Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Series 28 Examination Program, 64458-64461 [2015-26914]
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Notices
multiple-choice questions,19 and
candidates will have three hours and 45
minutes to complete the examination.
The passing score will be 70 percent.
Availability of Content Outline
The Series 57 content outline is
available on FINRA’s Web site, at https://
www.finra.org/industry/qualificationexams.
FINRA is filing the proposed rule
change for immediate effectiveness.
FINRA proposes to implement the
Series 57 examination on January 4,
2016. FINRA will announce the
proposed rule change and the
implementation date in a Regulatory
Notice.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(6) of the Act,20 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,21 which authorizes FINRA to
prescribe standards of training,
experience, and competence for persons
associated with FINRA members.
FINRA believes that the proposed rule
change furthers these purposes by
establishing the qualification
examination that individuals, including
associated persons of FINRA members,
must pass to register and function as
Securities Traders and Securities Trader
Principals. The examination is intended
to safeguard the investing public by
helping to ensure that individuals
registering as Securities Traders, as well
as those responsible for the supervision
of securities trading activities, are
competent to perform their job
functions.
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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 new
examination aligns with the functions
19 Consistent with FINRA’s practice of including
‘‘pretest’’ items on 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.
20 15 U.S.C. 78o–3(b)(6).
21 15 U.S.C. 78o–3(g)(3).
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and associated tasks currently
performed by associated persons
engaged in securities trading and tests
knowledge of the laws, rules,
regulations and skills relevant to those
functions and associated tasks.
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
Because the foregoing 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, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 22 and Rule 19b–
4(f)(6) thereunder.23
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 rule-comments@
sec.gov. Please include File Number SR–
FINRA–2015–042 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–2015–042. 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–2015–042 and
should be submitted on or before
November 13, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26912 Filed 10–22–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76190; File No. SR–FINRA–
2015–039]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to the Series 28
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
24 17
22 15
U.S.C. 78s(b)(3)(A).
23 17 CFR 240.19b–4(f)(6).
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Notices
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
proposed rule change from interested
persons.
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
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(c)(1) requires that
every member that is subject to the
requirements of SEA Rule 15c3–1,9
other than a member operating pursuant
to SEA Rule 15c3–1(a)(1)(ii),10 SEA Rule
15c3–1(a)(2)(i) 11 or SEA Rule 15c3–
1(a)(8),12 shall designate as Introducing
Broker-Dealer Financial and Operations
Principal 13 those persons associated
with it, at least one of whom shall be its
FINRA is filing revisions to the
content outline and selection
specifications for the Introducing
Broker-Dealer Financial and Operations
Principal (Series 28) 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 an Introducing
Broker-Dealer 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 ByLaws, Schedules to the By-Laws or
Rules of FINRA.
The revised content outline is
attached.6 The Series 28 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.
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 28 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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4 17
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
8 15
U.S.C. 78o–3(g)(3).
CFR 240.15c3–1. SEA Rule 15c3–1 is the
SEC’s net capital rule for brokers and dealers.
10 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.
11 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.
12 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.
13 The term ‘‘Limited Principal—Introducing
Broker/Dealer Financial and Operations’’ as set
forth in NASD Rule 1022(c) is referred to as
‘‘Introducing Broker-Dealer Financial and
Operations Principal’’ for purposes of this filing.
The term ‘‘principal’’ is defined in NASD Rule
1021(b) (Definition of Principal).
9 17
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64459
chief financial officer, who perform the
duties described in paragraph (c)(2) of
the rule. The rule provides that each
person associated with a member who
performs such duties shall be required
to register as an Introducing BrokerDealer 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 Introducing
Broker-Dealer Financial and Operations
Principal shall mean a person associated
with a member whose duties include:
• Final approval and responsibilities
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(c)(3) provides that,
except as set forth in NASD Rule
1021(c),14 a person designated pursuant
to the provisions of NASD Rule
1022(c)(1) shall not be required to take
the Introducing Broker-Dealer Financial
and Operations Principal examination
and shall be qualified for registration as
such if the person is qualified to be
registered or is registered as a Financial
and Operations Principal as defined in
NASD Rule 1022(b)(2).15
NASD Rule 1022(c)(4) provides that a
person registered solely as an
Introducing Broker-Dealer Financial and
Operations Principal shall not be
qualified to function in a principal
capacity with responsibility over any
14 NASD Rule 1021(c) addresses requirements for
examination on lapse of registration.
15 For purposes of this filing, the term ‘‘Financial
and Operations Principal’’ is used interchangeably
with the term ‘‘Limited Principal—Financial and
Operations’’ as set forth in NASD Rule 1022(b).
Rule 1022(b)(2) sets forth the duties of a Financial
and Operations Principal. See SR–FINRA–2015–038
(establishing revisions to the content outline and
selection specifications for the Financial and
Operations Principal (Series 27) examination
program).
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Notices
area of business activity not described
in paragraph (c)(2) of the rule. The rule
provides that such person shall not be
qualified to function in a principal
capacity at a member unless the member
operates under paragraph (c)(1) of the
rule.
In consultation with a committee of
industry representatives, FINRA
recently undertook a review of the
Series 28 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 an Introducing BrokerDealer Financial and Operations
Principal. FINRA also is proposing to
make changes to the format of the
content outline.
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Current Outline
The current content outline is divided
into five sections. The following are the
five sections and the number of
questions associated with each of the
sections, denoted Section 1 through
Section 5:
1. Keeping And Preservation of
Records and Broker-Dealer Financial
Reporting Requirements, 16 questions;
2. Net Capital Requirements, 36
questions;
3. Customer Protection, 10 questions;
4. Uniform Practice Rules, 5
questions; and
5. Other Relevant Regulations and
Interpretations, 28 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.
Proposed Revisions
To develop the revised outline,
FINRA conducted a job analysis study
of Introducing Broker-Dealer 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 Introducing BrokerDealer 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 an
Introducing Broker-Dealer Financial and
Operations Principal.
Specifically, FINRA is proposing to
divide the content outline into four
major job functions that are performed
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by an Introducing Broker-Dealer
Financial and Operations Principal. The
following are the four major job
functions, denoted Function 1 through
Function 4, with the associated number
of questions:
Function 1: Financial Reporting, 16
questions;
Function 2: Operations, General
Securities Industry Regulations, and
Preservation of Books and Records, 30
questions;
Function 3: Net Capital, 31 questions;
and
Function 4: Customer Protection,
Funding and Cash Management, 18
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 an
Introducing Broker-Dealer 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; seven tasks
(3.1–3.7) associated with Function 3;
and three tasks (4.1–4.3) associated with
Function 4.16 By way of example, one
such task (Task 2.2) is prepare and
preserve financial records to ensure
accuracy and completeness of internal
financial documents.17 Further, the
outline lists the knowledge required to
perform each function and associated
tasks (e.g., general ledger and subledgers).18 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).19
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
16 See Exhibit 3a, Outline Pages 6–17. The
Commission notes that all references to Exhibit 3a
refer to Exhibit 3a to the proposed rule change.
17 See Exhibit 3a, Outline Page 10.
18 See Exhibit 3a, Outline Page 10.
19 See Exhibit 3a, Outline Page 10.
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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).20
FINRA is proposing similar changes
to the Series 28 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; 21 (2) provide more details
regarding the purpose of the
examination; 22 (3) provide more details
on the application procedures; 23 (4)
provide more details on the
development and maintenance of the
content outline and examination; 24 (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; 25
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.26
The number of questions on the Series
28 examination will remain at 95
multiple-choice questions, and
candidates will continue to have 120
minutes to complete the examination.
Currently, a score of 70 percent is
required to pass the examination. The
passing score for the revised Series 28
examination will be 69 percent.
Availability of Content Outlines
The current Series 28 content outline
is available on FINRA’s Web site, at
https://www.finra.org/industry/
qualification-exams. The revised Series
28 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 28 examination program
on December 14, 2015. FINRA will
20 See Rule Conversion Chart, available at
https://www.finra.org/Industry/Regulation/
FINRARules/p085560.
21 See Exhibit 3a, Outline Page 2.
22 See Exhibit 3a, Outline Page 3.
23 See Exhibit 3a, Outline Page 3.
24 See Exhibit 3a, Outline Page 4.
25 See Exhibit 3a, Outline Page 5.
26 See Exhibit 3a, Outline Page 5.
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Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Notices
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 28 examination
program are consistent with the
provisions of Section 15A(b)(6) of the
Act,27 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,28 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 an Introducing BrokerDealer Financial and Operations
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 an Introducing BrokerDealer 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.
mstockstill on DSK4VPTVN1PROD with NOTICES
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 29 and paragraph (f)(1) of Rule
19b–4 thereunder.30 At any time within
60 days of the filing of the proposed rule
27 15
U.S.C. 78o–3(b)(6).
U.S.C. 78o–3(g)(3).
29 15 U.S.C. 78s(b)(3)(A).
30 17 CFR 240.19b–4(f)(1).
28 15
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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.
64461
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–FINRA–2015–039 and
should be submitted on or before
November 13, 2015.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.31
Robert W. Errett,
Deputy Secretary.
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:
[FR Doc. 2015–26914 Filed 10–22–15; 8:45 am]
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–2015–039 on the
subject line.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Withdrawal of a
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To Amend
NYSE Arca Equities Rule 8.600 To
Adopt Generic Listing Standards for
Managed Fund Shares
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–2015–039. 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
On February 17, 2015, NYSE Arca,
Inc. (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend NYSE Arca Equities Rule 8.600
to adopt generic listing standards for
Managed Fund Shares. The proposed
rule change was published for comment
in the Federal Register on March 10,
2015.3 On April 17, 2015, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.5
On June 3, 2015, the Exchange filed
Amendment No. 1 to the proposed rule
change. On June 11, 2015, the
Commission published a notice of filing
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76186; SR–NYSEArca–
2015–02]
October 19, 2015.
31 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74433
(Mar. 4, 2015), 80 FR 12690.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 74755,
80 FR 22762 (Apr. 23, 2015). The Commission
determined that it was appropriate to designate a
longer period within which to take action on the
proposed rule change so that it has sufficient time
to consider the proposed rule change and the
comments received. Accordingly, the Commission
designated June 8, 2015 as the date by which it
should approve, disapprove, or institute
proceedings to determine whether to disapprove the
proposed rule change.
1 15
E:\FR\FM\23OCN1.SGM
23OCN1
]]>Agencies
[Federal Register Volume 80, Number 205 (Friday, October 23, 2015)]
[Notices]
[Pages 64458-64461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26914]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76190; File No. SR-FINRA-2015-039]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the Series 28 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
[[Page 64459]]
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 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 Introducing Broker-Dealer Financial and
Operations Principal (Series 28) 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 an Introducing Broker-
Dealer 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 28 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 28 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(c)(1) requires that every member that is subject to
the requirements of SEA Rule 15c3-1,\9\ other than a member operating
pursuant to SEA Rule 15c3-1(a)(1)(ii),\10\ SEA Rule 15c3-1(a)(2)(i)
\11\ or SEA Rule 15c3-1(a)(8),\12\ shall designate as Introducing
Broker-Dealer Financial and Operations Principal \13\ those persons
associated with it, at least one of whom shall be its chief financial
officer, who perform the duties described in paragraph (c)(2) of the
rule. The rule provides that each person associated with a member who
performs such duties shall be required to register as an Introducing
Broker-Dealer 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 Introducing Broker-Dealer 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. SEA Rule 15c3-1 is the SEC's net capital
rule for brokers and dealers.
\10\ 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.
\11\ 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.
\12\ 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.
\13\ The term ``Limited Principal--Introducing Broker/Dealer
Financial and Operations'' as set forth in NASD Rule 1022(c) is
referred to as ``Introducing Broker-Dealer 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 responsibilities 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(c)(3) provides that, except as set forth in NASD
Rule 1021(c),\14\ a person designated pursuant to the provisions of
NASD Rule 1022(c)(1) shall not be required to take the Introducing
Broker-Dealer Financial and Operations Principal examination and shall
be qualified for registration as such if the person is qualified to be
registered or is registered as a Financial and Operations Principal as
defined in NASD Rule 1022(b)(2).\15\
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\14\ NASD Rule 1021(c) addresses requirements for examination on
lapse of registration.
\15\ For purposes of this filing, the term ``Financial and
Operations Principal'' is used interchangeably with the term
``Limited Principal--Financial and Operations'' as set forth in NASD
Rule 1022(b). Rule 1022(b)(2) sets forth the duties of a Financial
and Operations Principal. See SR-FINRA-2015-038 (establishing
revisions to the content outline and selection specifications for
the Financial and Operations Principal (Series 27) examination
program).
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NASD Rule 1022(c)(4) provides that a person registered solely as an
Introducing Broker-Dealer Financial and Operations Principal shall not
be qualified to function in a principal capacity with responsibility
over any
[[Page 64460]]
area of business activity not described in paragraph (c)(2) of the
rule. The rule provides that such person shall not be qualified to
function in a principal capacity at a member unless the member operates
under paragraph (c)(1) of the rule.
In consultation with a committee of industry representatives, FINRA
recently undertook a review of the Series 28 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 an Introducing Broker-Dealer
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 five sections. The
following are the five sections and the number of questions associated
with each of the sections, denoted Section 1 through Section 5:
1. Keeping And Preservation of Records and Broker-Dealer Financial
Reporting Requirements, 16 questions;
2. Net Capital Requirements, 36 questions;
3. Customer Protection, 10 questions;
4. Uniform Practice Rules, 5 questions; and
5. Other Relevant Regulations and Interpretations, 28 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.
Proposed Revisions
To develop the revised outline, FINRA conducted a job analysis
study of Introducing Broker-Dealer 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 Introducing Broker-Dealer 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 an Introducing Broker-
Dealer Financial and Operations Principal.
Specifically, FINRA is proposing to divide the content outline into
four major job functions that are performed by an Introducing Broker-
Dealer Financial and Operations Principal. The following are the four
major job functions, denoted Function 1 through Function 4, with the
associated number of questions:
Function 1: Financial Reporting, 16 questions;
Function 2: Operations, General Securities Industry Regulations,
and Preservation of Books and Records, 30 questions;
Function 3: Net Capital, 31 questions; and
Function 4: Customer Protection, Funding and Cash Management, 18
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 an
Introducing Broker-Dealer 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; seven tasks (3.1-3.7) associated with Function 3; and three
tasks (4.1-4.3) associated with Function 4.\16\ By way of example, one
such task (Task 2.2) is prepare and preserve financial records to
ensure accuracy and completeness of internal financial documents.\17\
Further, the outline lists the knowledge required to perform each
function and associated tasks (e.g., general ledger and sub-
ledgers).\18\ 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).\19\
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\16\ See Exhibit 3a, Outline Pages 6-17. The Commission notes
that all references to Exhibit 3a refer to Exhibit 3a to the
proposed rule change.
\17\ See Exhibit 3a, Outline Page 10.
\18\ See Exhibit 3a, Outline Page 10.
\19\ 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).\20\
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\20\ See Rule Conversion Chart, available at https://
www.finra.org/Industry/Regulation/FINRARules/p085560.
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FINRA is proposing similar changes to the Series 28 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; \21\ (2) provide more details regarding the purpose of the
examination; \22\ (3) provide more details on the application
procedures; \23\ (4) provide more details on the development and
maintenance of the content outline and examination; \24\ (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; \25\ 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.\26\
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\21\ See Exhibit 3a, Outline Page 2.
\22\ See Exhibit 3a, Outline Page 3.
\23\ See Exhibit 3a, Outline Page 3.
\24\ See Exhibit 3a, Outline Page 4.
\25\ See Exhibit 3a, Outline Page 5.
\26\ See Exhibit 3a, Outline Page 5.
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The number of questions on the Series 28 examination will remain at
95 multiple-choice questions, and candidates will continue to have 120
minutes to complete the examination. Currently, a score of 70 percent
is required to pass the examination. The passing score for the revised
Series 28 examination will be 69 percent.
Availability of Content Outlines
The current Series 28 content outline is available on FINRA's Web
site, at https://www.finra.org/industry/qualification-exams. The revised
Series 28 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 28
examination program on December 14, 2015. FINRA will
[[Page 64461]]
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 28
examination program are consistent with the provisions of Section
15A(b)(6) of the Act,\27\ 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,\28\ 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 an Introducing Broker-Dealer Financial and
Operations Principal.
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\27\ 15 U.S.C. 78o-3(b)(6).
\28\ 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 an
Introducing Broker-Dealer 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 \29\ and paragraph (f)(1) of Rule 19b-4
thereunder.\30\ 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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\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 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-2015-039 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-2015-039. 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-2015-039 and should be
submitted on or before November 13, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26914 Filed 10-22-15; 8:45 am]
BILLING CODE 8011-01-P
