Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To, Among Other Things, Amend MSRB Rule G-3 To Restructure the MSRB's Current Municipal Securities Representative Qualification Examination and Harmonize Certain MSRB Qualification Requirements With FINRA Rules, 29855-29861 [2018-13619]
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Federal Register / Vol. 83, No. 123 / Tuesday, June 26, 2018 / Notices
appropriate notice and comment can
take place after the proposed
amendment is effective. The primary
purpose of the amendment is to allocate
surveillance, investigation, and
enforcement responsibilities for Rule
14e–4 under the Act, as well as certain
provisions of Regulation SHO. By
declaring it effective today, the
Amended Plan can become effective and
be implemented without undue delay.
The Commission notes that the prior
version of this plan immediately prior to
this proposed amendment was
published for comment and the
Commission did not receive any
comments thereon.17 Furthermore, the
Commission does not believe that the
amendment to the plan raises any new
regulatory issues that the Commission
has not previously considered.
VI. Conclusion
This order gives effect to the
Amended Plan filed with the
Commission in File No. 4–709. The
Parties shall notify all members affected
by the Amended Plan of their rights and
obligations under the Amended Plan.
It is therefore ordered, pursuant to
Section 17(d) of the Act, that the
Amended Plan in File No. 4–709,
between the FINRA and BOX, filed
pursuant to Rule 17d–2 under the Act,
hereby is approved and declared
effective.
It is further ordered that BOX is
relieved of those responsibilities
allocated to FINRA under the Amended
Plan in File No. 4–709.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–13594 Filed 6–25–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83483; File No. SR–MSRB–
2018–04]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To, Among Other Things,
Amend MSRB Rule G–3 To Restructure
the MSRB’s Current Municipal
Securities Representative Qualification
Examination and Harmonize Certain
MSRB Qualification Requirements With
FINRA Rules
June 20, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 notice is hereby
given that on June 8, 2018 the
Municipal Securities Rulemaking Board
(the ‘‘MSRB’’ or ‘‘Board’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the MSRB. 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
The MSRB filed with the Commission
a proposed rule change to amend MSRB
Rule G–3, on professional qualification
requirements, to (i) restructure the
MSRB’s current Municipal Securities
Representative Qualification
Examination (‘‘Series 52’’); (ii)
harmonize certain MSRB qualification
requirements with the Financial
Industry Regulatory Authority’s
(‘‘FINRA’’) rule change to make
modifications to its representative-level
qualification program, consolidate
NASD and Incorporated NYSE
registration and qualification rules, and
amend its continuing education (‘‘CE’’)
requirements (hereinafter ‘‘FINRA’s
consolidated rule change’’); 3 and (iii)
make technical changes to Rule G–3
(collectively the ‘‘proposed rule
change’’). The MSRB has filed the
proposed rule change for immediate
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1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 On July 7, 2017, the SEC approved FINRA’s
consolidated rule change to: (1) restructure FINRA’s
representative-level qualification examination
program; (2) adopt amendments to consolidate
NASD and Incorporated NYSE rules as FINRA’s
consolidated qualification and registration rules;
and (3) amend FINRA’s CE requirements. See
Exchange Act Release No. 81098 (July 7, 2017), 82
FR 32419 (July 13, 2017) (SR–FINRA–2017–007).
2 17
17 See
supra note 12 (citing to Securities
Exchange Act Release No. 72137).
18 17 CFR 200.30–3(a)(34).
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29855
effectiveness pursuant to Section
19(b)(3)(A) of the Act 4 and Rule 19b–
4(f)(6) 5 thereunder. The MSRB proposes
an operative date of October 1, 2018, to
coincide with the effective date of
FINRA’s consolidated rule change.
The text of the proposed rule change
is available on the MSRB’s website at
www.msrb.org/Rules-andInterpretations/SEC-Filings/2018Filings.aspx, at the MSRB’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
MSRB included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The MSRB 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
MSRB The MSRB is charged with
setting professional qualification
standards for brokers, dealers, and
municipal securities dealers (‘‘dealers’’),
and municipal advisors. Specifically,
Section 15B(b)(2)(A) of the Act
authorizes the MSRB to prescribe
‘‘standards of training, experience,
competence, and such other
qualifications as the Board finds
necessary or appropriate in the public
interest or for the protection of investors
and municipal entities or obligated
persons.’’ 6 Section 15B(b)(2)(A)(iii) of
the Act also provides that the Board
may appropriately classify associated
persons of dealers and municipal
advisors and require persons in any
such class to pass tests prescribed by the
Board.7 Accordingly, over the years, the
MSRB has adopted professional
qualification standards to ensure that
associated persons of dealers and
municipal advisors attain and maintain
specified levels of competence and
knowledge for each classification
category. The purpose of the proposed
rule change is to generally harmonize
Rule G–3 with approved amendments to
4 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
6 See 15 U.S.C. 78o–4(b)(2)(A).
7 See 15 U.S.C. 78o–4(b)(2)(A)(iii).
5 17
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Federal Register / Vol. 83, No. 123 / Tuesday, June 26, 2018 / Notices
FINRA’s professional qualification and
registration rules in furtherance of
promoting regulatory consistency with
respect to qualification requirements. To
that end, the MSRB is proposing to (i)
require the Securities Industry
Essentials (SIE) examination as a
prerequisite for the Series 52
examination; (ii) restructure the Series
52 examination into a specialized
knowledge examination; (iii) amend
Rule G–3 to further harmonize with
FINRA’s consolidated rule change by
providing for permissive registrations
and relief to individuals from having to
requalify by examination by recognizing
the financial services affiliate (‘‘FSA’’)
waiver program; and (iv) make other
amendments that are technical in
nature.
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Background
FINRA’s consolidated rule change
reflected a multi-year effort to not only
create a consolidated FINRA rulebook,
but to create the SIE and tailored,
specialized knowledge examinations for
its particular registration categories, and
also to enhance its registration rules to
afford firms greater flexibility to develop
and maintain a depth of registered
associated persons with professional
qualifications. The consolidated rule
change began, in part, in December
2009, with the publication of FINRA
Regulatory Notice 09–70 8 requesting
comment on, among other things: (i)
Revising the categories of permissive
registrations to allow any associated
person to obtain and maintain any
registration permitted by the member;
and (ii) establishing a process by which
a person working for a financial services
affiliate of a member would be
permitted to re-associate with a member
without having to meet the necessary
qualification requirements.9
In May 2015, in connection with its
continued efforts to streamline its
registration and qualification rules,
FINRA published Regulatory Notice 15–
20 10 seeking comment on a proposal to
restructure its representative-level
qualification examination program. The
restructured program consists of the SIE
examination paired with specialized
knowledge examinations for specific
representative-level qualifications. The
SIE examination is designed to cover
8 See Regulatory Notice 09–70 (FINRA Requests
Comment on Proposed Consolidated FINRA Rules
Governing Registration and Qualification
Requirements) (December 2009).
9 FINRA received over 20 comments in response
to Regulatory Notice 09–70.
10 See Regulatory Notice 15–20 (FINRA Requests
Comment on a Concept Proposal to Restructure the
Representative-Level Qualification Examination
Program) (May 2015). FINRA received over 20
comments in response to Regulatory Notice 15–20.
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fundamental knowledge that is
commonly tested across the
representative-level examinations, such
as product knowledge, functions of the
regulatory agencies, and structure of the
securities markets. Each specialized
knowledge examination would test
knowledge of concepts and rules
specifically corresponding to a
particular representative-level
qualification.
In March 2017, FINRA’s consolidated
rule change was filed with the SEC to:
(i) Consolidate, with amendments, the
NASD and Incorporated NYSE
qualification and registration rules; (ii)
restructure FINRA’s representative-level
qualification examination program with
the creation of the SIE; and (iii) amend
FINRA’s CE requirements. All proposed
amendments were subject to notice and
comment through FINRA’s previous
requests for comments. FINRA’s
proposed rule change was published for
comment in the Federal Register on
April 10, 2017; the SEC received 18
comments in response to the proposal,
which FINRA responded to on June 26,
2017.11 The SEC found that the proposal
was consistent with the requirements of
the Exchange Act and the rules and
regulations thereunder and approved
FINRA’s proposed rule changes.12
Thereafter, FINRA announced that its
consolidated rule change would become
effective on October 1, 2018 in
Regulatory Notice 17–30 (October 2017).
The MSRB conducted a review of its
qualifications program to determine
where it was appropriate to harmonize
with FINRA’s consolidated rule change.
Provided below is a detailed description
of the proposed amendments to Rule
G–3.
Description of the Proposed
Amendments to Rule G–3—Designed To
Promote Regulatory Consistency With
FINRA’s Consolidated Rule Change
Permissive Registrations
FINRA’s consolidated rule change
expanded the scope of permissive
registrations under NASD Rules 1021
11 The SEC received another comment letter in
response to FINRA’s response to comments. See
Letter from Michele Van Tassel, President,
Association of Registration Management, to Afshin
Atabaki, Associate General Counsel, Financial
Industry Regulatory Authority (July 21, 2017).
12 Specifically, the Commission found that the
proposed rule change was consistent with Section
15A(b)(6) of the Exchange Act, 15 U.S.C. 78o–
3(b)(6), which requires, among other things, that
FINRA rules 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 15(A)(g)(3) of the Exchange Act, 15 U.S.C.
78o–3(g)(3), which authorizes FINRA to prescribe
standards of training, experience, and competence
for persons associated with FINRA members.
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and 1031 to eliminate a constraint that
only certain associated persons of a
member could obtain permissive
registrations and to codify such
provisions as FINRA Rule 1210.02.
Specifically, as approved, FINRA Rule
1210.02 allows any associated person of
a member to obtain and maintain any
registration permitted by the member
irrespective of the functional role of the
person at the firm. In addition, FINRA
Rule 1210.02 provides that a person
maintaining a permissive registration
would be deemed a registered person of
the firm and be assigned an
appropriately registered supervisor who
would be responsible for periodically
contacting such individual’s direct
supervisor to verify that the individual
is not engaging in activities outside the
scope of his or her current role.13 The
individual would nevertheless be
subject to all FINRA rules to the extent
relevant to their activities.14
The MSRB is proposing to amend
Rule G–3 to adopt Supplementary
Material .03 that would similarly allow
dealers to have any associated person at
a dealer maintain certain MSRB
qualifications. More specifically, any
individual associated with a dealer
would be allowed, if permitted by the
dealer, to obtain and maintain a
registration as a municipal securities
representative, a municipal securities
principal or a municipal fund securities
limited principal. Additionally,
proposed Supplementary Material .03
would make clear that individuals
maintaining permissive registrations
pursuant to Rule G–3 would be
considered qualified persons and, to the
extent relevant to the person’s activities,
the person would be subject to
applicable MSRB rules.15 The MSRB
recognizes that allowing dealers to
13 An individual’s day-to-day supervisor may be
a non-registered person, however an appropriately
registered supervisor would be responsible for
periodic check-ins to make sure that the individual
is not acting outside the scope of his or her assigned
functions.
14 For example, FINRA rules that relate to
interactions with customers would not be
applicable to the conduct of a permissivelyregistered individual who does not have any
customer contact.
15 At this time, the MSRB does not believe it is
necessary to be prescriptive in this area and identify
each potential rule that a permissively-qualified
person would be subject to based on a particular set
of activities. For example, the MSRB notes that a
rule such as Rule G–47, on time of trade disclosure,
would have very little application to a person
holding a permissive qualification who does not
have customer contact regarding the purchase or
sale of municipal securities. Bearing that in mind,
a facts and circumstances analysis would apply as
to the securities laws and regulations applicable to
persons holding permissive qualifications, and such
a determination would need to be made by the
dealer, as part of its supervisory obligations, under
Rule G–27.
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maintain permissive qualifications for
associated persons would support a
greater regulatory understanding of the
municipal securities market by persons
currently in capacities not requiring a
qualification classification, and would
further develop the knowledge and
skills of qualified persons, as it relates
to the municipal securities market, by
allowing permissive qualifications
specific to the municipal securities
business. Additionally, by harmonizing
with FINRA’s related rule on permissive
registrations, the industry is afforded
the opportunity to continue to develop
a robust workforce and a depth of
associated persons holding professional
qualifications for purposes of better
managing unanticipated staffing
changes.
FSA-Waiver Program
FINRA’s consolidated rule change
adopted Rule 1210.09, which
established a waiver program for any
individual registered with a member
who subsequently leaves the firm to
work for a financial services industry
affiliate of a member,16 whereby, upon
re-association with a member, an
individual may be granted a waiver
from having to requalify by examination
(‘‘FSA-waiver’’). In order to be granted
a waiver under FINRA Rule 1210.09, an
individual must be initially designated
as FSA-eligible at the time the
individual terminates association with a
member and the individual must have
satisfied the criteria, under FINRA Rule
1210.09 for an FSA-waiver.
Additionally, under FINRA Rule
1210.09, to be eligible for an initial
designation as an FSA-eligible person
by a FINRA member, an individual must
have been registered for a total of five
years within the most recent 10-year
period prior to the designation. Once
designated as FSA-eligible, the
individual is eligible for an FSA-waiver
for up to seven years, so long as the
individual is continuously working for
a financial services industry affiliate of
a member and other conditions are
satisfied.
Pursuant to FINRA Rule 1240, during
the period an FSA-eligible person is
working for a financial services industry
affiliate, the person is required to
complete the Regulatory Element
portion of CE that correlates with such
person’s most recent registration
16 The term ‘‘financial services industry affiliate
of a member’’ as defined under FINRA Rule 1210.09
is ‘‘a legal entity that controls, is controlled by or
is under common control with a member and is
regulated by the SEC, CFTC, state securities
authorities, federal or state banking authorities,
state insurance authorities, or substantially
equivalent foreign regulatory authorities.’’
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category and based on the same CE
cycle had the person remained
registered. Consequently, a person loses
the ability to qualify for an FSA-waiver
if such person fails to complete the
mandatory Regulatory Element portion
of CE. FINRA Rule 1210.09 provides
that once an FSA-eligible person reassociates with a FINRA member, the
firm can file a Form U4 (Uniform
Application for Securities Industry
Registration or Transfer) and request
that the individual’s prior FINRA
registration(s) be reinstated without
having to requalify by examination.
The MSRB is proposing to amend
Rule G–3 to adopt Supplementary
Material .04 that would allow a
municipal securities representative,
municipal securities principal and/or a
municipal fund securities limited
principal 17 to be eligible for a waiver
from having to requalify by
examination, for such MSRB
qualifications, if the following
conditions are met:
1. An individual must have been
registered with a dealer for a total of five
years within the most recent 10-year
period prior to working for a financial
services industry affiliate, which shall
be a legal entity that controls, is
controlled by or is under common
control with a dealer and is regulated by
the SEC, CFTC, state securities
authorities, federal or state banking
authorities, state insurance authorities,
or substantially equivalent foreign
regulatory authorities.
2. The individual has continuously
worked for a financial services industry
affiliate(s) of a dealer since terminating
association with a dealer;
3. The individual has completed the
Regulatory Element portion of CE
consistent with the requirements under
Rule G–3(i)(i)(A) based on the person’s
most recent registration status and such
CE has been completed based on the
same cycle, as if the person had
remained registered;
4. The individual does not have any
pending or adverse regulatory matters,
or terminations and has not otherwise
been subject to a statutory
disqualification while working for a
financial services industry affiliate(s) of
a dealer; and
5. The waiver request is made within
seven years of the individual’s initial
designation as an FSA-eligible person.
The MSRB is also proposing to amend
Rule G–3(h)(i) to provide that associated
17 An individual who has passed the Municipal
Securities Representative Qualification
Examination (Series 52), Municipal Securities
Principal Qualification Examination (Series 53) and
Municipal Fund Securities Limited Principal
Qualification Examination (Series 51), respectively.
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29857
persons that have met the conditions
under Supplementary Material .04 shall
be granted an FSA-waiver consistent
with Rule G–3(h)(i)(A) and (B).
Providing for such waivers allows
associated persons of dealers a greater
opportunity to enhance their financial
services industry knowledge without
having to requalify by examination each
time a person decides to explore
different career opportunities with a
financial services industry affiliate of a
dealer.
Qualified Persons Functioning as
Principals for a Limited Period
Currently Rule G–3(b)(ii)(D) provides
that an individual qualified as a
municipal securities representative,
general securities representative or
general securities principal may
function as a municipal securities
principal for a period of 90 days before
passing the Series 53 exam; and
pursuant to Rule G–3(b)(iv)(B)(4) an
individual qualified as a general
securities representative, investment
company/variable contracts limited
representative, general securities
principal or investment company/
variable contracts limited principal may
function as a municipal fund securities
limited principal for a period of 90 days
before passing the Series 51 exam. In
addition, Rule G–3(c)(ii)(D) provides
that an individual qualified as a
municipal securities representative,
general securities representative or
general securities principal may
function as a municipal securities sales
principal for a period of 90 days before
passing the General Securities Sales
Supervisory Qualification Examination
(Series 9/10).
FINRA’s consolidated rule change
modified a similar FINRA provision 18
permitting a registered person of a
member to function as a principal before
passing the applicable principal
examination, increasing the time period
from 90 calendar days to 120 calendar
days, to better align the time frame with
the current examination enrollment
window.19 In addition, FINRA imposed
an experience requirement providing
that a registered person must have at
least 18 months of experience
functioning as a registered
representative within the five-year
period immediately prior to being
permitted to function as a principal,
18 FINRA’s consolidated rule change amended
NASD Rule 1021 as FINRA Rule 1210.04.
19 An examination enrollment window is the
timeframe between a person registering for a
professional qualification examination and taking
the examination.
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without the applicable principal
qualification examination.
Accordingly, the MSRB is proposing
to amend Rule G–3(b) and (c) to extend
the limited time period in which a
person could function as a principal
without being qualified with a principal
examination, assuming other
qualification requirements are met, from
90 days to 120 calendar days in
furtherance of also better aligning with
the current examination enrollment
window. The MSRB is also proposing to
amend Rule G–3(b) and (c) to require
that, before a qualified representative
can be permitted to function as a
principal for 120 calendar days without
passing a principal examination, the
qualified representative must have at
least 18 months of experience within
the five-year period immediately
preceding the designation as principal.
The MSRB believes that establishing an
experience requirement ensures that
individuals designated to supervise
activities have an appropriate level of
experience as a qualified representative
before acting as a principal without
passing the principal examination. For
this reason, the 18-month experience
requirement will not apply to a
qualified principal who is designated to
function in another principal capacity
for 120 days before passing the
additional principal qualification
examination.
Continuing Education Program
Requirements
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A. Regulatory Element
Currently, Rule G–3(i)(i)(A)(2)
provides that any registered persons
who have not completed the Regulatory
Element portion of CE within the
prescribed time frames will have their
municipal securities registration(s)
deemed inactive until the Regulatory
Element requirements have been
satisfied. Rule G–3(i)(i)(A)(2) also
requires for any person whose
registration has been deemed inactive
that such person must cease all
activities as a registered person and
prohibits such person from performing
any duties and functioning in any
capacity requiring registration.
FINRA’s consolidated rule change
codified existing guidance in NASD’s
Notice to Members 95–35, regarding the
impact of failing to complete the
Regulatory Element portion of CE on a
person’s activities and compensation, as
FINRA Rule 1240(a)(2). Specifically,
approved FINRA Rule 1240(a)(2)
provides that any person whose
registration has been deemed inactive
under the rule may not accept or solicit
business or receive any compensation
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for the purchase or sale of securities.20
FINRA’s approved rule also prescribes
that a person deemed inactive for failing
to complete the Regulatory Element
portion of CE within the prescribed time
frames may, if it does not violate the
firm’s policy, receive trail or residual
commissions resulting from transactions
that were completed before the person’s
registration status was deemed inactive.
The MSRB is proposing to amend Rule
G–3(i)(i)(A)(2) to adopt the provision
restricting any person whose municipal
securities registration(s) have been
deemed inactive for failing to complete
the Regulatory Element portion of CE
from receiving any compensation for
transactions in municipal securities,
except for trails, residual commissions,
or like compensation resulting from
transactions completed before the
person’s inactive status, unless the
dealer’s policy prohibits such trails,
residual commissions or like
compensation. The MSRB recognizes
that, by adding the clause ‘‘like
compensation,’’ the proposed
amendment would provide flexibility as
to the types of compensation permitted
under the rule as compared to FINRA’s
approved rule. However, the MSRB
believes that such differentiation is
warranted to recognize the various
compensation arrangements for
associated persons of dealers with
respect to transactions in municipal
securities. For example, the
compensation received by an associated
person that is part of a dealer’s public
finance underwriting team is generally
not characterized as commissions.
B. Firm Element
Currently, Rule G–3(i)(i)(B), on Firm
Element continuing education, requires
that a dealer maintain a continuing
education program for its covered
registered persons to enhance their
securities knowledge, skill and
professionalism. The MSRB has
supported a principles-based approach
to compliance in this area and afforded
dealers’ considerable flexibility in
developing the scope and content for
their Firm Element portion of CE subject
to the enumerated minimum standards
for a firm’s training programs. A dealer’s
Firm Element portion of CE, as
prescribed in Rule G–3(i)(i)(B)(2)(b),
must cover, with respect to municipal
securities products, services and
strategies offered by the dealer, at a
minimum:
20 The MSRB believes that this prohibition is
adequately addressed currently in Rule G–
3(i)(i)(A)(2) and, therefore, is not proposing to adopt
FINRA’s provision that more specifically articulates
that such persons are prohibited from accepting or
soliciting business.
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(i) General investment features and
associated risk factors;
(ii) Suitability and sales practice
considerations; and
(iii) Applicable regulatory
requirements.
FINRA’s consolidated rule change
also requires, pursuant to FINRA Rule
1240, that each member maintain a
continuing education program for its
covered registered persons to enhance
their securities knowledge, skill and
professionalism and that the training be
appropriate for the business of the
member and, at a minimum, cover,
among other things, training in ethics
and professional responsibility. The
MSRB is proposing to amend Rule G–
3(i)(i)(B)(2)(b) to adopt a similar
provision to require dealers to also
include training in ethics and
professional responsibility for its
registered persons. The MSRB believes
such training promotes high standards
of professionalism for registered
persons.
Registration Status of Armed Forces
The MSRB does not currently have a
rule that provides an inactive status for
an associated person that volunteers for
or is called to active military service in
the Armed Forces of the United States
that would allow such person’s
registration to be tolled.
FINRA’s consolidated rule change
consolidated NASD Rule IM–1000–2 as
FINRA Rule 1210.10 with certain
changes, which affords relief to a
registered person who volunteers for or
is called to active military service in the
Armed Forces of the United States by
tolling such person’s lapse of
registration and CE obligations. More
specifically, FINRA Rule 1210.10
allows, after proper notification to
FINRA, for a member to place a
registered person on inactive status,
whereby such person does not have to
re-register upon returning to active
employment. An associated person who
is placed on inactive status may either
return to active employment with the
firm the person remained registered
with during the person’s inactive status
period or associate with a different firm.
FINRA Rule 1210.10 also relieves
registered persons on such inactive
status from having to complete either
the Regulatory Element or Firm Element
portion of CE during their active
military service.
Additionally, during the pendency of
the registered person’s inactive status,
the person may continue to receive
transaction-based compensation,
including continuing commissions. The
employing member may also allow an
inactive person to enter into an
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agreement with a registered person of
the member to take over and service
clients’ accounts, on behalf of the
person, and to share transaction-related
compensation based upon business
generated by the accounts.
A person who is no longer registered
with a member will generally have their
professional qualifications lapse after a
period of two years. However, FINRA
Rule 1210.10 provides that, for purposes
of determining the two year period, a
formerly registered person who
volunteers for or is called to active
military service will have that time
tolled, commencing on the date the
person began active service.21 FINRA
Rule 1210.10 also provides that a sole
proprietor who volunteers for or is
called to active military service will be
placed on inactive status and, in
addition to the relief provided under
FINRA Rule 1210.10, as a registered
person, the sole proprietor will not be
required to pay dues or assessments
during the inactive period and will not
be required to pay an admission fee
upon returning to his or her investment
banking or securities business.
Rule G–3 generally provides that an
individual who is not associated with a
dealer or municipal advisor for a period
of more than two years will have his or
her professional qualifications lapse,
requiring such person to requalify by
examination upon re-associating with a
dealer or municipal advisor. The MSRB
is proposing to amend Rule G–3 to
adopt Supplementary Material .05,
which would provide that, for purposes
of determining the two-year period, a
formerly qualified associated person
who volunteers for or is called to active
U.S. military service will have that time
tolled commencing on the date the
person began active military service.
Importantly, Supplementary Material
.05 would preserve the time tolled by
establishing that the MSRB must receive
notice of the person’s period of active
U.S. military service within 90 days
following the completion of such
person’s active U.S. military service.22
Absent such notice, the deferral will
terminate and the period of time while
21 More specifically, FINRA’s rule states that the
two-year period for lapse of registration of its
representative and principal-level qualifications
and the four-year expiration for the SIE examination
would be tolled for the period the individual is on
active service.
22 The notice required to preserve such deferral
shall be in the form of a letter to the MSRB that
includes the individual’s name (including, if
applicable, the individual’s CRD number), the start
and end dates of the individual’s active U.S.
military service and the branch of service. Such
notice shall be provided to the MSRB electronically
at Compliance@msrb.org.
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17:24 Jun 25, 2018
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on active U.S. military service will not
have been tolled.
In addition, proposed Supplementary
Material .05 would permit an associated
person of a dealer or municipal advisor
that is qualified under Rule G–3, upon
volunteering for or being called to active
U.S. military service, to be deemed
inactive until the associated person
returns from active U.S. military service.
Additionally, under the proposed rule
change, during the period the associated
person is on active U.S. military service,
the person would remain eligible for
transaction-related compensation,
including continuing commissions and
the firm could permit the inactive
person to enter into an agreement with
a qualified associated person of the
dealer or municipal advisor to have
such qualified associated person service
clients on behalf of the inactive person
and share transaction-related
compensation resulting from the
municipal securities or municipal
advisory business generated by the
accounts. In addition, an associated
person of a dealer or municipal advisor
would not be subject to the applicable
CE obligations under Rule G–3(i) during
the period of active U.S. military
service, provided the MSRB receives
notice of the associated person’s period
of active U.S. military service within 30
days of completion of such service.23
Proposed Supplementary Material .05
would also provide that a dealer or
municipal advisor sole proprietor who
temporarily closes his or her business
by reason of volunteering for or being
called into active U.S. military service
shall be placed, on an inactive status
after notice to the MSRB. As a result, in
addition to the relief provided to the
sole proprietor as a qualified associated
person, the sole proprietor will not be
required to pay fees pursuant to Rules
A–11 or A–12 that, if applicable, accrue
during the inactive period. Further,
upon returning from active U.S. military
service, the dealer or municipal advisor
sole proprietor must provide the MSRB
notice within 30 calendar days that the
sole proprietor has returned to his or her
business.24
23 The notice required shall be in the form of a
letter to the MSRB on firm letterhead that includes
the firm’s MSRB ID number, the individual’s name
(including, if applicable, the individual’s CRD
number), the start and end dates of the individual’s
active U.S. military service and the branch of
service. Such notice shall be provided to the MSRB
electronically at Compliance@msrb.org.
24 The notice required shall be in the form of a
letter to the MSRB on firm letterhead that includes
the firm’s MSRB ID number, the individual’s name
(including, if applicable, the individual’s CRD
number), the start and end dates of the individual’s
active military service and the branch of service.
Such notice shall be provided to the MSRB
electronically at Compliance@msrb.org.
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29859
Waiting Periods for Retaking a Failed
Examination
Rule G–3(g) allows any associated
person of a broker, dealer, municipal
securities dealer or municipal advisor
who fails to pass an MSRB qualification
examination to take the examination
again after a period of 30 days has
elapsed from the date of the prior
examination, except that any person
who fails to pass an examination three
or more times in succession shall be
prohibited from taking the examination
again until a period of six months has
elapsed from the date of such person’s
last attempt to pass the examination.
FINRA’s consolidated rule change
consolidated NASD Rule 1070(e) as
FINRA Rule 1210.06 to provide that a
person who fails a FINRA examination
may retake the examination after 30
calendar days from the date of the
person’s last attempt to pass the
examination, except a person who fails
an examination three or more times in
succession within a two-year period
may only retake the examination after
180 calendar days from the date of the
person’s last attempt to pass the
examination. In addition, FINRA Rule
1210.06 extended these provisions to
the SIE examination.
Although generally consistent with
FINRA’s approved rule, to promote
regulatory consistency, the MSRB is
proposing to amend to Rule G–3(g), on
retaking of qualification examinations,
to change the term ‘‘six months’’ to ‘‘180
calendar days’’ and to add ‘‘within a
two-year period’’ after the phrase ‘‘three
of more times in succession.’’ The
addition of the phrase is intended to
clarify the frequency with which
FINRA’s test delivery system resets a
candidate’s exam history data.
Restructuring of the MSRB’s
Professional Qualification Examination
Program
A. Accepting the SIE Examination and
Revising the Municipal Securities
Representative Qualification
Examination
FINRA’s consolidated rule change
established the SIE exam to eliminate
the duplicative testing of general
securities knowledge across its current
representative-level qualification
examinations by moving such content
into the SIE exam.25 With the
establishment of the SIE exam, FINRA
restructured its representative-level
exams into specialized knowledge
examinations to test knowledge of
25 Individuals do not have to be associated with
a FINRA member to take the SIE examination,
unlike FINRA’s representative-level qualification
examinations.
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concepts and rules specifically
corresponding to a particular
representative-level qualification.
FINRA Rule 1210.03, on qualification
examinations, provides that before a
person can become registered as a
representative, such person must pass
the SIE exam and an appropriate
representative-level qualification
examination.
In developing the SIE exam, FINRA
established a committee of industry
professionals to create the content
outline for the SIE exam and invited
staff from the MSRB’s Professional
Qualifications department to participate
on the committee.26 The SIE exam
content outline is divided into four
sections, with each section addressing
the essential areas of general knowledge.
The SIE exam will consist of 75 scored
multiple-choice questions.27 Pursuant to
FINRA Rule 1210.08, a passing score on
the SIE exam would be valid for four
years and a person that passes the SIE
exam would have up to four years to
pass a representative-level qualification
examination in order to become
registered in a representative-level
capacity.
The sections and the associated
number of questions for each section
are:
• Section 1: Knowledge of Capital
Markets (12 questions);
• Section 2: Understanding Products
and Their Risks (33 questions);
• Section 3: Understanding Trading,
Customer Accounts and Prohibited
Activities (23 questions); and
• Section 4: Overview of the
Regulatory Framework (7 questions).
Rule G–3(a)(ii), on qualification
requirements, provides that ‘‘every
municipal securities representative shall
take and pass the Municipal Securities
Representative Qualification
Examination prior to being qualified as
a municipal securities
representative.’’ 28 The Series 52 is
designed to establish that persons
associated with dealers that effect
26 MSRB staff reviewed the SIE content outline
and provided substantive comments to ensure
relevant MSRB rules were incorporated and content
specific to municipal securities was addressed on
the outline. FINRA filed the content outline and
selection specifications for the new SIE
examination with the SEC for immediate
effectiveness. See Exchange Act Release No. 82578
(January 24, 2018), 83 FR 4375 (January 30, 2018)
(SR–FINRA–2018–002).
27 The passing score for the SIE exam will be
published on FINRA’s website prior to the first
administration of the examination in October 2018.
28 An exception to the rule, allows only persons
having been duly qualified as a general securities
representative by reason of having passed the
General Securities Representative Qualification
Examination before November 7, 2011 to qualify as
a municipal securities representative.
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18:54 Jun 25, 2018
Jkt 244001
transactions in municipal securities
have attained specified levels of
competence and knowledge to become
registered as municipal securities
representatives.
The Series 52, in its current format,
has general securities knowledge
content that will be tested on the future
SIE exam. The MSRB, therefore, intends
to restructure the Series 52 as a
specialized knowledge examination to
better focus the content of the
examination more specifically to
municipal securities knowledge.
Accordingly, the MSRB is proposing an
amendment to Rule G–3(a)(ii) that
would require an individual to pass
both the SIE exam and the revised
Series 52 29 in order to become qualified
as a municipal securities
representative.30 Additionally, the
MSRB will continue to recognize, in
their revised forms as specialized
knowledge examinations, the Municipal
Securities Sales Limited Representative
Examination (Series 7) and the Limited
Representative-Investment Company
Variable Contracts Product
Representative Examination (Series 6) in
furtherance of regulatory consistency
and for purposes of avoiding impact to
the current distribution channel for the
sale of municipal securities.
2. Statutory Basis
The MSRB believes that the proposed
rule change is consistent with Section
15B(b)(2)(A) of the Act,31 which
provides that the MSRB’s rules shall
prescribe:
such standards of training, experience,
competence, and such other qualifications as
the Board finds necessary or appropriate in
the public interest or for the protection of
investors and municipal entities or obligated
persons. In connection with the definition
and application of such standards the Board
29 The content outlines for MSRB’s qualification
examinations serve as a guide to the subject matters
tested on each examination. The MSRB’s Series 52/
53 Subcommittee of the Professional Qualification
Advisory Committee has been reviewing the current
content covered on the Series 52 examination to
determine the revisions that will be necessary to
appropriately modify the Series 52 into a
specialized knowledge examination. In connection
with the filing of this proposed rule change, and in
advance of the October 1, 2018 effective date of the
proposed rule change, the MSRB anticipates filing
with the SEC a revised Series 52 content outline to
reflect the modifications to the Series 52
examination and the removal of duplicative content
that would appear on the SIE exam.
30 Since the SIE examination is meant to
eliminate duplicative testing of general content
across representative-level examinations and
thereby, affording the opportunity for
representative-level examinations to become more
specialized knowledge examinations there is no
impact to the Series 51 exam and Series 53 exam
that would necessitate restructuring of those
principal-level exams.
31 15 U.S.C. 78o–4(b)(2)(A).
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Frm 00120
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Sfmt 4703
may . . . specify that all or any portion of
such standards shall be applicable to any
such class; and require persons in any such
class to pass tests . . .
The MSRB believes that, by requiring
persons to take and pass a professional
qualification examination, such
requirement promotes public
confidence by ensuring the minimum
standards of training, experience and
competence required by the Board are
being achieved. The MSRB also believes
that the restructuring of its current
qualification examination program is
consistent with and in furtherance of
the stated objectives of Section
15B(b)(2)(A) of the Act because by
ensuring the Series 52 specialized
knowledge examination focuses on the
most relevant laws, rules and
regulations of the municipal securities
market, investors are more well
protected. Also, by more closely
aligning the Series 52 specialized
knowledge examination content to the
functions and activities performed by a
municipal securities representative,
such associated persons are more likely
to fully grasp the prescribed regulatory
standards, which aides to preserve the
integrity of the municipal securities
market. Importantly, without
compromising the qualification
standards, the proposed rule change
would improve the efficiency of the
examination program by eliminating
duplicative testing of general securities
knowledge.
Moreover, consistent with Section
15B(b)(2)(A) of the Act, permitting such
persons to work at an industry affiliate
of a dealer without having to requalify
by examination upon re-registering with
a dealer, by permitting them to seek a
waiver from re-examination, lends itself
to a greater understanding of the
financial services industry. Further, the
proposed rule change would allow
individuals to maintain their knowledge
base while working in areas ancillary to
the municipal securities market, thereby
providing such market professionals
additional securities knowledge, which,
in turn, promotes confidence in market
professionals. The proposed rule change
would also expand the scope of
permissive qualifications, which, among
other things, would allow dealers to
develop a depth of associated persons
with qualifications to respond to
unanticipated personnel changes and
would encourage a greater
understanding of the municipal
securities markets. As proposed, by
allowing individuals to function in a
principal capacity for a limited period
of time before having to pass a
principal-level examination would
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minimize operational disruptions to a
dealer.
Lastly, under the proposed rule
change, allowing associated persons that
volunteer for or are called into active
U.S. military service to be placed in an
inactive status allows for regulatory
consistency and promotes the public
interest.
IV. Solicitation of Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The MSRB 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
proposed rule change reflects the
MSRB’s belief that its registration
requirements should be generally
harmonized with FINRA’s consolidated
rule change for purposes of regulatory
efficiency and that such changes do not
attach additional burdens on dealers,
and as applicable, municipal advisors.
In addition, the MSRB’s restructuring of
its qualification examination program to
better align with the functions and
associated tasks currently performed by
a municipal securities representative
makes for a more effective qualification
examination.
Electronic Comments
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Board did not solicit comment on
the proposed change. Therefore, there
are no comments on the proposed rule
change received from members,
participants or others.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 32 and Rule 19b–
4(f)(6) thereunder.33
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.
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:
• 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–
MSRB–2018–04 on the subject line.
Paper Comments
All submissions should refer to File
Number SR–MSRB–2018–04. 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 the MSRB. 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–MSRB–2018–04 and should
be submitted on or before July 17, 2018.
U.S.C. 78s(b)(3)(A).
33 17 CFR 240.19b–4(f)(6).
17:24 Jun 25, 2018
For the Commission, pursuant to delegated
authority.34
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–13619 Filed 6–25–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
(Release No. 34–83482; File No. SR–
NASDAQ–2018–046)
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
4702
June 20, 2018.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
32 15
VerDate Sep<11>2014
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 June 8,
2018, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. 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
The Exchange proposes to amend
Rule 4702(b)(12)(A) so that Participants
can choose to have their Limit On Close
Orders rejected if subject to being repriced when entered between 3:50 p.m.
ET and immediately prior to 3:55 p.m.
ET.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
34 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 83, Number 123 (Tuesday, June 26, 2018)]
[Notices]
[Pages 29855-29861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13619]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83483; File No. SR-MSRB-2018-04]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To, Among Other Things, Amend MSRB Rule G-3 To Restructure the
MSRB's Current Municipal Securities Representative Qualification
Examination and Harmonize Certain MSRB Qualification Requirements With
FINRA Rules
June 20, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on June 8, 2018 the Municipal Securities
Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities
and Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the MSRB. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB filed with the Commission a proposed rule change to amend
MSRB Rule G-3, on professional qualification requirements, to (i)
restructure the MSRB's current Municipal Securities Representative
Qualification Examination (``Series 52''); (ii) harmonize certain MSRB
qualification requirements with the Financial Industry Regulatory
Authority's (``FINRA'') rule change to make modifications to its
representative-level qualification program, consolidate NASD and
Incorporated NYSE registration and qualification rules, and amend its
continuing education (``CE'') requirements (hereinafter ``FINRA's
consolidated rule change''); \3\ and (iii) make technical changes to
Rule G-3 (collectively the ``proposed rule change''). The MSRB has
filed the proposed rule change for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6) \5\ thereunder.
The MSRB proposes an operative date of October 1, 2018, to coincide
with the effective date of FINRA's consolidated rule change.
---------------------------------------------------------------------------
\3\ On July 7, 2017, the SEC approved FINRA's consolidated rule
change to: (1) restructure FINRA's representative-level
qualification examination program; (2) adopt amendments to
consolidate NASD and Incorporated NYSE rules as FINRA's consolidated
qualification and registration rules; and (3) amend FINRA's CE
requirements. See Exchange Act Release No. 81098 (July 7, 2017), 82
FR 32419 (July 13, 2017) (SR-FINRA-2017-007).
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the MSRB's
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2018-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the MSRB included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The MSRB 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
MSRB The MSRB is charged with setting professional qualification
standards for brokers, dealers, and municipal securities dealers
(``dealers''), and municipal advisors. Specifically, Section
15B(b)(2)(A) of the Act authorizes the MSRB to prescribe ``standards of
training, experience, competence, and such other qualifications as the
Board finds necessary or appropriate in the public interest or for the
protection of investors and municipal entities or obligated persons.''
\6\ Section 15B(b)(2)(A)(iii) of the Act also provides that the Board
may appropriately classify associated persons of dealers and municipal
advisors and require persons in any such class to pass tests prescribed
by the Board.\7\ Accordingly, over the years, the MSRB has adopted
professional qualification standards to ensure that associated persons
of dealers and municipal advisors attain and maintain specified levels
of competence and knowledge for each classification category. The
purpose of the proposed rule change is to generally harmonize Rule G-3
with approved amendments to
[[Page 29856]]
FINRA's professional qualification and registration rules in
furtherance of promoting regulatory consistency with respect to
qualification requirements. To that end, the MSRB is proposing to (i)
require the Securities Industry Essentials (SIE) examination as a
prerequisite for the Series 52 examination; (ii) restructure the Series
52 examination into a specialized knowledge examination; (iii) amend
Rule G-3 to further harmonize with FINRA's consolidated rule change by
providing for permissive registrations and relief to individuals from
having to requalify by examination by recognizing the financial
services affiliate (``FSA'') waiver program; and (iv) make other
amendments that are technical in nature.
---------------------------------------------------------------------------
\6\ See 15 U.S.C. 78o-4(b)(2)(A).
\7\ See 15 U.S.C. 78o-4(b)(2)(A)(iii).
---------------------------------------------------------------------------
Background
FINRA's consolidated rule change reflected a multi-year effort to
not only create a consolidated FINRA rulebook, but to create the SIE
and tailored, specialized knowledge examinations for its particular
registration categories, and also to enhance its registration rules to
afford firms greater flexibility to develop and maintain a depth of
registered associated persons with professional qualifications. The
consolidated rule change began, in part, in December 2009, with the
publication of FINRA Regulatory Notice 09-70 \8\ requesting comment on,
among other things: (i) Revising the categories of permissive
registrations to allow any associated person to obtain and maintain any
registration permitted by the member; and (ii) establishing a process
by which a person working for a financial services affiliate of a
member would be permitted to re-associate with a member without having
to meet the necessary qualification requirements.\9\
---------------------------------------------------------------------------
\8\ See Regulatory Notice 09-70 (FINRA Requests Comment on
Proposed Consolidated FINRA Rules Governing Registration and
Qualification Requirements) (December 2009).
\9\ FINRA received over 20 comments in response to Regulatory
Notice 09-70.
---------------------------------------------------------------------------
In May 2015, in connection with its continued efforts to streamline
its registration and qualification rules, FINRA published Regulatory
Notice 15-20 \10\ seeking comment on a proposal to restructure its
representative-level qualification examination program. The
restructured program consists of the SIE examination paired with
specialized knowledge examinations for specific representative-level
qualifications. The SIE examination is designed to cover fundamental
knowledge that is commonly tested across the representative-level
examinations, such as product knowledge, functions of the regulatory
agencies, and structure of the securities markets. Each specialized
knowledge examination would test knowledge of concepts and rules
specifically corresponding to a particular representative-level
qualification.
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\10\ See Regulatory Notice 15-20 (FINRA Requests Comment on a
Concept Proposal to Restructure the Representative-Level
Qualification Examination Program) (May 2015). FINRA received over
20 comments in response to Regulatory Notice 15-20.
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In March 2017, FINRA's consolidated rule change was filed with the
SEC to: (i) Consolidate, with amendments, the NASD and Incorporated
NYSE qualification and registration rules; (ii) restructure FINRA's
representative-level qualification examination program with the
creation of the SIE; and (iii) amend FINRA's CE requirements. All
proposed amendments were subject to notice and comment through FINRA's
previous requests for comments. FINRA's proposed rule change was
published for comment in the Federal Register on April 10, 2017; the
SEC received 18 comments in response to the proposal, which FINRA
responded to on June 26, 2017.\11\ The SEC found that the proposal was
consistent with the requirements of the Exchange Act and the rules and
regulations thereunder and approved FINRA's proposed rule changes.\12\
Thereafter, FINRA announced that its consolidated rule change would
become effective on October 1, 2018 in Regulatory Notice 17-30 (October
2017).
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\11\ The SEC received another comment letter in response to
FINRA's response to comments. See Letter from Michele Van Tassel,
President, Association of Registration Management, to Afshin
Atabaki, Associate General Counsel, Financial Industry Regulatory
Authority (July 21, 2017).
\12\ Specifically, the Commission found that the proposed rule
change was consistent with Section 15A(b)(6) of the Exchange Act, 15
U.S.C. 78o-3(b)(6), which requires, among other things, that FINRA
rules 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
15(A)(g)(3) of the Exchange Act, 15 U.S.C. 78o-3(g)(3), which
authorizes FINRA to prescribe standards of training, experience, and
competence for persons associated with FINRA members.
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The MSRB conducted a review of its qualifications program to
determine where it was appropriate to harmonize with FINRA's
consolidated rule change. Provided below is a detailed description of
the proposed amendments to Rule G-3.
Description of the Proposed Amendments to Rule G-3--Designed To Promote
Regulatory Consistency With FINRA's Consolidated Rule Change
Permissive Registrations
FINRA's consolidated rule change expanded the scope of permissive
registrations under NASD Rules 1021 and 1031 to eliminate a constraint
that only certain associated persons of a member could obtain
permissive registrations and to codify such provisions as FINRA Rule
1210.02. Specifically, as approved, FINRA Rule 1210.02 allows any
associated person of a member to obtain and maintain any registration
permitted by the member irrespective of the functional role of the
person at the firm. In addition, FINRA Rule 1210.02 provides that a
person maintaining a permissive registration would be deemed a
registered person of the firm and be assigned an appropriately
registered supervisor who would be responsible for periodically
contacting such individual's direct supervisor to verify that the
individual is not engaging in activities outside the scope of his or
her current role.\13\ The individual would nevertheless be subject to
all FINRA rules to the extent relevant to their activities.\14\
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\13\ An individual's day-to-day supervisor may be a non-
registered person, however an appropriately registered supervisor
would be responsible for periodic check-ins to make sure that the
individual is not acting outside the scope of his or her assigned
functions.
\14\ For example, FINRA rules that relate to interactions with
customers would not be applicable to the conduct of a permissively-
registered individual who does not have any customer contact.
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The MSRB is proposing to amend Rule G-3 to adopt Supplementary
Material .03 that would similarly allow dealers to have any associated
person at a dealer maintain certain MSRB qualifications. More
specifically, any individual associated with a dealer would be allowed,
if permitted by the dealer, to obtain and maintain a registration as a
municipal securities representative, a municipal securities principal
or a municipal fund securities limited principal. Additionally,
proposed Supplementary Material .03 would make clear that individuals
maintaining permissive registrations pursuant to Rule G-3 would be
considered qualified persons and, to the extent relevant to the
person's activities, the person would be subject to applicable MSRB
rules.\15\ The MSRB recognizes that allowing dealers to
[[Page 29857]]
maintain permissive qualifications for associated persons would support
a greater regulatory understanding of the municipal securities market
by persons currently in capacities not requiring a qualification
classification, and would further develop the knowledge and skills of
qualified persons, as it relates to the municipal securities market, by
allowing permissive qualifications specific to the municipal securities
business. Additionally, by harmonizing with FINRA's related rule on
permissive registrations, the industry is afforded the opportunity to
continue to develop a robust workforce and a depth of associated
persons holding professional qualifications for purposes of better
managing unanticipated staffing changes.
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\15\ At this time, the MSRB does not believe it is necessary to
be prescriptive in this area and identify each potential rule that a
permissively-qualified person would be subject to based on a
particular set of activities. For example, the MSRB notes that a
rule such as Rule G-47, on time of trade disclosure, would have very
little application to a person holding a permissive qualification
who does not have customer contact regarding the purchase or sale of
municipal securities. Bearing that in mind, a facts and
circumstances analysis would apply as to the securities laws and
regulations applicable to persons holding permissive qualifications,
and such a determination would need to be made by the dealer, as
part of its supervisory obligations, under Rule G-27.
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FSA-Waiver Program
FINRA's consolidated rule change adopted Rule 1210.09, which
established a waiver program for any individual registered with a
member who subsequently leaves the firm to work for a financial
services industry affiliate of a member,\16\ whereby, upon re-
association with a member, an individual may be granted a waiver from
having to requalify by examination (``FSA-waiver''). In order to be
granted a waiver under FINRA Rule 1210.09, an individual must be
initially designated as FSA-eligible at the time the individual
terminates association with a member and the individual must have
satisfied the criteria, under FINRA Rule 1210.09 for an FSA-waiver.
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\16\ The term ``financial services industry affiliate of a
member'' as defined under FINRA Rule 1210.09 is ``a legal entity
that controls, is controlled by or is under common control with a
member and is regulated by the SEC, CFTC, state securities
authorities, federal or state banking authorities, state insurance
authorities, or substantially equivalent foreign regulatory
authorities.''
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Additionally, under FINRA Rule 1210.09, to be eligible for an
initial designation as an FSA-eligible person by a FINRA member, an
individual must have been registered for a total of five years within
the most recent 10-year period prior to the designation. Once
designated as FSA-eligible, the individual is eligible for an FSA-
waiver for up to seven years, so long as the individual is continuously
working for a financial services industry affiliate of a member and
other conditions are satisfied.
Pursuant to FINRA Rule 1240, during the period an FSA-eligible
person is working for a financial services industry affiliate, the
person is required to complete the Regulatory Element portion of CE
that correlates with such person's most recent registration category
and based on the same CE cycle had the person remained registered.
Consequently, a person loses the ability to qualify for an FSA-waiver
if such person fails to complete the mandatory Regulatory Element
portion of CE. FINRA Rule 1210.09 provides that once an FSA-eligible
person re-associates with a FINRA member, the firm can file a Form U4
(Uniform Application for Securities Industry Registration or Transfer)
and request that the individual's prior FINRA registration(s) be
reinstated without having to requalify by examination.
The MSRB is proposing to amend Rule G-3 to adopt Supplementary
Material .04 that would allow a municipal securities representative,
municipal securities principal and/or a municipal fund securities
limited principal \17\ to be eligible for a waiver from having to
requalify by examination, for such MSRB qualifications, if the
following conditions are met:
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\17\ An individual who has passed the Municipal Securities
Representative Qualification Examination (Series 52), Municipal
Securities Principal Qualification Examination (Series 53) and
Municipal Fund Securities Limited Principal Qualification
Examination (Series 51), respectively.
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1. An individual must have been registered with a dealer for a
total of five years within the most recent 10-year period prior to
working for a financial services industry affiliate, which shall be a
legal entity that controls, is controlled by or is under common control
with a dealer and is regulated by the SEC, CFTC, state securities
authorities, federal or state banking authorities, state insurance
authorities, or substantially equivalent foreign regulatory
authorities.
2. The individual has continuously worked for a financial services
industry affiliate(s) of a dealer since terminating association with a
dealer;
3. The individual has completed the Regulatory Element portion of
CE consistent with the requirements under Rule G-3(i)(i)(A) based on
the person's most recent registration status and such CE has been
completed based on the same cycle, as if the person had remained
registered;
4. The individual does not have any pending or adverse regulatory
matters, or terminations and has not otherwise been subject to a
statutory disqualification while working for a financial services
industry affiliate(s) of a dealer; and
5. The waiver request is made within seven years of the
individual's initial designation as an FSA-eligible person.
The MSRB is also proposing to amend Rule G-3(h)(i) to provide that
associated persons that have met the conditions under Supplementary
Material .04 shall be granted an FSA-waiver consistent with Rule G-
3(h)(i)(A) and (B). Providing for such waivers allows associated
persons of dealers a greater opportunity to enhance their financial
services industry knowledge without having to requalify by examination
each time a person decides to explore different career opportunities
with a financial services industry affiliate of a dealer.
Qualified Persons Functioning as Principals for a Limited Period
Currently Rule G-3(b)(ii)(D) provides that an individual qualified
as a municipal securities representative, general securities
representative or general securities principal may function as a
municipal securities principal for a period of 90 days before passing
the Series 53 exam; and pursuant to Rule G-3(b)(iv)(B)(4) an individual
qualified as a general securities representative, investment company/
variable contracts limited representative, general securities principal
or investment company/variable contracts limited principal may function
as a municipal fund securities limited principal for a period of 90
days before passing the Series 51 exam. In addition, Rule G-3(c)(ii)(D)
provides that an individual qualified as a municipal securities
representative, general securities representative or general securities
principal may function as a municipal securities sales principal for a
period of 90 days before passing the General Securities Sales
Supervisory Qualification Examination (Series 9/10).
FINRA's consolidated rule change modified a similar FINRA provision
\18\ permitting a registered person of a member to function as a
principal before passing the applicable principal examination,
increasing the time period from 90 calendar days to 120 calendar days,
to better align the time frame with the current examination enrollment
window.\19\ In addition, FINRA imposed an experience requirement
providing that a registered person must have at least 18 months of
experience functioning as a registered representative within the five-
year period immediately prior to being permitted to function as a
principal,
[[Page 29858]]
without the applicable principal qualification examination.
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\18\ FINRA's consolidated rule change amended NASD Rule 1021 as
FINRA Rule 1210.04.
\19\ An examination enrollment window is the timeframe between a
person registering for a professional qualification examination and
taking the examination.
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Accordingly, the MSRB is proposing to amend Rule G-3(b) and (c) to
extend the limited time period in which a person could function as a
principal without being qualified with a principal examination,
assuming other qualification requirements are met, from 90 days to 120
calendar days in furtherance of also better aligning with the current
examination enrollment window. The MSRB is also proposing to amend Rule
G-3(b) and (c) to require that, before a qualified representative can
be permitted to function as a principal for 120 calendar days without
passing a principal examination, the qualified representative must have
at least 18 months of experience within the five-year period
immediately preceding the designation as principal. The MSRB believes
that establishing an experience requirement ensures that individuals
designated to supervise activities have an appropriate level of
experience as a qualified representative before acting as a principal
without passing the principal examination. For this reason, the 18-
month experience requirement will not apply to a qualified principal
who is designated to function in another principal capacity for 120
days before passing the additional principal qualification examination.
Continuing Education Program Requirements
A. Regulatory Element
Currently, Rule G-3(i)(i)(A)(2) provides that any registered
persons who have not completed the Regulatory Element portion of CE
within the prescribed time frames will have their municipal securities
registration(s) deemed inactive until the Regulatory Element
requirements have been satisfied. Rule G-3(i)(i)(A)(2) also requires
for any person whose registration has been deemed inactive that such
person must cease all activities as a registered person and prohibits
such person from performing any duties and functioning in any capacity
requiring registration.
FINRA's consolidated rule change codified existing guidance in
NASD's Notice to Members 95-35, regarding the impact of failing to
complete the Regulatory Element portion of CE on a person's activities
and compensation, as FINRA Rule 1240(a)(2). Specifically, approved
FINRA Rule 1240(a)(2) provides that any person whose registration has
been deemed inactive under the rule may not accept or solicit business
or receive any compensation for the purchase or sale of securities.\20\
FINRA's approved rule also prescribes that a person deemed inactive for
failing to complete the Regulatory Element portion of CE within the
prescribed time frames may, if it does not violate the firm's policy,
receive trail or residual commissions resulting from transactions that
were completed before the person's registration status was deemed
inactive. The MSRB is proposing to amend Rule G-3(i)(i)(A)(2) to adopt
the provision restricting any person whose municipal securities
registration(s) have been deemed inactive for failing to complete the
Regulatory Element portion of CE from receiving any compensation for
transactions in municipal securities, except for trails, residual
commissions, or like compensation resulting from transactions completed
before the person's inactive status, unless the dealer's policy
prohibits such trails, residual commissions or like compensation. The
MSRB recognizes that, by adding the clause ``like compensation,'' the
proposed amendment would provide flexibility as to the types of
compensation permitted under the rule as compared to FINRA's approved
rule. However, the MSRB believes that such differentiation is warranted
to recognize the various compensation arrangements for associated
persons of dealers with respect to transactions in municipal
securities. For example, the compensation received by an associated
person that is part of a dealer's public finance underwriting team is
generally not characterized as commissions.
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\20\ The MSRB believes that this prohibition is adequately
addressed currently in Rule G-3(i)(i)(A)(2) and, therefore, is not
proposing to adopt FINRA's provision that more specifically
articulates that such persons are prohibited from accepting or
soliciting business.
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B. Firm Element
Currently, Rule G-3(i)(i)(B), on Firm Element continuing education,
requires that a dealer maintain a continuing education program for its
covered registered persons to enhance their securities knowledge, skill
and professionalism. The MSRB has supported a principles-based approach
to compliance in this area and afforded dealers' considerable
flexibility in developing the scope and content for their Firm Element
portion of CE subject to the enumerated minimum standards for a firm's
training programs. A dealer's Firm Element portion of CE, as prescribed
in Rule G-3(i)(i)(B)(2)(b), must cover, with respect to municipal
securities products, services and strategies offered by the dealer, at
a minimum:
(i) General investment features and associated risk factors;
(ii) Suitability and sales practice considerations; and
(iii) Applicable regulatory requirements.
FINRA's consolidated rule change also requires, pursuant to FINRA
Rule 1240, that each member maintain a continuing education program for
its covered registered persons to enhance their securities knowledge,
skill and professionalism and that the training be appropriate for the
business of the member and, at a minimum, cover, among other things,
training in ethics and professional responsibility. The MSRB is
proposing to amend Rule G-3(i)(i)(B)(2)(b) to adopt a similar provision
to require dealers to also include training in ethics and professional
responsibility for its registered persons. The MSRB believes such
training promotes high standards of professionalism for registered
persons.
Registration Status of Armed Forces
The MSRB does not currently have a rule that provides an inactive
status for an associated person that volunteers for or is called to
active military service in the Armed Forces of the United States that
would allow such person's registration to be tolled.
FINRA's consolidated rule change consolidated NASD Rule IM-1000-2
as FINRA Rule 1210.10 with certain changes, which affords relief to a
registered person who volunteers for or is called to active military
service in the Armed Forces of the United States by tolling such
person's lapse of registration and CE obligations. More specifically,
FINRA Rule 1210.10 allows, after proper notification to FINRA, for a
member to place a registered person on inactive status, whereby such
person does not have to re-register upon returning to active
employment. An associated person who is placed on inactive status may
either return to active employment with the firm the person remained
registered with during the person's inactive status period or associate
with a different firm. FINRA Rule 1210.10 also relieves registered
persons on such inactive status from having to complete either the
Regulatory Element or Firm Element portion of CE during their active
military service.
Additionally, during the pendency of the registered person's
inactive status, the person may continue to receive transaction-based
compensation, including continuing commissions. The employing member
may also allow an inactive person to enter into an
[[Page 29859]]
agreement with a registered person of the member to take over and
service clients' accounts, on behalf of the person, and to share
transaction-related compensation based upon business generated by the
accounts.
A person who is no longer registered with a member will generally
have their professional qualifications lapse after a period of two
years. However, FINRA Rule 1210.10 provides that, for purposes of
determining the two year period, a formerly registered person who
volunteers for or is called to active military service will have that
time tolled, commencing on the date the person began active
service.\21\ FINRA Rule 1210.10 also provides that a sole proprietor
who volunteers for or is called to active military service will be
placed on inactive status and, in addition to the relief provided under
FINRA Rule 1210.10, as a registered person, the sole proprietor will
not be required to pay dues or assessments during the inactive period
and will not be required to pay an admission fee upon returning to his
or her investment banking or securities business.
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\21\ More specifically, FINRA's rule states that the two-year
period for lapse of registration of its representative and
principal-level qualifications and the four-year expiration for the
SIE examination would be tolled for the period the individual is on
active service.
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Rule G-3 generally provides that an individual who is not
associated with a dealer or municipal advisor for a period of more than
two years will have his or her professional qualifications lapse,
requiring such person to requalify by examination upon re-associating
with a dealer or municipal advisor. The MSRB is proposing to amend Rule
G-3 to adopt Supplementary Material .05, which would provide that, for
purposes of determining the two-year period, a formerly qualified
associated person who volunteers for or is called to active U.S.
military service will have that time tolled commencing on the date the
person began active military service. Importantly, Supplementary
Material .05 would preserve the time tolled by establishing that the
MSRB must receive notice of the person's period of active U.S. military
service within 90 days following the completion of such person's active
U.S. military service.\22\ Absent such notice, the deferral will
terminate and the period of time while on active U.S. military service
will not have been tolled.
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\22\ The notice required to preserve such deferral shall be in
the form of a letter to the MSRB that includes the individual's name
(including, if applicable, the individual's CRD number), the start
and end dates of the individual's active U.S. military service and
the branch of service. Such notice shall be provided to the MSRB
electronically at [email protected].
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In addition, proposed Supplementary Material .05 would permit an
associated person of a dealer or municipal advisor that is qualified
under Rule G-3, upon volunteering for or being called to active U.S.
military service, to be deemed inactive until the associated person
returns from active U.S. military service. Additionally, under the
proposed rule change, during the period the associated person is on
active U.S. military service, the person would remain eligible for
transaction-related compensation, including continuing commissions and
the firm could permit the inactive person to enter into an agreement
with a qualified associated person of the dealer or municipal advisor
to have such qualified associated person service clients on behalf of
the inactive person and share transaction-related compensation
resulting from the municipal securities or municipal advisory business
generated by the accounts. In addition, an associated person of a
dealer or municipal advisor would not be subject to the applicable CE
obligations under Rule G-3(i) during the period of active U.S. military
service, provided the MSRB receives notice of the associated person's
period of active U.S. military service within 30 days of completion of
such service.\23\
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\23\ The notice required shall be in the form of a letter to the
MSRB on firm letterhead that includes the firm's MSRB ID number, the
individual's name (including, if applicable, the individual's CRD
number), the start and end dates of the individual's active U.S.
military service and the branch of service. Such notice shall be
provided to the MSRB electronically at [email protected].
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Proposed Supplementary Material .05 would also provide that a
dealer or municipal advisor sole proprietor who temporarily closes his
or her business by reason of volunteering for or being called into
active U.S. military service shall be placed, on an inactive status
after notice to the MSRB. As a result, in addition to the relief
provided to the sole proprietor as a qualified associated person, the
sole proprietor will not be required to pay fees pursuant to Rules A-11
or A-12 that, if applicable, accrue during the inactive period.
Further, upon returning from active U.S. military service, the dealer
or municipal advisor sole proprietor must provide the MSRB notice
within 30 calendar days that the sole proprietor has returned to his or
her business.\24\
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\24\ The notice required shall be in the form of a letter to the
MSRB on firm letterhead that includes the firm's MSRB ID number, the
individual's name (including, if applicable, the individual's CRD
number), the start and end dates of the individual's active military
service and the branch of service. Such notice shall be provided to
the MSRB electronically at [email protected].
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Waiting Periods for Retaking a Failed Examination
Rule G-3(g) allows any associated person of a broker, dealer,
municipal securities dealer or municipal advisor who fails to pass an
MSRB qualification examination to take the examination again after a
period of 30 days has elapsed from the date of the prior examination,
except that any person who fails to pass an examination three or more
times in succession shall be prohibited from taking the examination
again until a period of six months has elapsed from the date of such
person's last attempt to pass the examination.
FINRA's consolidated rule change consolidated NASD Rule 1070(e) as
FINRA Rule 1210.06 to provide that a person who fails a FINRA
examination may retake the examination after 30 calendar days from the
date of the person's last attempt to pass the examination, except a
person who fails an examination three or more times in succession
within a two-year period may only retake the examination after 180
calendar days from the date of the person's last attempt to pass the
examination. In addition, FINRA Rule 1210.06 extended these provisions
to the SIE examination.
Although generally consistent with FINRA's approved rule, to
promote regulatory consistency, the MSRB is proposing to amend to Rule
G-3(g), on retaking of qualification examinations, to change the term
``six months'' to ``180 calendar days'' and to add ``within a two-year
period'' after the phrase ``three of more times in succession.'' The
addition of the phrase is intended to clarify the frequency with which
FINRA's test delivery system resets a candidate's exam history data.
Restructuring of the MSRB's Professional Qualification Examination
Program
A. Accepting the SIE Examination and Revising the Municipal Securities
Representative Qualification Examination
FINRA's consolidated rule change established the SIE exam to
eliminate the duplicative testing of general securities knowledge
across its current representative-level qualification examinations by
moving such content into the SIE exam.\25\ With the establishment of
the SIE exam, FINRA restructured its representative-level exams into
specialized knowledge examinations to test knowledge of
[[Page 29860]]
concepts and rules specifically corresponding to a particular
representative-level qualification. FINRA Rule 1210.03, on
qualification examinations, provides that before a person can become
registered as a representative, such person must pass the SIE exam and
an appropriate representative-level qualification examination.
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\25\ Individuals do not have to be associated with a FINRA
member to take the SIE examination, unlike FINRA's representative-
level qualification examinations.
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In developing the SIE exam, FINRA established a committee of
industry professionals to create the content outline for the SIE exam
and invited staff from the MSRB's Professional Qualifications
department to participate on the committee.\26\ The SIE exam content
outline is divided into four sections, with each section addressing the
essential areas of general knowledge. The SIE exam will consist of 75
scored multiple-choice questions.\27\ Pursuant to FINRA Rule 1210.08, a
passing score on the SIE exam would be valid for four years and a
person that passes the SIE exam would have up to four years to pass a
representative-level qualification examination in order to become
registered in a representative-level capacity.
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\26\ MSRB staff reviewed the SIE content outline and provided
substantive comments to ensure relevant MSRB rules were incorporated
and content specific to municipal securities was addressed on the
outline. FINRA filed the content outline and selection
specifications for the new SIE examination with the SEC for
immediate effectiveness. See Exchange Act Release No. 82578 (January
24, 2018), 83 FR 4375 (January 30, 2018) (SR-FINRA-2018-002).
\27\ The passing score for the SIE exam will be published on
FINRA's website prior to the first administration of the examination
in October 2018.
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The sections and the associated number of questions for each
section are:
Section 1: Knowledge of Capital Markets (12 questions);
Section 2: Understanding Products and Their Risks (33
questions);
Section 3: Understanding Trading, Customer Accounts and
Prohibited Activities (23 questions); and
Section 4: Overview of the Regulatory Framework (7
questions).
Rule G-3(a)(ii), on qualification requirements, provides that
``every municipal securities representative shall take and pass the
Municipal Securities Representative Qualification Examination prior to
being qualified as a municipal securities representative.'' \28\ The
Series 52 is designed to establish that persons associated with dealers
that effect transactions in municipal securities have attained
specified levels of competence and knowledge to become registered as
municipal securities representatives.
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\28\ An exception to the rule, allows only persons having been
duly qualified as a general securities representative by reason of
having passed the General Securities Representative Qualification
Examination before November 7, 2011 to qualify as a municipal
securities representative.
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The Series 52, in its current format, has general securities
knowledge content that will be tested on the future SIE exam. The MSRB,
therefore, intends to restructure the Series 52 as a specialized
knowledge examination to better focus the content of the examination
more specifically to municipal securities knowledge. Accordingly, the
MSRB is proposing an amendment to Rule G-3(a)(ii) that would require an
individual to pass both the SIE exam and the revised Series 52 \29\ in
order to become qualified as a municipal securities representative.\30\
Additionally, the MSRB will continue to recognize, in their revised
forms as specialized knowledge examinations, the Municipal Securities
Sales Limited Representative Examination (Series 7) and the Limited
Representative-Investment Company Variable Contracts Product
Representative Examination (Series 6) in furtherance of regulatory
consistency and for purposes of avoiding impact to the current
distribution channel for the sale of municipal securities.
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\29\ The content outlines for MSRB's qualification examinations
serve as a guide to the subject matters tested on each examination.
The MSRB's Series 52/53 Subcommittee of the Professional
Qualification Advisory Committee has been reviewing the current
content covered on the Series 52 examination to determine the
revisions that will be necessary to appropriately modify the Series
52 into a specialized knowledge examination. In connection with the
filing of this proposed rule change, and in advance of the October
1, 2018 effective date of the proposed rule change, the MSRB
anticipates filing with the SEC a revised Series 52 content outline
to reflect the modifications to the Series 52 examination and the
removal of duplicative content that would appear on the SIE exam.
\30\ Since the SIE examination is meant to eliminate duplicative
testing of general content across representative-level examinations
and thereby, affording the opportunity for representative-level
examinations to become more specialized knowledge examinations there
is no impact to the Series 51 exam and Series 53 exam that would
necessitate restructuring of those principal-level exams.
\31\ 15 U.S.C. 78o-4(b)(2)(A).
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2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(A) of the Act,\31\ which provides that the MSRB's
rules shall prescribe:
such standards of training, experience, competence, and such other
qualifications as the Board finds necessary or appropriate in the
public interest or for the protection of investors and municipal
entities or obligated persons. In connection with the definition and
application of such standards the Board may . . . specify that all
or any portion of such standards shall be applicable to any such
class; and require persons in any such class to pass tests . . .
The MSRB believes that, by requiring persons to take and pass a
professional qualification examination, such requirement promotes
public confidence by ensuring the minimum standards of training,
experience and competence required by the Board are being achieved. The
MSRB also believes that the restructuring of its current qualification
examination program is consistent with and in furtherance of the stated
objectives of Section 15B(b)(2)(A) of the Act because by ensuring the
Series 52 specialized knowledge examination focuses on the most
relevant laws, rules and regulations of the municipal securities
market, investors are more well protected. Also, by more closely
aligning the Series 52 specialized knowledge examination content to the
functions and activities performed by a municipal securities
representative, such associated persons are more likely to fully grasp
the prescribed regulatory standards, which aides to preserve the
integrity of the municipal securities market. Importantly, without
compromising the qualification standards, the proposed rule change
would improve the efficiency of the examination program by eliminating
duplicative testing of general securities knowledge.
Moreover, consistent with Section 15B(b)(2)(A) of the Act,
permitting such persons to work at an industry affiliate of a dealer
without having to requalify by examination upon re-registering with a
dealer, by permitting them to seek a waiver from re-examination, lends
itself to a greater understanding of the financial services industry.
Further, the proposed rule change would allow individuals to maintain
their knowledge base while working in areas ancillary to the municipal
securities market, thereby providing such market professionals
additional securities knowledge, which, in turn, promotes confidence in
market professionals. The proposed rule change would also expand the
scope of permissive qualifications, which, among other things, would
allow dealers to develop a depth of associated persons with
qualifications to respond to unanticipated personnel changes and would
encourage a greater understanding of the municipal securities markets.
As proposed, by allowing individuals to function in a principal
capacity for a limited period of time before having to pass a
principal-level examination would
[[Page 29861]]
minimize operational disruptions to a dealer.
Lastly, under the proposed rule change, allowing associated persons
that volunteer for or are called into active U.S. military service to
be placed in an inactive status allows for regulatory consistency and
promotes the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The MSRB 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 proposed rule change
reflects the MSRB's belief that its registration requirements should be
generally harmonized with FINRA's consolidated rule change for purposes
of regulatory efficiency and that such changes do not attach additional
burdens on dealers, and as applicable, municipal advisors. In addition,
the MSRB's restructuring of its qualification examination program to
better align with the functions and associated tasks currently
performed by a municipal securities representative makes for a more
effective qualification examination.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Board did not solicit comment on the proposed change.
Therefore, there are no comments on the proposed rule change received
from members, participants or others.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \32\ and Rule 19b-
4(f)(6) thereunder.\33\
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\32\ 15 U.S.C. 78s(b)(3)(A).
\33\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MSRB-2018-04 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-MSRB-2018-04. 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 the MSRB. 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-MSRB-2018-04 and should be submitted on
or before July 17, 2018.
For the Commission, pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13619 Filed 6-25-18; 8:45 am]
BILLING CODE 8011-01-P
