Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Revise the Direct Participation Programs Representative (Series 22) Examination, 8529-8532 [2018-03887]
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Federal Register / Vol. 83, No. 39 / Tuesday, February 27, 2018 / Notices
incorporate the functions and associated
tasks currently performed by an
Investment Banking Representative.
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 Investment Banking
Representative 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 effective. FINRA also
provided a detailed economic impact
assessment regarding the introduction of
the SIE examination and the
restructuring of the representative-level
examinations as part of the proposed
rule change to restructure the FINRA
representative-level qualification
examination program.23
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.
daltland on DSKBBV9HB2PROD with NOTICES
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 24 and paragraph (f)(1) of Rule
19b–4 thereunder.25 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:
23 See
Securities Exchange Act Release No. 80371
(April 4, 2017), 82 FR 17336 (April 10, 2017)
(Notice of Filing of File No. SR–FINRA–2017–007).
24 15 U.S.C. 78s(b)(3)(A).
25 17 CFR 240.19b–4(f)(1).
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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–2018–004 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2018–004. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2018–004 and should be submitted on
or before March 20, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–03889 Filed 2–26–18; 8:45 am]
BILLING CODE 8011–01–P
26 17
PO 00000
CFR 200.30–3(a)(12).
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8529
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82748; File No. SR–FINRA–
2018–009]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Revise the Direct
Participation Programs Representative
(Series 22) Examination
February 21, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
12, 2018, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing revisions to the
content outline and selection
specifications for the Direct
Participation Programs Representative
(Series 22) examination as part of the
restructuring of the representative-level
examination program.5 The proposed
revisions also 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 Direct Participation Programs
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(i).
4 17 CFR 240.19b–4(f)(1).
5 FINRA also is proposing corresponding
revisions to the Series 22 question bank. Based on
instruction from SEC staff, FINRA is submitting this
filing for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(1)
thereunder, and is not filing the question bank. 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.
2 17
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Representative. 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 Series 22 content outline
is attached.6 The revised Series 22
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 website at
https://www.finra.org, at the principal
office of FINRA and at the
Commission’s Public Reference Room.
[sic]
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 the
Statutory Basis for, the Proposed Rule
Change
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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.
The SEC recently approved a
proposed rule change to restructure the
FINRA representative-level qualification
6 The Commission notes that the content outline
is attached to the filing, not to this Notice.
7 17 CFR 240.24b–2.
8 15 U.S.C. 78o–3(g)(3).
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examination program.9 The rule change,
which will become effective on October
1, 2018,10 restructures the examination
program into a new format whereby all
new representative-level applicants will
be required to take a general knowledge
examination (the Securities Industry
Essentials or SIE TM) and a tailored,
specialized knowledge examination (a
revised representative-level
qualification examination) for their
particular registered role.
The restructured program eliminates
duplicative testing of general securities
knowledge on the current
representative-level qualification
examinations by moving such content
into the SIE examination.11 The SIE
examination will test fundamental
securities-related knowledge, including
knowledge of basic products, the
structure and function of the securities
industry, the regulatory agencies and
their functions and regulated and
prohibited practices, whereas the
revised representative-level
qualification examinations will test
knowledge relevant to day-to-day
activities, responsibilities and job
functions of representatives.12
As part of the restructuring process
and in consultation with a committee of
industry representatives, FINRA
undertook a review of the Direct
Participation Programs Representative
(Series 22) examination to remove the
general securities knowledge currently
covered on the examination and to
create a tailored examination to test
knowledge relevant to the day-to-day
activities, responsibilities and job
functions of a Direct Participation
Programs Representative. As a result of
this review, FINRA also is proposing to
revise the Series 22 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
9 See Securities Exchange Act Release No. 81098
(July 7, 2017), 82 FR 32419 (July 13, 2017) (Order
Approving File No. SR–FINRA–2017–007).
10 See Regulatory Notice 17–30 (SEC Approves
Consolidated FINRA Registration Rules,
Restructured Representative-Level Qualification
Examinations and Changes to Continuing Education
Requirements) (October 2017).
11 Each of the current representative-level
examinations covers general securities knowledge,
with the exception of the Research Analyst (Series
86 and 87) examinations.
12 FINRA filed the SIE content outline with the
SEC for immediate effectiveness. See Securities
Exchange Act Release No. 82578 (January 24, 2018),
83 FR 4375 (January 30, 2018) (Notice of Filing and
Immediate Effectiveness of File No. SR–FINRA–
2018–002). In addition to the proposed rule change
relating to the revised Series 22 examination,
FINRA is filing with the Commission for immediate
effectiveness the content outlines for the other
revised representative-level qualification
examinations.
PO 00000
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a Direct Participation Programs
Representative. The proposed change
will align the organization of the Series
22 content outline with the organization
of the content outlines of the other
revised representative-level
examinations.13 In addition, FINRA is
proposing to make other changes to the
format of the Series 22 content outline.
Beginning on October 1, 2018, new
applicants seeking to register as Direct
Participation Programs Representatives
must pass the SIE examination and the
revised Direct Participation Programs
Representative (Series 22) examination.
Current Content Outline
The current Series 22 content outline
is divided into six sections. The
following are the six sections, denoted
Section 1 through Section 6, with the
associated number of questions:
1. Investment Entities for Direct
Participation Programs, 12 questions;
2. Types of Direct Participation
Programs, 11 questions;
3. Offering Practices Applicable to
Direct Participation Programs, 14
questions;
4. Tax Issues Applicable to Direct
Participation Programs, 20 questions;
5. Regulation of Direct Participation
Programs, 32 questions; and
6. Factors to Consider in Evaluating
Direct Participation Programs, 11
questions.
In addition, each section includes
references to the applicable laws, rules
and regulations associated with that
section. The current content outline also
includes a preface (addressing, among
other things, the purpose,
administration and scoring of the
examination), sample questions and
reference materials.
Revised Content Outline
As noted above, FINRA is proposing
to move the general securities
knowledge currently covered on the
Series 22 examination to the SIE
examination. For example, FINRA Rule
3220 (Influencing or Rewarding
Employees of Others) (the Gifts Rule)
will now be tested on the SIE
examination, rather than on the Series
22 examination. As a result, the revised
Series 22 examination will test
knowledge specific to the day-to-day
activities, responsibilities and job
functions of a Direct Participation
Programs Representative.
13 FINRA currently has organized several FINRA
qualification examinations, such as the Securities
Trader (Series 57) examination, based on the
functions that are performed by the respective
registered persons and the associated tasks. FINRA
is proposing similar layouts for all of the
representative-level examinations, including the
Series 22 examination.
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Further, FINRA is proposing to
reorganize the content outline by
dividing it into four major job functions
that are performed by a Direct
Participation Programs Representative.
The proposed change aligns the major
job functions performed by a Direct
Participation Programs Representative
with the major job functions performed
by other sales representatives, including
Investment Company and Variable
Contracts Products Representatives,
General Securities Representatives and
Private Securities Offerings
Representatives. The following are the
four major job functions, denoted
Function 1 through Function 4, with the
associated number of questions:
Function 1: Seeks Business for the
Broker-Dealer from Customers and
Potential Customers, 17 questions;
Function 2: Opens Accounts After
Obtaining and Evaluating Customers’
Financial Profile and Investment
Objectives, 4 questions;
Function 3: Provides Customers with
Information About Investments, Makes
Suitable Recommendations, Transfers
Assets and Maintains Appropriate
Records, 27 questions; and
Function 4: Obtains and Verifies
Customers’ Purchase Instructions and
Agreements; Processes, Completes and
Confirms Transactions, 2 questions.
FINRA also is proposing to adjust the
number of questions assigned to each
major job function to ensure that the
overall examination better reflects the
key tasks performed by a Direct
Participation Programs Representative.
The questions on the revised Series 22
examination will place emphasis on
tasks such as seeking business for the
broker-dealer from customers and
potential customers, opening customer
accounts, providing customers with
suitable recommendations and verifying
customer agreements and transactions.
Each function also includes specific
tasks describing activities associated
with performing that function. There are
two tasks (1.1—1.2) associated with
Function 1;14 four tasks (2.1—2.4)
associated with Function 2; 15 four tasks
(3.1—3.4) associated with Function 3; 16
and three tasks (4.1—4.3) associated
with Function 4.17 For example, one
such task (Task 1.1) is contacting
current and potential customers in
person and by telephone, mail and
electronic means, developing
promotional and advertising materials
and seeking appropriate approvals to
14 See Exhibit 3a, Outline Pages 3–4. The outline
is attached as Exhibit 3a to the 19b–4 form.
15 See Exhibit 3a, Outline Pages 5–6.
16 See Exhibit 3a, Outline Pages 7–10.
17 See Exhibit 3a, Outline Pages 11–12.
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distribute marketing materials.18 The
content outline also lists the knowledge
required to perform each function and
associated tasks (e.g., standards and
required approvals of communications).
In addition, where applicable, the
content outline lists the laws, rules and
regulations a candidate is expected to
know to perform each function and
associated tasks (e.g., FINRA Rule 2111
(Suitability)).
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 new FINRA rules (e.g.,
FINRA Rule 2273 (Educational
Communication Related to Recruitment
Practices and Account Transfers)).
FINRA is proposing similar changes
to the Series 22 selection specifications
and question bank.
Finally, FINRA is proposing to make
other changes to the format of the
content outline, including to the
preface, sample questions and reference
materials.19 Among other changes,
FINRA is proposing to: (1) Reduce the
preface to one page of introductory
information; (2) streamline details
regarding the purpose of the
examination; (3) move the application
procedures to FINRA’s website; and (4)
explain that the passing score is
established using a standard setting
procedure, and that a statistical
adjustment process known as equating
is used in scoring the examination.20
As a result of the proposed changes,
the number of scored questions on the
Series 22 examination will be reduced
from 100 questions to 50 questions.21
Further, the test time, which is the
amount of time candidates will have to
complete the examination, will be
reduced from two hours and 30 minutes
to one hour and 30 minutes. Currently,
a score of 70 percent is required to pass
the examination. FINRA will publish
the passing score of the revised Series
22 examination on its website, at
18 See
Exhibit 3a, Outline Page 3.
is proposing similar changes to the
content outlines for other representative-level
examinations.
20 See Exhibit 3a, Outline Page 2.
21 Consistent with FINRA’s practice of including
‘‘pretest’’ questions on examinations, the Series 22
examination includes five additional, unidentified
pretest questions that do not contribute towards the
candidate’s score. The pretest questions are
designed to ensure that new examination questions
meet acceptable testing standards prior to use for
scoring purposes. Therefore, the Series 22
examination actually consists of 55 questions, 50 of
which are scored. The five pretest questions are
randomly distributed throughout the examination.
19 FINRA
PO 00000
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8531
www.finra.org, prior to its first
administration.
Availability of Content Outline
The current Series 22 content outline
is available on FINRA’s website. The
revised Series 22 content outline will
replace the current content outline on
FINRA’s website, and it will be made
available on the website on the date of
this filing.
FINRA is filing the proposed rule
change for immediate effectiveness. The
implementation date will be October 1,
2018, to coincide with the
implementation of the restructured
representative-level examination
program. FINRA will also announce the
implementation date of the proposed
rule change in a Regulatory Notice.
2. Statutory Basis
FINRA believes that the proposed
revisions to the Series 22 examination
program are consistent with the
provisions of Section 15A(b)(6) of the
Act,22 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,23 which
authorizes FINRA to prescribe standards
of training, experience, and competence
for persons associated with FINRA
members. The proposed rule change
will improve the examination program,
without compromising the qualification
standards, by removing the general
knowledge content currently covered on
the Series 22 examination, since that
content will be covered in the corequisite SIE examination. In addition,
the proposed revisions will further the
purposes of the Act 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 Direct
Participation Programs Representative.
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 Direct Participation
Programs Representative and tests
knowledge of the most current laws,
22 15
23 15
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U.S.C. 78o–3(b)(6).
U.S.C. 78o–3(g)(3).
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Federal Register / Vol. 83, No. 39 / Tuesday, February 27, 2018 / Notices
rules, regulations and skills relevant to
those functions and associated tasks. As
such, the proposed revisions would
make the examination more effective.
FINRA also provided a detailed
economic impact assessment regarding
the introduction of the SIE examination
and the restructuring of the
representative-level examinations as
part of the proposed rule change to
restructure the FINRA representativelevel qualification examination
program.24
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 25 and paragraph (f)(1) of Rule
19b–4 thereunder.26 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–2018–009 on the subject line.
daltland on DSKBBV9HB2PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
24 See
Securities Exchange Act Release No. 80371
(April 4, 2017), 82 FR 17336 (April 10, 2017)
(Notice of Filing of File No. SR–FINRA–2017–007).
25 15 U.S.C. 78s(b)(3)(A).
26 17 CFR 240.19b–4(f)(1).
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All submissions should refer to File
Number SR–FINRA–2018–009. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2018–009, and should be submitted on
or before March 20, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–03887 Filed 2–26–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82757; File No. SR–
NASDAQ–2017–128]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change To List and Trade the
Shares of the Western Asset Total
Return ETF
CFR 200.30–3(a)(12).
Frm 00115
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[FR Doc. 2018–03895 Filed 2–26–18; 8:45 am]
BILLING CODE 8011–01–P
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 82439
(Jan. 3, 2018), 83 FR 1062.
4 15 U.S.C. 78s(b)(2).
5 Id.
6 17 CFR 200.30–3(a)(31).
2 17
On December 20, 2017, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’) filed with
the Securities and Exchange
PO 00000
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Eduardo A. Aleman,
Assistant Secretary.
1 15
February 21, 2018.
27 17
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 list and trade shares of the
Western Asset Total Return ETF, a
series of Legg Mason ETF Investment
Trust under Nasdaq Rule 5735. The
proposed rule change was published for
comment in the Federal Register on
January 9, 2018.3 The Commission has
received no comments on the proposed
rule change.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is February 23,
2018. The Commission is extending this
45-day time period.
The Commission finds that it is
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. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Act,5 designates April 9,
2018, as the date by which the
Commission shall either approve or
disapprove, or institute proceedings to
determine whether to disapprove, the
proposed rule change (File Number SR–
NASDAQ–2017–128).
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]]>Agencies
[Federal Register Volume 83, Number 39 (Tuesday, February 27, 2018)]
[Notices]
[Pages 8529-8532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03887]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82748; File No. SR-FINRA-2018-009]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Revise the Direct Participation Programs
Representative (Series 22) Examination
February 21, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 12, 2018, 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 proposing revisions to the content outline and selection
specifications for the Direct Participation Programs Representative
(Series 22) examination as part of the restructuring of the
representative-level examination program.\5\ The proposed revisions
also 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 Direct Participation
Programs
[[Page 8530]]
Representative. 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 22 question bank. Based on instruction from SEC staff, FINRA
is submitting this filing for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(1) thereunder, and
is not filing the question bank. 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 Series 22 content outline is attached.\6\ The revised
Series 22 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
website at https://www.finra.org, at the principal office of FINRA and
at the Commission's Public Reference Room. [sic]
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 the
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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The SEC recently approved a proposed rule change to restructure the
FINRA representative-level qualification examination program.\9\ The
rule change, which will become effective on October 1, 2018,\10\
restructures the examination program into a new format whereby all new
representative-level applicants will be required to take a general
knowledge examination (the Securities Industry Essentials or SIE
TM) and a tailored, specialized knowledge examination (a
revised representative-level qualification examination) for their
particular registered role.
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\9\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007).
\10\ See Regulatory Notice 17-30 (SEC Approves Consolidated
FINRA Registration Rules, Restructured Representative-Level
Qualification Examinations and Changes to Continuing Education
Requirements) (October 2017).
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The restructured program eliminates duplicative testing of general
securities knowledge on the current representative-level qualification
examinations by moving such content into the SIE examination.\11\ The
SIE examination will test fundamental securities-related knowledge,
including knowledge of basic products, the structure and function of
the securities industry, the regulatory agencies and their functions
and regulated and prohibited practices, whereas the revised
representative-level qualification examinations will test knowledge
relevant to day-to-day activities, responsibilities and job functions
of representatives.\12\
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\11\ Each of the current representative-level examinations
covers general securities knowledge, with the exception of the
Research Analyst (Series 86 and 87) examinations.
\12\ FINRA filed the SIE content outline with the SEC for
immediate effectiveness. See Securities Exchange Act Release No.
82578 (January 24, 2018), 83 FR 4375 (January 30, 2018) (Notice of
Filing and Immediate Effectiveness of File No. SR-FINRA-2018-002).
In addition to the proposed rule change relating to the revised
Series 22 examination, FINRA is filing with the Commission for
immediate effectiveness the content outlines for the other revised
representative-level qualification examinations.
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As part of the restructuring process and in consultation with a
committee of industry representatives, FINRA undertook a review of the
Direct Participation Programs Representative (Series 22) examination to
remove the general securities knowledge currently covered on the
examination and to create a tailored examination to test knowledge
relevant to the day-to-day activities, responsibilities and job
functions of a Direct Participation Programs Representative. As a
result of this review, FINRA also is proposing to revise the Series 22
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 Direct Participation Programs
Representative. The proposed change will align the organization of the
Series 22 content outline with the organization of the content outlines
of the other revised representative-level examinations.\13\ In
addition, FINRA is proposing to make other changes to the format of the
Series 22 content outline.
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\13\ FINRA currently has organized several FINRA qualification
examinations, such as the Securities Trader (Series 57) examination,
based on the functions that are performed by the respective
registered persons and the associated tasks. FINRA is proposing
similar layouts for all of the representative-level examinations,
including the Series 22 examination.
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Beginning on October 1, 2018, new applicants seeking to register as
Direct Participation Programs Representatives must pass the SIE
examination and the revised Direct Participation Programs
Representative (Series 22) examination.
Current Content Outline
The current Series 22 content outline is divided into six sections.
The following are the six sections, denoted Section 1 through Section
6, with the associated number of questions:
1. Investment Entities for Direct Participation Programs, 12
questions;
2. Types of Direct Participation Programs, 11 questions;
3. Offering Practices Applicable to Direct Participation Programs,
14 questions;
4. Tax Issues Applicable to Direct Participation Programs, 20
questions;
5. Regulation of Direct Participation Programs, 32 questions; and
6. Factors to Consider in Evaluating Direct Participation Programs,
11 questions.
In addition, each section includes references to the applicable
laws, rules and regulations associated with that section. The current
content outline also includes a preface (addressing, among other
things, the purpose, administration and scoring of the examination),
sample questions and reference materials.
Revised Content Outline
As noted above, FINRA is proposing to move the general securities
knowledge currently covered on the Series 22 examination to the SIE
examination. For example, FINRA Rule 3220 (Influencing or Rewarding
Employees of Others) (the Gifts Rule) will now be tested on the SIE
examination, rather than on the Series 22 examination. As a result, the
revised Series 22 examination will test knowledge specific to the day-
to-day activities, responsibilities and job functions of a Direct
Participation Programs Representative.
[[Page 8531]]
Further, FINRA is proposing to reorganize the content outline by
dividing it into four major job functions that are performed by a
Direct Participation Programs Representative. The proposed change
aligns the major job functions performed by a Direct Participation
Programs Representative with the major job functions performed by other
sales representatives, including Investment Company and Variable
Contracts Products Representatives, General Securities Representatives
and Private Securities Offerings Representatives. The following are the
four major job functions, denoted Function 1 through Function 4, with
the associated number of questions:
Function 1: Seeks Business for the Broker-Dealer from Customers and
Potential Customers, 17 questions;
Function 2: Opens Accounts After Obtaining and Evaluating
Customers' Financial Profile and Investment Objectives, 4 questions;
Function 3: Provides Customers with Information About Investments,
Makes Suitable Recommendations, Transfers Assets and Maintains
Appropriate Records, 27 questions; and
Function 4: Obtains and Verifies Customers' Purchase Instructions
and Agreements; Processes, Completes and Confirms Transactions, 2
questions.
FINRA also is proposing to adjust the number of questions assigned
to each major job function to ensure that the overall examination
better reflects the key tasks performed by a Direct Participation
Programs Representative. The questions on the revised Series 22
examination will place emphasis on tasks such as seeking business for
the broker-dealer from customers and potential customers, opening
customer accounts, providing customers with suitable recommendations
and verifying customer agreements and transactions.
Each function also includes specific tasks describing activities
associated with performing that function. There are two tasks (1.1--
1.2) associated with Function 1;\14\ four tasks (2.1--2.4) associated
with Function 2; \15\ four tasks (3.1--3.4) associated with Function 3;
\16\ and three tasks (4.1--4.3) associated with Function 4.\17\ For
example, one such task (Task 1.1) is contacting current and potential
customers in person and by telephone, mail and electronic means,
developing promotional and advertising materials and seeking
appropriate approvals to distribute marketing materials.\18\ The
content outline also lists the knowledge required to perform each
function and associated tasks (e.g., standards and required approvals
of communications). In addition, where applicable, the content outline
lists the laws, rules and regulations a candidate is expected to know
to perform each function and associated tasks (e.g., FINRA Rule 2111
(Suitability)).
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\14\ See Exhibit 3a, Outline Pages 3-4. The outline is attached
as Exhibit 3a to the 19b-4 form.
\15\ See Exhibit 3a, Outline Pages 5-6.
\16\ See Exhibit 3a, Outline Pages 7-10.
\17\ See Exhibit 3a, Outline Pages 11-12.
\18\ See Exhibit 3a, Outline Page 3.
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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 new FINRA rules (e.g., FINRA Rule 2273
(Educational Communication Related to Recruitment Practices and Account
Transfers)).
FINRA is proposing similar changes to the Series 22 selection
specifications and question bank.
Finally, FINRA is proposing to make other changes to the format of
the content outline, including to the preface, sample questions and
reference materials.\19\ Among other changes, FINRA is proposing to:
(1) Reduce the preface to one page of introductory information; (2)
streamline details regarding the purpose of the examination; (3) move
the application procedures to FINRA's website; and (4) explain that the
passing score is established using a standard setting procedure, and
that a statistical adjustment process known as equating is used in
scoring the examination.\20\
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\19\ FINRA is proposing similar changes to the content outlines
for other representative-level examinations.
\20\ See Exhibit 3a, Outline Page 2.
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As a result of the proposed changes, the number of scored questions
on the Series 22 examination will be reduced from 100 questions to 50
questions.\21\ Further, the test time, which is the amount of time
candidates will have to complete the examination, will be reduced from
two hours and 30 minutes to one hour and 30 minutes. Currently, a score
of 70 percent is required to pass the examination. FINRA will publish
the passing score of the revised Series 22 examination on its website,
at www.finra.org, prior to its first administration.
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\21\ Consistent with FINRA's practice of including ``pretest''
questions on examinations, the Series 22 examination includes five
additional, unidentified pretest questions that do not contribute
towards the candidate's score. The pretest questions are designed to
ensure that new examination questions meet acceptable testing
standards prior to use for scoring purposes. Therefore, the Series
22 examination actually consists of 55 questions, 50 of which are
scored. The five pretest questions are randomly distributed
throughout the examination.
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Availability of Content Outline
The current Series 22 content outline is available on FINRA's
website. The revised Series 22 content outline will replace the current
content outline on FINRA's website, and it will be made available on
the website on the date of this filing.
FINRA is filing the proposed rule change for immediate
effectiveness. The implementation date will be October 1, 2018, to
coincide with the implementation of the restructured representative-
level examination program. FINRA will also announce the implementation
date of the proposed rule change in a Regulatory Notice.
2. Statutory Basis
FINRA believes that the proposed revisions to the Series 22
examination program are consistent with the provisions of Section
15A(b)(6) of the Act,\22\ 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,\23\ which authorizes FINRA to prescribe
standards of training, experience, and competence for persons
associated with FINRA members. The proposed rule change will improve
the examination program, without compromising the qualification
standards, by removing the general knowledge content currently covered
on the Series 22 examination, since that content will be covered in the
co-requisite SIE examination. In addition, the proposed revisions will
further the purposes of the Act 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 Direct Participation Programs Representative.
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\22\ 15 U.S.C. 78o-3(b)(6).
\23\ 15 U.S.C. 78o-3(g)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The updated examination aligns
with the functions and associated tasks currently performed by a Direct
Participation Programs Representative and tests knowledge of the most
current laws,
[[Page 8532]]
rules, regulations and skills relevant to those functions and
associated tasks. As such, the proposed revisions would make the
examination more effective. FINRA also provided a detailed economic
impact assessment regarding the introduction of the SIE examination and
the restructuring of the representative-level examinations as part of
the proposed rule change to restructure the FINRA representative-level
qualification examination program.\24\
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\24\ See Securities Exchange Act Release No. 80371 (April 4,
2017), 82 FR 17336 (April 10, 2017) (Notice of Filing of File No.
SR-FINRA-2017-007).
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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 \25\ and paragraph (f)(1) of Rule 19b-4
thereunder.\26\ 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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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 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 [email protected]. Please include
File Number SR- FINRA-2018-009 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2018-009. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of FINRA. All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FINRA-2018-009, and should be submitted
on or before March 20, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03887 Filed 2-26-18; 8:45 am]
BILLING CODE 8011-01-P
