 
associated with performing that function. There are four tasks (1.1-
1.4) associated with Function 1; four tasks (2.1-2.4) associated with 
Function 2; four tasks (3.1-3.4) associated with Function 3; four tasks 
(4.1-4.4) associated with Function 4; two tasks (5.1-5.2) associated 
with Function 5; and four tasks (6.1-6.4) associated with Function 
6.\12\ By way of example, one such task (Task 4.2) is review options 
retail communications and determine appropriate approval.\13\ Further, 
the content outline lists the knowledge required to perform each 
function and associated tasks (e.g., types of retail communications, 
required approvals).\14\ In addition, where applicable, the content 
outline lists the laws, rules and regulations a candidate is expected 
to know to perform each function and associated tasks. These include 
the applicable FINRA Rules (e.g., FINRA Rule 2220), NASD Rules (e.g., 
NASD Rule 2711(i)) and SEC rules (e.g., Rule 135a under the Securities 
Act of 1933).\15\ FINRA conducted a job analysis study of Registered 
Options Principals, which included the use of a survey, in developing 
each function and associated tasks and updating the required knowledge 
set forth in the revised content outline. The functions and associated 
tasks, which appear in the revised content outline for the first time, 
reflect the day-to-day activities of a Registered Options Principal.
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    \12\ See Exhibit 3a, Outline Pages 6-22. See footnote 6 
regarding availability of the content outline.
    \13\ See Exhibit 3a, Outline Page 15.
    \14\ See Exhibit 3a, Outline Page 15.
    \15\ See Exhibit 3a, Outline Page 15.
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    As noted above, FINRA also is proposing to revise the content 
outline to reflect changes to the laws, rules and regulations covered 
by the examination. Among other revisions, FINRA is proposing to revise 
the content outline to reflect the adoption of rules in the 
consolidated FINRA rulebook (e.g., NASD Rule 2310 (Recommendations to 
Customers (Suitability)), NASD Rule 2212 (Telemarketing) and NASD Rule 
3110 (Books and Records) were adopted as FINRA Rule 2111 (Suitability), 
FINRA Rule 3230 (Telemarketing) and

[[Page 36390]]

FINRA Rule 4510 Series (Books and Records Requirements), 
respectively).\16\
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    \16\ See Rule Conversion Chart, available at https://www.finra.org/industry/finra-rule-consolidation.
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    FINRA is proposing similar changes to the Series 4 selection 
specifications and question bank.
    Finally, FINRA is proposing to make changes to the format of the 
content outline, including the preface, sample questions and reference 
materials. Among other changes, FINRA is proposing to: (1) Add a table 
of contents; \17\ (2) provide more details regarding the purpose of the 
examination; \18\ (3) provide more details on the application 
procedures; \19\ (4) provide more details on the development and 
maintenance of the content outline and examination; \20\ (5) explain 
that the passing scores are established by FINRA staff, in consultation 
with a committee of industry representatives, using a standard setting 
procedure, and that a statistical adjustment process known as equating 
is used in scoring exams; \21\ and (6) note that each candidate will 
receive a score report at the end of the test session, which will 
indicate a pass or fail status and include a score profile listing the 
candidate's performance on each major content area covered on the 
examination.\22\
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    \17\ See Exhibit 3a, Outline Page 2.
    \18\ See Exhibit 3a, Outline Page 3.
    \19\ See Exhibit 3a, Outline Page 3.
    \20\ See Exhibit 3a, Outline Page 4.
    \21\ See Exhibit 3a, Outline Page 5.
    \22\ See Exhibit 3a, Outline Page 5.
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    The number of questions on the Series 4 examination will remain at 
125 multiple-choice questions,\23\ and candidates will have 195 minutes 
to complete the examination. The test time will change from 180 minutes 
to 195 minutes because pretest items increased from 5 items to 10 
items. Currently, a score of 70 percent is required to pass the 
examination. The passing score will change to 72 percent with the 
revised Series 4 examination program.
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    \23\ Consistent with FINRA's practice of including ``pretest'' 
items on certain qualification examinations, which is designed to 
ensure that new examination items meet acceptable testing standards 
prior to use for scoring purposes, the examination includes 10 
additional, unidentified pretest items that do not contribute 
towards the candidate's score. Therefore, the examination actually 
consists of 135 items, 125 of which are scored. The 10 pretest items 
are randomly distributed throughout the examination.
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Availability of Content Outline
    The current Series 4 content outline is available on FINRA's Web 
site, at www.finra.org/brokerqualifications/exams. The revised Series 4 
content outline will replace the current content outline on FINRA's Web 
site.
    FINRA is filing the proposed rule change for immediate 
effectiveness. FINRA proposes to implement the revised Series 4 
examination program on September 28, 2015. FINRA will announce the 
proposed rule change and the implementation date in a Regulatory 
Notice.
2. Statutory Basis
    FINRA believes that the proposed revisions to the Series 4 
examination program are consistent with the provisions of Section 
15A(b)(6) of the Act,\24\ 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, and 
Section 15A(g)(3) of the Act,\25\ which authorizes FINRA to prescribe 
standards of training, experience, and competence for persons 
associated with FINRA members. FINRA believes that the proposed 
revisions will further these purposes by updating the examination 
program to reflect changes to the laws, rules and regulations covered 
by the examination and to incorporate the functions and associated 
tasks currently performed by a Registered Options Principal.
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    \24\ 15 U.S.C. 78o-3(b)(6).
    \25\ 15 U.S.C. 78o-3(g)(3).
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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. The updated examination aligns 
with the functions and associated tasks currently performed by a 
Registered Options Principal and tests knowledge of the most current 
laws, rules, regulations and skills relevant to those functions and 
associated tasks. As such, the proposed revisions would make the 
examination more efficient and effective.

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 \26\ and paragraph (f)(1) of Rule 19b-4 
thereunder.\27\ 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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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f)(1).
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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-2015-018 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2015-018. 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

[[Page 36391]]

Reference Room, 100 F Street NE., Washington, DC 20549 on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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-2015-018, and should be submitted on or before 
July 15, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-15454 Filed 6-23-15; 8:45 am]
 BILLING CODE 8011-01-P
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