Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Revise the Private Securities Offerings Representative (Series 82) Examination, 9050-9053 [2018-04210]

Download as PDF daltland on DSKBBV9HB2PROD with NOTICES 9050 Federal Register / Vol. 83, No. 42 / Friday, March 2, 2018 / Notices circumstances specified in the application, purchasers will be required to purchase Creation Units by depositing specified instruments (‘‘Deposit Instruments’’), and shareholders redeeming their shares will receive specified instruments (‘‘Redemption Instruments’’). The Deposit Instruments and the Redemption Instruments will each correspond pro rata to the positions in the Fund’s portfolio (including cash positions) except as specified in the application. 4. Because shares will not be individually redeemable, applicants request an exemption from section 5(a)(1) and section 2(a)(32) of the Act that would permit the Funds to register as open-end management investment companies and issue shares that are redeemable in Creation Units only. 5. Applicants also request an exemption from section 22(d) of the Act and rule 22c–1 under the Act as secondary market trading in shares will take place at negotiated prices, not at a current offering price described in a Fund’s prospectus, and not at a price based on NAV. Applicants state that (a) secondary market trading in shares does not involve a Fund as a party and will not result in dilution of an investment in shares, and (b) to the extent different prices exist during a given trading day, or from day to day, such variances occur as a result of third-party market forces, such as supply and demand. Therefore, applicants assert that secondary market transactions in shares will not lead to discrimination or preferential treatment among purchasers. Finally, applicants represent that share market prices will be disciplined by arbitrage opportunities, which should prevent shares from trading at a material discount or premium from NAV. 6. With respect to Funds that hold non-U.S. Portfolio Instruments and that effect creations and redemptions of Creation Units in kind, applicants request relief from the requirement imposed by section 22(e) in order to allow such Funds to pay redemption proceeds within fifteen calendar days following the tender of Creation Units for redemption. Applicants assert that the requested relief would not be inconsistent with the spirit and intent of section 22(e) to prevent unreasonable, undisclosed or unforeseen delays in the actual payment of redemption proceeds. 7. Applicants request an exemption to permit Funds of Funds to acquire Fund shares beyond the limits of section 12(d)(1)(A) of the Act; and the Funds, and any principal underwriter for the Funds, and/or any broker or dealer registered under the Exchange Act, to VerDate Sep<11>2014 18:10 Mar 01, 2018 Jkt 244001 sell shares to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act. The application’s terms and conditions are designed to, among other things, help prevent any potential (i) undue influence over a Fund through control or voting power, or in connection with certain services, transactions, and underwritings, (ii) excessive layering of fees, and (iii) overly complex fund structures, which are the concerns underlying the limits in sections 12(d)(1)(A) and (B) of the Act. 8. Applicants request an exemption from sections 17(a)(1) and 17(a)(2) of the Act to permit persons that are affiliated persons, or second-tier affiliates, of the Funds, solely by virtue of certain ownership interests, to effectuate purchases and redemptions in-kind. The deposit procedures for in-kind purchases of Creation Units and the redemption procedures for in-kind redemptions of Creation Units will be the same for all purchases and redemptions and Deposit Instruments and Redemption Instruments will be valued in the same manner as those Portfolio Instruments currently held by the Funds. Applicants also seek relief from the prohibitions on affiliated transactions in section 17(a) to permit a Fund to sell its shares to and redeem its shares from a Fund of Funds, and to engage in the accompanying in-kind transactions with the Fund of Funds.2 The purchase of Creation Units by a Fund of Funds directly from a Fund will be accomplished in accordance with the policies of the Fund of Funds and will be based on the NAVs of the Funds. 9. Applicants also request relief to permit a Feeder Fund to acquire shares of another registered investment company managed by the Adviser having substantially the same investment objectives as the Feeder Fund (‘‘Master Fund’’) beyond the limitations in section 12(d)(1)(A) and permit the Master Fund, and any principal underwriter for the Master Fund, to sell shares of the Master Fund to the Feeder Fund beyond the limitations in section 12(d)(1)(B). 10. Section 6(c) of the Act permits the Commission to exempt any persons or transactions from any provision of the Act if such exemption is necessary or 2 The requested relief would apply to direct sales of shares in Creation Units by a Fund to a Fund of Funds and redemptions of those shares. Applicants, moreover, are not seeking relief from section 17(a) for, and the requested relief will not apply to, transactions where a Fund could be deemed an Affiliated Person, or a Second-Tier Affiliate, of a Fund of Funds because an Adviser or an entity controlling, controlled by or under common control with an Adviser provides investment advisory services to that Fund of Funds. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act. For the Commission, by the Division of Investment Management, under delegated authority. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–04199 Filed 3–1–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82774; File No. SR–FINRA– 2018–011] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Revise the Private Securities Offerings Representative (Series 82) Examination February 26, 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(i). 2 17 E:\FR\FM\02MRN1.SGM 02MRN1 Federal Register / Vol. 83, No. 42 / Friday, March 2, 2018 / Notices 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 Private Securities Offerings Representative (Series 82) 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 Private Securities Offerings 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. The revised Series 82 content outline is attached.6 The revised Series 82 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 4 17 CFR 240.19b–4(f)(1). also is proposing corresponding revisions to the Series 82 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. 6 The Commission notes that the content outline is attached to the filing, not to this Notice. 7 17 CFR 240.24b–2. 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. 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 SIETM) 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 daltland on DSKBBV9HB2PROD with NOTICES 5 FINRA VerDate Sep<11>2014 18:10 Mar 01, 2018 Jkt 244001 8 15 U.S.C. 78o–3(g)(3). 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. 9 See PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 9051 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 Private Securities Offerings Representative (Series 82) 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 Private Securities Offerings Representative. As a result of this review, FINRA also is proposing to revise the Series 82 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 Private Securities Offerings Representative. The proposed change will align the organization of the Series 82 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 82 content outline. Beginning on October 1, 2018, new applicants seeking to register as Private Securities Offerings Representatives must pass the SIE examination and the revised Private Securities Offerings Representative (Series 82) examination. Current Content Outline The current Series 82 content outline is divided into four sections. The following are the four sections, denoted Section 1 through Section 4, with the associated number of questions: 1. Characteristics of Corporate Securities, 13 questions; 2. Regulation of The Market for Registered and Unregistered Securities, 45 questions; 3. Analyzing Corporate Securities and Investment Planning, 16 questions; and 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 82 examination, FINRA is filing with the Commission for immediate effectiveness the content outlines for the other revised representative-level qualification examinations. 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 82 examination. E:\FR\FM\02MRN1.SGM 02MRN1 9052 Federal Register / Vol. 83, No. 42 / Friday, March 2, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES 4. Handling Customer Accounts and Industry Regulations, 26 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 82 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 82 examination. As a result, the revised Series 82 examination will test knowledge specific to the day-to-day activities, responsibilities and job functions of a Private Securities Offerings Representative. Further, FINRA is proposing to reorganize the content outline by dividing it into four major job functions that are performed by a Private Securities Offerings Representative. The proposed change aligns the major job functions performed by a Private Securities Offerings Representative with the major job functions performed by other sales representatives, including Investment Company and Variable Contracts Products Representatives, General Securities Representatives and Direct Participation Programs 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, 25 questions; Function 2: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives, 9 questions; Function 3: Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records, 13 questions; and Function 4: Obtains and Verifies Customers’ Purchase Instructions and Agreements; Processes, Completes and Confirms Transactions, 3 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 Private Securities Offerings Representative. The questions on the revised Series 82 VerDate Sep<11>2014 18:10 Mar 01, 2018 Jkt 244001 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 two tasks (4.1–4.2) 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)). 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 82 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 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 7–8. 17 See Exhibit 3a, Outline Page 9. 18 See Exhibit 3a, Outline Page 3. 19 FINRA is proposing similar changes to the content outlines for other representative-level examinations. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 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 82 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 82 examination on its website, at www.finra.org, prior to its first administration. Availability of Content Outline The current Series 82 content outline is available on FINRA’s website. The revised Series 82 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 82 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 20 See Exhibit 3a, Outline Page 2. with FINRA’s practice of including ‘‘pretest’’ questions on examinations, the Series 82 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 82 examination actually consists of 55 questions, 50 of which are scored. The five pretest questions are randomly distributed throughout the examination. 22 15 U.S.C. 78o–3(b)(6). 23 15 U.S.C. 78o–3(g)(3). 21 Consistent E:\FR\FM\02MRN1.SGM 02MRN1 Federal Register / Vol. 83, No. 42 / Friday, March 2, 2018 / Notices 9053 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Eduardo A. Aleman, Assistant Secretary. knowledge content currently covered on the Series 82 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 Private Securities Offerings Representative. to determine whether the proposed rule should be approved or disapproved. B. Self-Regulatory Organization’s Statement on Burden on Competition Electronic Comments Proposed Collection; Comment Request • 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–2018–011 on the subject line. Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 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 Private Securities Offerings 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 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. 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 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 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). VerDate Sep<11>2014 18:10 Mar 01, 2018 Jkt 244001 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: 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–2018–011. 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 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. 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– 2018–011 and should be submitted on or before March 23, 2018. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 [FR Doc. 2018–04210 Filed 3–1–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Extension: Rule 17Ac2–1, SEC File No. 270–095, OMB Control No. 3235–0084 Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Rule 17Ac2–1 (17 CFR 240.17Ac2–1), under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Rule 17Ac2–1, pursuant to Section 17A(c) of the Exchange Act, generally requires transfer agents for whom the Commission is the transfer agent’s Appropriate Regulatory Agency (‘‘ARA’’), to file an application for registration with the Commission on Form TA–1 and to amend their registrations under certain circumstances. Specifically, Rule 17Ac2–1 requires transfer agents to file a Form TA–1 application for registration with the Commission where the Commission is their ARA. Such transfer agents must also amend their Form TA–1 if the existing information on their Form TA–1 becomes inaccurate, misleading, or incomplete within 60 days following the date the information became inaccurate, misleading or incomplete. Registration filings on Form TA–1 and amendments thereto must be filed with the Commission electronically, absent an exemption, on EDGAR pursuant to Regulation S–T (17 CFR 232). The Commission annually receives approximately 186 filings on Form TA–1 from transfer agents required to register as such with the Commission. Included in this figure are 27 17 E:\FR\FM\02MRN1.SGM CFR 200.30–3(a)(12). 02MRN1

Agencies

[Federal Register Volume 83, Number 42 (Friday, March 2, 2018)]
[Notices]
[Pages 9050-9053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82774; File No. SR-FINRA-2018-011]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Revise the Private Securities Offerings 
Representative (Series 82) Examination

February 26, 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

[[Page 9051]]

Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal effective 
upon receipt of this filing by the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

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

    FINRA is proposing revisions to the content outline and selection 
specifications for the Private Securities Offerings Representative 
(Series 82) 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 Private Securities 
Offerings 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 82 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 82 content outline is attached.\6\ The revised 
Series 82 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 
Statutory Basis for, the Proposed Rule Change

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

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

    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 
SIETM) 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).
---------------------------------------------------------------------------

    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 82 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 
Private Securities Offerings Representative (Series 82) 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 Private Securities Offerings Representative. As a result 
of this review, FINRA also is proposing to revise the Series 82 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 Private Securities Offerings 
Representative. The proposed change will align the organization of the 
Series 82 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 82 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 82 examination.
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    Beginning on October 1, 2018, new applicants seeking to register as 
Private Securities Offerings Representatives must pass the SIE 
examination and the revised Private Securities Offerings Representative 
(Series 82) examination.
Current Content Outline
    The current Series 82 content outline is divided into four 
sections. The following are the four sections, denoted Section 1 
through Section 4, with the associated number of questions:
    1. Characteristics of Corporate Securities, 13 questions;
    2. Regulation of The Market for Registered and Unregistered 
Securities, 45 questions;
    3. Analyzing Corporate Securities and Investment Planning, 16 
questions; and

[[Page 9052]]

    4. Handling Customer Accounts and Industry Regulations, 26 
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 82 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 82 examination. As a result, the 
revised Series 82 examination will test knowledge specific to the day-
to-day activities, responsibilities and job functions of a Private 
Securities Offerings Representative.
    Further, FINRA is proposing to reorganize the content outline by 
dividing it into four major job functions that are performed by a 
Private Securities Offerings Representative. The proposed change aligns 
the major job functions performed by a Private Securities Offerings 
Representative with the major job functions performed by other sales 
representatives, including Investment Company and Variable Contracts 
Products Representatives, General Securities Representatives and Direct 
Participation Programs 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, 25 questions;
    Function 2: Opens Accounts After Obtaining and Evaluating 
Customers' Financial Profile and Investment Objectives, 9 questions;
    Function 3: Provides Customers with Information About Investments, 
Makes Suitable Recommendations, Transfers Assets and Maintains 
Appropriate Records, 13 questions; and
    Function 4: Obtains and Verifies Customers' Purchase Instructions 
and Agreements; Processes, Completes and Confirms Transactions, 3 
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 Private Securities 
Offerings Representative. The questions on the revised Series 82 
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 two tasks (4.1-4.2) 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 7-8.
    \17\ See Exhibit 3a, Outline Page 9.
    \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 82 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 82 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 82 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 82 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 
82 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 82 content outline is available on FINRA's 
website. The revised Series 82 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 82 
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

[[Page 9053]]

knowledge content currently covered on the Series 82 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 Private 
Securities Offerings 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 
Private Securities Offerings 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.\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-2018-011 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-2018-011. 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 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. 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-2018-011 and should be submitted on or before March 23, 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. 2018-04210 Filed 3-1-18; 8:45 am]
BILLING CODE 8011-01-P
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