Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Series 27 Examination Program, 64465-64468 [2015-26913]
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Notices
to investors by providing them with
additional investment alternatives.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Phlx does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed change does not impose any
burden on intra-market competition
because it applies to all members and
member organizations uniformly. There
is no burden on inter-market
competition because the Exchange is
merely attempting to continue to permit
trading of GOOGL as a Mini Options, as
is the case today. As a result, there will
be no substantive changes to the
Exchange’s operations or its rules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 8 and Rule 19b–4(f)(6)
thereunder.9
A proposed rule change filed under
Rule 19b–4(f)(6) 10 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii) 11 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest.
The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
deems this requirement to have been met.
10 17 CFR 240.19b–4(f)(6).
11 17 CFR 240.19b–4(f)(6)(iii).
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9 17
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filing. The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest, as it
will allow the Exchange to continue to
list mini options on the Google Class A
shares, now Alphabet’s Class A shares,
following Google’s reorganization. For
this reason, the Commission designates
the proposed rule change to be operative
upon filing.12
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.
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–
PHLX–2015–82 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–PHLX–2015–82. 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
12 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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64465
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 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–PHLX–
2015–82, and should be submitted on or
before November 13, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26915 Filed 10–22–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76189; File No. SR–FINRA–
2015–038]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the Series 27
Examination Program
October 19, 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 October 13, 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
13 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)(i).
4 17 CFR 240.19b–4(f)(1).
1 15
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Notices
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is filing revisions to the
content outline and selection
specifications for the Financial and
Operations Principal (Series 27)
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 Financial and Operations 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.
The revised content outline is
attached.6 The Series 27 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
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(b)(1) requires that
each member that operates pursuant to
the provisions of SEA Rule 15c3–
1(a)(1)(ii),9 SEA Rule 15c3–1(a)(2)(i) 10
or SEA Rule 15c3–1(a)(8) 11 shall
designate as Financial and Operations
Principal 12 those persons associated
with it, at least one of whom shall be its
chief financial officer, who perform the
duties described in paragraph (b)(2) of
the rule. The rule provides that each
person associated with a member who
performs such duties shall be required
to register as a Financial and Operations
Principal with FINRA and shall pass an
appropriate qualification examination
before such registration may become
effective. Paragraph (b)(2) of the rule
provides that the term Financial and
Operations Principal shall mean a
person associated with a member whose
duties include:
• Final approval and responsibility
for the accuracy of financial reports
submitted to any duly established
securities industry regulatory body;
• final preparation of such reports;
8 15
U.S.C. 78o–3(g)(3).
CFR 240.15c3–1(a)(1)(ii). SEA Rule 15c3–
1(a)(1)(ii) addresses net capital requirements for
brokers or dealers that elect not to be subject to the
Aggregate Indebtedness Standard of paragraph
(a)(1)(i) under Rule 15c3–1.
10 17 CFR 240.15c3–1(a)(2)(i). SEA Rule 15c3–
1(a)(2)(i) addresses net capital requirements for
brokers or dealers that carry customer accounts.
11 17 CFR 240.15c3–1(a)(8). SEA Rule 15c3–
1(a)(8) addresses net capital requirements for
municipal securities brokers’ brokers, as defined
under the rule.
12 The term ‘‘Limited Principal—Financial and
Operations’’ as set forth in NASD Rule 1022(b) is
referred to as ‘‘Financial and Operations Principal’’
for purposes of this filing. The term ‘‘principal’’ is
defined in NASD Rule 1021(b) (Definition of
Principal).
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9 17
5 FINRA also is proposing corresponding
revisions to the Series 27 question bank. 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. 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 content outline
is attached to the filing, not to this Notice.
7 17 CFR 240.24b–2.
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• supervision of individuals who
assist in the preparation of such reports;
• supervision of and responsibility
for individuals who are involved in the
actual maintenance of the member’s
books and records from which such
reports are derived;
• supervision and/or performance of
the member’s responsibilities under all
financial responsibility rules
promulgated pursuant to the provisions
of the Act;
• overall supervision of and
responsibility for the individuals who
are involved in the administration and
maintenance of the member’s back
office operations; or
• any other matter involving the
financial and operational management
of the member.
NASD Rule 1022(b)(3) provides that a
person registered solely as a Financial
and Operations Principal shall not be
qualified to function in a principal
capacity with responsibility over any
area of business activity not described
in paragraph (b)(2) of the rule.
In consultation with a committee of
industry representatives, FINRA
recently undertook a review of the
Series 27 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 Financial and
Operations Principal. FINRA also is
proposing to make changes to the format
of the content outline.
Current Outline
The current content outline is divided
into seven sections. The following are
the seven sections and the number of
questions associated with each of the
sections, denoted Section 1 through
Section 7:
1. Keeping And Preservation of
Records and Broker-Dealer Financial
Reporting Requirements, 15 questions;
2. Net Capital Requirements, 44
questions;
3. Customer Protection, 36 questions;
4. Municipal Securities Rulemaking
Board—Regulations, 9 questions;
5. Extensions Of Credit In The
Securities Industry, 8 questions;
6. Procedural Rules, 12 questions; and
7. Other Relevant Regulation and
Interpretations, 21 questions.
Each section also includes the
applicable laws, rules and regulations
associated with that section. The current
outline also includes a preface
(addressing, among other things, the
purpose, administration and scoring of
the examination), sample questions and
reference materials.
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Notices
Proposed Revisions
To develop the revised outline,
FINRA conducted a job analysis study
of Financial and Operations Principals,
which included the use of a survey. The
study provided detailed information
regarding the day-to-day roles,
responsibilities and job functions of
Financial and Operations Principals. As
a result, FINRA is proposing to revise
the structure of the outline as described
below to include functions and
associated tasks that reflect the day-today activities of a Financial and
Operations Principal.
Specifically, FINRA is proposing to
divide the content outline into five
major job functions that are performed
by a Financial and Operations Principal.
The following are the five major job
functions, denoted Function 1 through
Function 5, with the associated number
of questions:
Function 1: Financial Reporting, 25
questions;
Function 2: Operations, General
Securities Industry Regulations, and
Preservation of Books and Records, 42
questions;
Function 3: Customer Protection, 24
questions;
Function 4: Net Capital, 41 questions;
and
Function 5: Funding and Cash
Management, 13 questions.
As noted above, each major job
function includes an assigned number
of questions. FINRA determined the
number of questions for each function
based on the results of the job analysis
study. Thus, compared to the existing
outline, the allocation of questions in
the revised outline more closely reflects
the current day-to-day activities of a
Financial and Operations Principal.
Each function also includes specific
tasks describing activities associated
with performing that function. There are
five tasks (1.1–1.5) associated with
Function 1; three tasks (2.1–2.3)
associated with Function 2; five tasks
(3.1–3.5) associated with Function 3;
seven tasks (4.1–4.7) associated with
Function 4; and two tasks (5.1–5.2)
associated with Function 5.13 By way of
example, one such task (Task 2.2) is to
prepare and preserve financial records
to ensure accuracy and completeness of
internal financial documents.14 Further,
the outline lists the knowledge required
to perform each function and associated
tasks (e.g., general ledger and subledgers).15 In addition, where
13 See Exhibit 3a, Outline Pages 6–20. The
Commission notes that all references to Exhibit 3a
refer to Exhibit 3a to the proposed rule change.
14 See Exhibit 3a, Outline Page 10.
15 See Exhibit 3a, Outline Page 10.
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applicable, the 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 4160), NASD Rules
(e.g., NASD Rule 2340) and SEC rules
(e.g., SEA Rule 17a–4).16
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 2430 (Charges for Services
Performed) and NASD Rule 3110 (Books
and Records) were adopted as FINRA
Rule 2122 (Charges for Services
Performed) and FINRA Rule 4510 Series
(Books and Records Requirements),
respectively).17 Further, based on the
MSRB’s elimination of the Financial
and Operations Principal requirements
in MSRB Rule G–3(d), the revised
outline does not include any MSRB
rules.18
FINRA is proposing similar changes
to the Series 27 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; 19 (2) provide more details
regarding the purpose of the
examination; 20 (3) provide more details
on the application procedures; 21 (4)
provide more details on the
development and maintenance of the
content outline and examination; 22 (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 the
scores are an absolute standard
independent of the performance of
candidates taking the examination; 23
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
16 See
Exhibit 3a, Outline Page 10.
17 See Rule Conversion Chart, available at
https://www.finra.org/Industry/Regulation/
FINRARules/p085560.
18 See Securities Exchange Act Release No. 72743
(August 1, 2014), 79 FR 46290 (August 7, 2014)
(Order Approving File No. SR–MSRB–2014–04).
19 See Exhibit 3a, Outline Page 2.
20 See Exhibit 3a, Outline Page 3.
21 See Exhibit 3a, Outline Page 3.
22 See Exhibit 3a, Outline Page 4.
23 See Exhibit 3a, Outline Page 5.
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64467
each major content area covered on the
examination.24
The number of questions on the Series
27 examination will remain at 145
scored multiple-choice questions,25 and
candidates will continue to have 225
minutes to complete the examination.
Currently, a score of 70 percent is
required to pass the examination. The
passing score for the revised Series 27
examination will be 69 percent.
Availability of Content Outlines
The current Series 27 content outline
is available on FINRA’s Web site, at
https://www.finra.org/industry/
qualification-exams. The revised Series
27 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 27 examination program
on December 14, 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 27 examination
program are consistent with the
provisions of Section 15A(b)(6) of the
Act,26 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,27 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 Financial and
Operations Principal.
24 See
Exhibit 3a, Outline Page 5.
with FINRA’s practice of including
‘‘pre-test’’ questions on certain qualification
examinations, which is designed to ensure that new
examination questions meet acceptable testing
standards prior to use for scoring purposes, the
examination includes ten additional, unidentified
pre-test questions that do not contribute towards
the candidate’s score. Therefore, the examination
actually consists of 155 questions, 145 of which are
scored. The ten pre-test questions are randomly
distributed throughout the examination.
26 15 U.S.C. 78o–3(b)(6).
27 15 U.S.C. 78o–3(g)(3).
25 Consistent
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / 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. The updated
examination aligns with the functions
and associated tasks currently
performed by a Financial and
Operations 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 28 and paragraph (f)(1) of Rule
19b–4 thereunder.29 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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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–2015–038 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Robert W. Errett, Deputy Secretary,
Securities and Exchange Commission,
28 15
29 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(1).
VerDate Sep<11>2014
18:05 Oct 22, 2015
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–FINRA–2015–038. 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
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. All comments received will be
posted without change; the Commission
does not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–FINRA–2015–038 and
should be submitted on or before
November 13, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26913 Filed 10–22–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Investment Company Act Release No.
31870; File No. 812–14536 Advisors
Asset Management, Inc. and AAM ETF
Trust; Notice of Application
October 19, 2015.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 12(d)(1)(J) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
12(d)(1)(A), (B), and (C) of the Act and
under sections 6(c) and 17(b) of the Act
AGENCY:
30 17
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CFR 200.30–3(a)(12).
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for an exemption from sections 17(a)(1)
and (2) of the Act. The requested order
would permit certain registered openend investment companies to acquire
shares of certain registered open-end
investment companies, registered
closed-end investment companies,
business development companies, as
defined in section 2(a)(48) of the Act,
and unit investment trusts (collectively,
‘‘Underlying Funds’’) that are within
and outside the same group of
investment companies as the acquiring
investment companies, in excess of the
limits in section 12(d)(1) of the Act.
AAM ETF Trust, a
Massachusetts business trust that
intends to register under the Act as an
open-end management investment
company with multiple series and
Advisors Asset Management, Inc., a
Delaware Corporation registered as an
investment adviser under the
Investment Advisers Act of 1940.
FILING DATES: The application was filed
on August 20, 2015.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on November 13, 2015 and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit, or, for lawyers, a certificate
of service. Pursuant to Rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Brent J. Fields, Secretary,
U.S. Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: c/o Scott I. Colyer, Advisors
Asset Management, Inc., 18925 Base
Camp Road, Suite 203, Monument,
Colorado 80132.
FOR FURTHER INFORMATION CONTACT:
Barbara T. Heussler, Senior Counsel, at
(202) 551–6990, or Mary Kay Frech,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
APPLICANTS:
E:\FR\FM\23OCN1.SGM
23OCN1
]]>Agencies
[Federal Register Volume 80, Number 205 (Friday, October 23, 2015)]
[Notices]
[Pages 64465-64468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26913]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76189; File No. SR-FINRA-2015-038]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the Series 27 Examination Program
October 19, 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 October 13, 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
[[Page 64466]]
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)(i).
\4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is filing revisions to the content outline and selection
specifications for the Financial and Operations Principal (Series 27)
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 Financial and Operations 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.
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\5\ FINRA also is proposing corresponding revisions to the
Series 27 question bank. 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. 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.
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The revised content outline is attached.\6\ The Series 27 selection
specifications have been submitted to the Commission under separate
cover with a request for confidential treatment pursuant to SEA Rule
24b-2.\7\
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\6\ The Commission notes that the content outline is attached to
the filing, not to this Notice.
\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 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.
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\8\ 15 U.S.C. 78o-3(g)(3).
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NASD Rule 1022(b)(1) requires that each member that operates
pursuant to the provisions of SEA Rule 15c3-1(a)(1)(ii),\9\ SEA Rule
15c3-1(a)(2)(i) \10\ or SEA Rule 15c3-1(a)(8) \11\ shall designate as
Financial and Operations Principal \12\ those persons associated with
it, at least one of whom shall be its chief financial officer, who
perform the duties described in paragraph (b)(2) of the rule. The rule
provides that each person associated with a member who performs such
duties shall be required to register as a Financial and Operations
Principal with FINRA and shall pass an appropriate qualification
examination before such registration may become effective. Paragraph
(b)(2) of the rule provides that the term Financial and Operations
Principal shall mean a person associated with a member whose duties
include:
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\9\ 17 CFR 240.15c3-1(a)(1)(ii). SEA Rule 15c3-1(a)(1)(ii)
addresses net capital requirements for brokers or dealers that elect
not to be subject to the Aggregate Indebtedness Standard of
paragraph (a)(1)(i) under Rule 15c3-1.
\10\ 17 CFR 240.15c3-1(a)(2)(i). SEA Rule 15c3-1(a)(2)(i)
addresses net capital requirements for brokers or dealers that carry
customer accounts.
\11\ 17 CFR 240.15c3-1(a)(8). SEA Rule 15c3-1(a)(8) addresses
net capital requirements for municipal securities brokers' brokers,
as defined under the rule.
\12\ The term ``Limited Principal--Financial and Operations'' as
set forth in NASD Rule 1022(b) is referred to as ``Financial and
Operations Principal'' for purposes of this filing. The term
``principal'' is defined in NASD Rule 1021(b) (Definition of
Principal).
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Final approval and responsibility for the accuracy of
financial reports submitted to any duly established securities industry
regulatory body;
final preparation of such reports;
supervision of individuals who assist in the preparation
of such reports;
supervision of and responsibility for individuals who are
involved in the actual maintenance of the member's books and records
from which such reports are derived;
supervision and/or performance of the member's
responsibilities under all financial responsibility rules promulgated
pursuant to the provisions of the Act;
overall supervision of and responsibility for the
individuals who are involved in the administration and maintenance of
the member's back office operations; or
any other matter involving the financial and operational
management of the member.
NASD Rule 1022(b)(3) provides that a person registered solely as a
Financial and Operations Principal shall not be qualified to function
in a principal capacity with responsibility over any area of business
activity not described in paragraph (b)(2) of the rule.
In consultation with a committee of industry representatives, FINRA
recently undertook a review of the Series 27 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 Financial and Operations
Principal. FINRA also is proposing to make changes to the format of the
content outline.
Current Outline
The current content outline is divided into seven sections. The
following are the seven sections and the number of questions associated
with each of the sections, denoted Section 1 through Section 7:
1. Keeping And Preservation of Records and Broker-Dealer Financial
Reporting Requirements, 15 questions;
2. Net Capital Requirements, 44 questions;
3. Customer Protection, 36 questions;
4. Municipal Securities Rulemaking Board--Regulations, 9 questions;
5. Extensions Of Credit In The Securities Industry, 8 questions;
6. Procedural Rules, 12 questions; and
7. Other Relevant Regulation and Interpretations, 21 questions.
Each section also includes the applicable laws, rules and
regulations associated with that section. The current outline also
includes a preface (addressing, among other things, the purpose,
administration and scoring of the examination), sample questions and
reference materials.
[[Page 64467]]
Proposed Revisions
To develop the revised outline, FINRA conducted a job analysis
study of Financial and Operations Principals, which included the use of
a survey. The study provided detailed information regarding the day-to-
day roles, responsibilities and job functions of Financial and
Operations Principals. As a result, FINRA is proposing to revise the
structure of the outline as described below to include functions and
associated tasks that reflect the day-to-day activities of a Financial
and Operations Principal.
Specifically, FINRA is proposing to divide the content outline into
five major job functions that are performed by a Financial and
Operations Principal. The following are the five major job functions,
denoted Function 1 through Function 5, with the associated number of
questions:
Function 1: Financial Reporting, 25 questions;
Function 2: Operations, General Securities Industry Regulations,
and Preservation of Books and Records, 42 questions;
Function 3: Customer Protection, 24 questions;
Function 4: Net Capital, 41 questions; and
Function 5: Funding and Cash Management, 13 questions.
As noted above, each major job function includes an assigned number
of questions. FINRA determined the number of questions for each
function based on the results of the job analysis study. Thus, compared
to the existing outline, the allocation of questions in the revised
outline more closely reflects the current day-to-day activities of a
Financial and Operations Principal.
Each function also includes specific tasks describing activities
associated with performing that function. There are five tasks (1.1-
1.5) associated with Function 1; three tasks (2.1-2.3) associated with
Function 2; five tasks (3.1-3.5) associated with Function 3; seven
tasks (4.1-4.7) associated with Function 4; and two tasks (5.1-5.2)
associated with Function 5.\13\ By way of example, one such task (Task
2.2) is to prepare and preserve financial records to ensure accuracy
and completeness of internal financial documents.\14\ Further, the
outline lists the knowledge required to perform each function and
associated tasks (e.g., general ledger and sub-ledgers).\15\ In
addition, where applicable, the 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 4160), NASD Rules (e.g., NASD Rule 2340) and SEC rules
(e.g., SEA Rule 17a-4).\16\
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\13\ See Exhibit 3a, Outline Pages 6-20. The Commission notes
that all references to Exhibit 3a refer to Exhibit 3a to the
proposed rule change.
\14\ See Exhibit 3a, Outline Page 10.
\15\ See Exhibit 3a, Outline Page 10.
\16\ See Exhibit 3a, Outline Page 10.
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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 2430 (Charges for Services
Performed) and NASD Rule 3110 (Books and Records) were adopted as FINRA
Rule 2122 (Charges for Services Performed) and FINRA Rule 4510 Series
(Books and Records Requirements), respectively).\17\ Further, based on
the MSRB's elimination of the Financial and Operations Principal
requirements in MSRB Rule G-3(d), the revised outline does not include
any MSRB rules.\18\
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\17\ See Rule Conversion Chart, available at https://www.finra.org/Industry/Regulation/FINRARules/p085560.
\18\ See Securities Exchange Act Release No. 72743 (August 1,
2014), 79 FR 46290 (August 7, 2014) (Order Approving File No. SR-
MSRB-2014-04).
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FINRA is proposing similar changes to the Series 27 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; \19\ (2) provide more details regarding the purpose of the
examination; \20\ (3) provide more details on the application
procedures; \21\ (4) provide more details on the development and
maintenance of the content outline and examination; \22\ (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 the scores are an absolute standard independent of
the performance of candidates taking the examination; \23\ 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.\24\
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\19\ See Exhibit 3a, Outline Page 2.
\20\ See Exhibit 3a, Outline Page 3.
\21\ See Exhibit 3a, Outline Page 3.
\22\ See Exhibit 3a, Outline Page 4.
\23\ See Exhibit 3a, Outline Page 5.
\24\ See Exhibit 3a, Outline Page 5.
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The number of questions on the Series 27 examination will remain at
145 scored multiple-choice questions,\25\ and candidates will continue
to have 225 minutes to complete the examination. Currently, a score of
70 percent is required to pass the examination. The passing score for
the revised Series 27 examination will be 69 percent.
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\25\ Consistent with FINRA's practice of including ``pre-test''
questions on certain qualification examinations, which is designed
to ensure that new examination questions meet acceptable testing
standards prior to use for scoring purposes, the examination
includes ten additional, unidentified pre-test questions that do not
contribute towards the candidate's score. Therefore, the examination
actually consists of 155 questions, 145 of which are scored. The ten
pre-test questions are randomly distributed throughout the
examination.
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Availability of Content Outlines
The current Series 27 content outline is available on FINRA's Web
site, at https://www.finra.org/industry/qualification-exams. The revised
Series 27 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 27
examination program on December 14, 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 27
examination program are consistent with the provisions of Section
15A(b)(6) of the Act,\26\ 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,\27\ 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 Financial and Operations Principal.
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\26\ 15 U.S.C. 78o-3(b)(6).
\27\ 15 U.S.C. 78o-3(g)(3).
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[[Page 64468]]
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
Financial and Operations 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 \28\ and paragraph (f)(1) of Rule 19b-4
thereunder.\29\ 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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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 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-2015-038 on the subject line.
Paper Comments
Send paper comments in triplicate to Robert W. Errett,
Deputy Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2015-038. 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
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2015-038 and should be
submitted on or before November 13, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26913 Filed 10-22-15; 8:45 am]
BILLING CODE 8011-01-P
