Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Section 4 of Schedule A to the FINRA By-Laws Relating to the Continuing Education Fees, 2193-2197 [2022-00490]
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Federal Register / Vol. 87, No. 9 / Thursday, January 13, 2022 / Notices
Exchange’s proposed membership fees
will be lower than the cost of
membership on other exchanges,13 and
therefore, may stimulate intramarket
competition by attracting additional
firms to become Members on the
Exchange or at least should not deter
interested participants from joining the
Exchange. In addition, membership fees
are subject to competition from other
exchanges. Accordingly, if the changes
proposed herein are unattractive to
market participants, it is likely the
Exchange will see a decline in
membership as a result. The proposed
fee change will not impact intermarket
[sic] competition because it will apply
to all Members equally. The Exchange
operates in a highly competitive market
in which market participants can
determine whether or not to join the
Exchange based on the value received
compared to the cost of joining and
maintaining membership on the
Exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 14 and Rule
19b–4(f)(2) 15 thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MEMX–2021–19 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–MEMX–2021–19. 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 Exchange. 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–MEMX–2021–19 and
should be submitted on or before
February 3, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
J. Matthew DeLesDernier,
Assistant Secretary.
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[Release No. 34–93928; File No. SR–FINRA–
2021–034]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Section 4 of
Schedule A to the FINRA By-Laws
Relating to the Continuing Education
Fees
January 7, 2022.
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 December
30, 2021, the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by FINRA. FINRA
has designated the proposed rule change
as ‘‘establishing or changing a due, fee
or other charge’’ under Section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon receipt of this
filing by the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to amend Section
4 of Schedule A to the FINRA By-Laws
to: (1) Revise the fee for the Regulatory
Element of continuing education (‘‘CE’’);
(2) establish the fee for individuals who
elect to maintain their qualification
following the termination of a
registration category through the
Maintaining Qualifications Program
(‘‘MQP’’); and (3) make a technical
change to clarify that the fee for failing
to timely appear for a scheduled
qualification examination appointment
and for cancelling or rescheduling a
qualification examination close to the
scheduled appointment date equally
applies to online administrations of
qualification examinations.
Below is the text of the proposed rule
change. Proposed new language is in
italics; proposed deletions are in
brackets.
*
*
*
*
*
1 15
BILLING CODE 8011–01–P
supra note 6.
14 15 U.S.C. 78s(b)(3)(A)(ii).
15 17 CFR 240.19b–4(f)(2).
SECURITIES AND EXCHANGE
COMMISSION
[FR Doc. 2022–00489 Filed 1–12–22; 8:45 am]
13 See
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
16 17
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By-Laws of the Corporation
*
*
*
*
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
*
Schedule A to the By-Laws of the
Corporation
*
*
*
*
*
Section 4—Fees
(a) through (b) No Change.
(c) The following fees shall be assessed to
each individual who takes an examination as
described below. These fees are in addition
to the registration fee described in paragraph
(b) and any other fees that the owner of an
examination that FINRA administers may
assess.
*
*
*
*
*
(1) through (2) No Change.
(3) There shall be a service charge equal to
the examination or Regulatory Element
session fee assessed to each individual who,
having made an appointment for [a specific
time and place for] an [test center-based]
administration of an examination listed
above or a test center-based Regulatory
Element session, fails to timely appear for
such appointment or cancels or reschedules
such appointment within two business days
prior to the [test center] appointment date.
(4) There shall be a service charge equal to
one-half of the examination or Regulatory
Element session fee assessed to each
individual who, having made an
appointment for [a specific time and place
for] an [test center-based] administration of
an examination listed above or a test centerbased Regulatory Element session, cancels or
reschedules such appointment three to 10
business days prior to the [test center]
appointment date.
(d) through (e) No Change.
(f)(1) There shall be a session fee of $18
[$55] assessed to each individual who
completes the Regulatory Element of the
Continuing Education requirements pursuant
to FINRA rules.
(2) There shall be assessed to each
individual electing to participate in the
continuing education program under Rule
1240(c) a fee of $100 for each year that such
individual is participating in the program.
Individuals who elect to participate in the
program within two years from the
termination of a registration would also be
assessed any accrued annual fee.
(g) through (i) No Change.
*
*
*
*
*
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
FINRA included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. FINRA has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
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1. Purpose
On September 21, 2021, the SEC
approved amendments to FINRA Rules
1210 (Registration Requirements) and
1240 (Continuing Education
Requirements) to, among other things,
require registered persons to complete
the Regulatory Element of CE annually
by December 31 of each year, rather
than every three years, and to complete
Regulatory Element content for each
representative or principal registration
category that they hold.5 In addition, the
amendments provide eligible
individuals who terminate any of their
representative or principal registration
categories the option of maintaining
their qualification for any terminated
registration categories by completing
annual CE through a new program, the
MQP.6 The annual Regulatory Element
requirement will become effective on
January 1, 2023; eligible individuals can
make their election to participate in the
MQP beginning on January 31, 2022.7
FINRA currently charges a fee of $55
to each individual who completes the
Regulatory Element. In conjunction with
the amendments to transition to an
annual Regulatory Element requirement,
FINRA is proposing amendments to
Section 4 of Schedule A to the FINRA
By-Laws to revise the fee for the
Regulatory Element from $55 to $18.8
5 See Securities Exchange Act Release No. 93097
(September 21, 2021), 86 FR 53358 (September 27,
2021) (Order Approving File No. SR–FINRA–2021–
015). The Regulatory Element is administered by
FINRA and focuses on regulatory requirements and
industry standards. The proposed rule change also
included amendments to the Firm Element training,
which is provided by each firm annually to its
registered persons and focuses on securities
products, services and strategies the firm offers,
firm policies and industry trends.
6 See supra note 5. Currently, individuals must
requalify by examination if they have not
reregistered within two years after their
registrations have been terminated (‘‘the two-year
qualification period’’). Individuals may also seek to
obtain a waiver of the applicable qualification
examination(s). MQP participants will have a
maximum of five years following the termination of
a representative or principal registration category to
reregister with FINRA without having to requalify
by examination or having to obtain an examination
waiver, subject to satisfying the conditions of the
MQP. Among other conditions, MQP participants
will be required to complete annual MQP content
consisting of a combination of Regulatory Element
content and Practical Element content developed by
FINRA and the Securities Industry/Regulatory
Council on Continuing Education.
7 See Regulatory Notice 21–41 (November 17,
2021) announcing the SEC approval and effective
dates of the amendments.
8 The annual Regulatory Element fee is set forth
in proposed Section 4(f)(1) of Schedule A to the
FINRA By-Laws. See also FINRA Rule 1240(a)
(Regulatory Element).
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The proposed $18 annual fee is
comparable to the current $55 fee over
a three-year period. Moreover, the
proposed fee for the annual Regulatory
Element would be the same for all
registered persons, regardless of the
amount of annual content that they
would be required to complete (that is,
an individual who holds multiple
registrations would be subject to the
same proposed $18 annual fee as an
individual who holds a single
registration).
Further, in conjunction with the
amendments to adopt the MQP, FINRA
is proposing amendments to Section 4
of Schedule A to the FINRA By-Laws to
charge an annual fee of $100 to each
MQP participant.9 The proposed annual
fee would be a flat fee, regardless of the
number of registrations for which an
individual elects to remain qualified
under the MQP (that is, an individual
who elects to remain qualified for
multiple registrations under the MQP
would be subject to the same proposed
$100 annual fee as an individual who
elects to remain qualified for a single
registration under the MQP). The
proposed annual fee would be assessed
at the time an eligible individual elects
to participate in the MQP and thereafter
annually each year that the individual
continues in the MQP. Eligible
individuals who elect to participate in
the MQP within two years from the
termination of a registration category
would be assessed any accrued annual
fee.10
Finally, FINRA is proposing
amendments to Section 4 of Schedule A
to the FINRA By-Laws to make a
technical change to clarify that the
administrative fee for failing to timely
appear for a scheduled appointment and
for cancelling or rescheduling a
qualification examination close to the
scheduled appointment date equally
applies to online administrations of
qualification examinations. FINRA
qualification examinations are currently
administered in test centers as well as
online. Similar to test-center
9 The annual MQP fee is set forth in proposed
Section 4(f)(2) of Schedule A to the FINRA ByLaws. See also FINRA Rule 1240(c) (Continuing
Education Program for Persons Maintaining Their
Qualification Following the Termination of a
Registration Category).
10 Eligible individuals must make their election to
participate in the MQP at the time of their Form U5
(Uniform Termination Notice for Securities
Industry Registration) submission or within two
years from the termination of a registration
category. Individuals who elect to participate in the
MQP at the later date will be required to complete,
within two years from the termination of the
registration category, any CE that becomes due
under the MQP between the time of their Form U5
submission and the date that they commence their
participation in the MQP.
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administrations of qualification
examinations, candidates must schedule
an appointment and satisfy other
requirements to take a qualification
examination online.11 Likewise, there is
an administrative fee for failing to
timely appear for a scheduled online
appointment and for cancelling or
rescheduling a qualification
examination close to the scheduled
online appointment date.12
FINRA has filed the proposed rule
change for immediate effectiveness.
However, the proposed annual MQP fee
will be implemented on January 31,
2022 to coincide with the date that
eligible individuals can begin making
their election to participate in the MQP.
In addition, the proposed revised fee for
the Regulatory Element will be
implemented on January 1, 2023 to
coincide with the effective date of the
transition to an annual Regulatory
Element requirement.
2. Statutory Basis
FINRA believes that the proposed rule
change is consistent with the provisions
of Section 15A(b)(5) of the Act,13 which
requires, among other things, that
FINRA rules provide for the equitable
allocation of reasonable dues, fees and
other charges among members and
issuers and other persons using any
facility or system that FINRA operates
or controls.
Proposed Fees
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As described above, FINRA is
proposing to charge an annual fee of $18
for completing the Regulatory Element
requirement and an annual fee of $100
to each MQP participant.14 The
proposed fees are based on the use of a
particular service by registered persons
and are therefore use-based fees as that
term was used in FINRA’s 2020
comprehensive fee filing.15 FINRA
employs use-based fees for some of the
specific services and data it provides to
members and the public in support of
its regulatory mission.16
11 Additional information regarding the online
appointment process is available at https://
www.finra.org/registration-exams-ce/qualificationexams/testonline.
12 Further information regarding the rescheduling
and cancellation policy is available at https://
www.finra.org/registration-exams-ce/qualificationexams/cancellation-policy.
13 15 U.S.C. 78o–3(b)(5).
14 The $100 fee would provide each MQP
participant with all the content required of that
participant, including the Regulatory Element
content.
15 See Securities Exchange Act Release No. 90176
(October 14, 2020), 85 FR 66592, 66594 (October 20,
2020) (Notice of Filing and Immediate Effectiveness
of File No. SR–FINRA–2020–032).
16 See 85 FR 66594 n.14.
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With respect to the Regulatory
Element, in 2019, FINRA delivered
approximately 202,600 Regulatory
Element sessions and charged a fee of
$55 per session.17 These sessions
produced approximately $11.1 million
in (gross) revenue. In 2023, when the
annual Regulatory Element requirement
is in effect, FINRA anticipates
delivering approximately 626,000
annual sessions. Assuming the proposed
$18 fee is in effect, the annual
Regulatory Element requirement would
produce approximately $11.3 million in
revenue. Revenue is nearly the same in
2019 as is anticipated for 2023 since the
reduction in the session fee and the
increase in the number of sessions are
expected to balance each other.
With respect to the MQP, in 2023,
when the MQP has been in effect for an
entire year,18 FINRA expects that
approximately 38,000 individuals
would be enrolled in the MQP.19
Assuming the proposed $100 fee is in
effect, the MQP would produce
approximately $3.8 million in revenue.
Changes in the assumptions, for
example concerning the projected
number of program participants, may
have a significant impact on the
projected aggregate revenue over time.
Reasonableness of the Proposed Fees
FINRA believes that the proposed fees
are reasonable. With respect to the
Regulatory Element, as discussed above,
revenue is nearly the same in 2019 as is
17 The analysis uses data from 2019 and expected
for 2023. The year 2019 was indicative of historical
program performance. The year 2019 also pre-dates
a change from FINRA’s proprietary delivery
platform to a vendor-supplied learning management
system and one-time costs associated with changes
to the format, content and frequency of the
Regulatory Element. The year 2023 is the first year
that the annual Regulatory Element requirement
will be in effect.
18 Given that eligible individuals can begin
making their election to participate in the MQP on
January 31, 2022, 2023 will be the first fiscal year
that the proposed annual MQP fee would be in
effect for the entire year.
19 FINRA estimates that approximately 90,000
individuals end their registration with all firms
with which they are registered in a typical year.
Among them, FINRA estimates that approximately
40,500 individuals (or 45 percent) do not reregister
within two years of terminating their registrations
and would therefore need to participate in the MQP
to be able to reregister with FINRA without having
to requalify by examination or having to obtain an
examination waiver. FINRA expects that out of
these individuals, approximately 8,100 individuals
(or 20 percent) would likely choose to participate
in the MQP to maintain their qualification. After
adding approximately 15,000 individuals who may
terminate their permissive registrations in 2023 and
instead elect to participate in the program, as well
as approximately 14,850 individuals who may have
terminated their registrations between 2020 to 2022
and who elect to join the program, FINRA estimates
that the total number of individuals who would
participate in the program in 2023 to be
approximately 38,000 individuals.
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2195
anticipated for 2023 since the reduction
in the session fee and the increase in the
number of sessions are expected to
balance each other. Further, FINRA’s
annual costs for developing,
maintaining and delivering the
Regulatory Element are also expected to
remain fairly constant over this period.
Thus, the proposed annual fee of $18
will produce similar annual revenues
and provide a similar annual
contribution to FINRA’s overall
regulatory operations as the current
Regulatory Element program for which
member firms pay $55 every three years
on behalf of their registered persons.
The annual Regulatory Element will
serve the same function as the current
Regulatory Element program, and the
amount of content completed in a threeyear, annual cycle, is expected to be
comparable to what most registered
persons are currently completing every
three years.
With respect to the MQP, the
proposed fee is designed to recover the
systems and operational costs of
establishing the annual MQP, and the
annual costs for developing,
maintaining and delivering the annual
MQP content, which, as noted earlier,
will include a combination of
Regulatory Element content and
Practical Element content.20 The
proposed fee is also expected to provide
a contribution to FINRA’s overall
regulatory operations as with the
Regulatory Element fee. As explained in
FINRA’s 2020 comprehensive fee filing,
it is not feasible to associate a direct
affiliated revenue stream for each of
FINRA’s programs, and thus numerous
operations and services must be funded
by other revenue sources, which include
both general regulatory assessments and
use-based fees.21 The contribution from
the proposed MQP fee in each year is
anticipated to be similar to or less than
that of the current (and proposed)
Regulatory Element program as a share
of revenue raised. For comparison
purposes, FINRA reviewed state-level
information on the annual cost of
continuing education for other financial
service providers and found that the
20 See supra note 6. FINRA expects that the
number of individuals who will participate in the
MQP each year (approximately 38,000 individuals
in 2023) will be significantly smaller than the
population of registered persons, which, as noted
below, is currently approximately 620,000
individuals.
21 See 85 FR 66599–600 (including the discussion
of the role of oversight, transparency and rebates in
providing cost discipline). A portion of the
proposed annual fee for the MQP will replace the
contribution to FINRA’s overall regulatory
operations from qualification examinations that will
no longer be taken.
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proposed annual fee of $100 is generally
lower.
The Proposed Fees are Equitable and
Not Unfairly Discriminatory
FINRA believes that the proposed fees
are equitable and not unfairly
discriminatory. With respect to the
Regulatory Element, the requirement to
complete Regulatory Element content on
an annual basis will be applicable to
every registered person based on the
same terms and they will pay the same
proposed fee. With respect to the MQP,
all eligible individuals who elect to
participate in the MQP to maintain their
qualification for a terminated
registration category will be subject to
the same terms and will pay the same
proposed fee. In addition, FINRA
believes that the proposed fee for the
MQP is low enough that individuals
who expect to obtain meaningful
benefits from the MQP will not be
discouraged from participating due to
the fee.
Further, as explained above, the
proposed fees are use-based fees. The
SEC has stated its belief that a ‘‘usebased approach is consistent with
equitable distribution of fees’’ and
approved use-based fees when
reasonably related to costs.22 As
discussed above, the proposed usebased fees are reasonably related to
costs. The proposed fees will cover the
cost of developing, maintaining and
delivering the annual Regulatory
Element content and the annual MQP
content and the systems and operational
costs of establishing and managing the
annual Regulatory Element and the
annual MQP. The proposed fees in each
year are anticipated to provide a
contribution to FINRA’s overall
regulatory operations as a share of
revenue raised that is similar to or less
than that of the current Regulatory
Element program.
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B.Self-Regulatory Organization’s
Statement on Burden on Competition
FINRA does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Economic Impact Assessment
FINRA has undertaken an economic
impact assessment, as set forth below, to
analyze the regulatory need for the
proposed rule change, its potential
22 See Securities Exchange Act Release No. 72280
(May 29, 2014), 79 FR 32351, 32353 (June 4, 2014)
(Order Approving File No. SR–FINRA–2014–018)
(approving fees for ATS data that varied according
to use and discussing the SEC’s prior approval of
similar use-based TRACE fees).
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economic impacts, including
anticipated costs, benefits, and
distributional and competitive effects,
relative to the current baseline, and the
alternatives FINRA considered in
assessing how best to meet FINRA’s
regulatory objectives.
Regulatory Need
FINRA previously established the
regulatory need for the annual
Regulatory Element and the annual
MQP.23 This filing addresses the fees for
those programs.
Regulatory Element
Economic Baseline
All FINRA registered persons must
take the Regulatory Element two years
after they initially became registered
and then every three years ongoing. In
2015, FINRA transitioned the delivery
of the Regulatory Element to an online
platform (CE Online), which allows
individuals to complete the content
online at a location of their choosing,
including their private residence.24 The
transition in 2015 to CE Online reduced
the associated Regulatory Element fee
from $100 to $55 per individual, which
is the current fee.
The population of FINRA registered
persons is approximately 620,000
individuals.25 FINRA delivered
approximately 202,600 Regulatory
Element sessions in 2019. FINRA
expects to deliver approximately
204,000 Regulatory Element sessions in
2021.
Economic Impacts
FINRA previously considered the
economic impacts of the Regulatory
Element program.26 The proposed fee is
slightly less than one-third of the $55
fee that is currently paid every three
years for the Regulatory Element. Thus,
the proposed rule change impacts the
timing of payments but leaves the total
collected over three years essentially
unchanged. In addition, instead of
taking the Regulatory Element two years
after first becoming registered,
individuals would be required to
complete the Regulatory Element one
year after first becoming registered. This
would result in an extra one-time fee.
The change in timing may necessitate
some small adjustments among certain
firms and individuals. For example,
small firms with a stable number of
23 See Securities Exchange Act Release No. 92183
(June 15, 2021), 86 FR 33427, 33432–33436 (June
24, 2021) (Notice of File No. SR–FINRA–2021–015).
24 See Regulatory Notice 15–28 (August 2015).
25 See 2020 FINRA Industry Snapshot, available
at https://www.finra.org/sites/default/files/2020-07/
2020-industry-snapshot.pdf.
26 See supra note 23.
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registered persons for which previously
no registered persons took the
Regulatory Element in some years will
see a shift from a varying annual
expense to a flat annual expense. Large
firms are less likely to see this effect,
since they are more likely to have
registered persons taking the Regulatory
Element every year under the current
program. If firms pay the Regulatory
Element fee and do not reduce
compensation or other benefits, there
would be no financial impact on
individuals from these changes. If
individuals pay the Regulatory Element
fee, then they will see a shift from a
varying annual expense to a flat annual
expense.
Alternatives Considered
In establishing the proposed fee,
FINRA sought to minimize changes in
the fees paid over three years by firms
and individuals while covering program
costs and maintaining the contribution
of the Regulatory Element to FINRA’s
overall regulatory operations. FINRA
considered a range of possible fees and
found that the proposed fee and annual
revenue come within narrow ranges of
meeting these goals.
MQP
Economic Baseline
The economic baseline for the
proposed fee is the existing
requalification requirements and the
fees and costs to individuals and their
potential employers relating to those
requirements.27 As stated earlier, under
the current regime, individuals
generally have a two-year window from
the termination of their registration(s) to
reregister without having to requalify by
examination or having to obtain an
examination waiver. Requalification
imposes costs in the form of time spent
preparing for and taking the applicable
examinations, potential limitations to
the activities permitted to be conducted
until the requalification is completed,
opportunity costs for the individual and
the potential employers in terms of lost
business, and the direct registration
costs.28 Member firms may also
27 See FINRA Rule 1210.08 (Lapse of Registration
and Expiration of SIE).
28 The current fees for FINRA qualification
examinations are available at https://www.finra.org/
registration-exams-ce/qualification-exams. In order
to requalify for a registration, an individual may
need to repeat the Securities Industry Essentials
(SIE) examination as well as a representative- or
principal-level qualification examination. Thus, the
direct cost of requalifying for a single registration,
such as the General Securities Representative
registration, could range from $300 to $380 (for both
the SIE and Series 7); requalifying for two
registrations, such as the General Securities
Representative and Investment Banking
E:\FR\FM\13JAN1.SGM
13JAN1
Federal Register / Vol. 87, No. 9 / Thursday, January 13, 2022 / Notices
experience material costs when they are
not able to retain qualified experienced
persons because of professional and
personal events that require such
individuals to take an extended leave of
absence from the industry.
As noted above, the population of
FINRA-registered persons is
approximately 620,000 individuals.29 In
recent years, out of the approximately
620,000 individuals, approximately
90,000 individuals end their registration
with all firms with which they are
registered at some point during the year.
Out of these, approximately half do not
reregister and are considered to have left
the securities industry.
Economic Impacts
FINRA previously considered the
economic impacts of the MQP.30 As
discussed above, the proposed fee of
$100 will permit recovery of the costs
for the development, maintenance and
delivery of the MQP content and the
systems and operational costs of
establishing and managing the MQP.
The proposed fee will also provide for
a contribution to FINRA’s overall
regulatory operations.
The proposed $100 annual fee is
imposed on individuals following the
termination of a registration category.31
As such, FINRA anticipates that the
proposed fee will not impose costs on
member firms.
Participating in the MQP is voluntary,
so individuals will pay the fee when the
anticipated benefits outweigh the costs.
Potential beneficiaries are not limited to
individuals who under the current
baseline requalify and reregister
between two and five years after their
registrations are terminated. Some
individuals who currently do not
terminate their registrations, and others
who terminate their registrations and
never reregister, may also benefit from
the option provided by the MQP and
paying the proposed $100 fee.
jspears on DSK121TN23PROD with NOTICES1
Alternatives Considered
In establishing the proposed fee,
FINRA sought to minimize the burden
to individuals who would elect to
participate in the MQP while covering
program costs and maintaining the
Representative registrations, could range from $600
to $680 (for the SIE, Series 7 and Series 79). The
qualification examination fees used in the examples
above are based on the revised fees that will go into
effect on January 1, 2022. See supra note 15.
29 See 2020 FINRA Industry Snapshot, available
at https://www.finra.org/sites/default/files/2020-07/
2020-industry-snapshot.pdf.
30 See supra note 23.
31 In the event of a partial termination, some firms
may determine to reimburse individuals who elect
to remain qualified for a terminated registration
through the MQP.
VerDate Sep<11>2014
18:18 Jan 12, 2022
Jkt 256001
contribution of the testing and CE
programs to FINRA’s overall regulatory
operations. FINRA considered a range of
possible fees and found that the
proposed fee and annual revenue come
within narrow ranges of meeting these
goals.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 32 and paragraph (f)(2) of Rule
19b–4 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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2021–034 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2021–034. 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/
32 15
33 17
PO 00000
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
Frm 00072
Fmt 4703
Sfmt 4703
2197
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 such
filing also will be available for
inspection and copying at the principal
office of FINRA. All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–FINRA–
2021–034 and should be submitted on
or before February 3, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–00490 Filed 1–12–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–512, OMB Control No.
3235–0570]
Proposed Collection; Comment
Request; Extension: Form N–CSR
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget (‘‘OMB’’) for
extension and approval.
Form N–CSR (17 CFR 249.331 and
274.128) is a combined reporting form
34 17
E:\FR\FM\13JAN1.SGM
CFR 200.30–3(a)(12).
13JAN1
]]>Agencies
[Federal Register Volume 87, Number 9 (Thursday, January 13, 2022)]
[Notices]
[Pages 2193-2197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00490]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93928; File No. SR-FINRA-2021-034]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Section 4 of Schedule A to the FINRA By-
Laws Relating to the Continuing Education Fees
January 7, 2022.
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 December 30, 2021, the Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by FINRA. FINRA has
designated the proposed rule change as ``establishing or changing a
due, fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal
effective upon receipt of this filing by the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend Section 4 of Schedule A to the FINRA
By-Laws to: (1) Revise the fee for the Regulatory Element of continuing
education (``CE''); (2) establish the fee for individuals who elect to
maintain their qualification following the termination of a
registration category through the Maintaining Qualifications Program
(``MQP''); and (3) make a technical change to clarify that the fee for
failing to timely appear for a scheduled qualification examination
appointment and for cancelling or rescheduling a qualification
examination close to the scheduled appointment date equally applies to
online administrations of qualification examinations.
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
[[Page 2194]]
By-Laws of the Corporation
* * * * *
Schedule A to the By-Laws of the Corporation
* * * * *
Section 4--Fees
(a) through (b) No Change.
(c) The following fees shall be assessed to each individual who
takes an examination as described below. These fees are in addition
to the registration fee described in paragraph (b) and any other
fees that the owner of an examination that FINRA administers may
assess.
* * * * *
(1) through (2) No Change.
(3) There shall be a service charge equal to the examination or
Regulatory Element session fee assessed to each individual who,
having made an appointment for [a specific time and place for] an
[test center-based] administration of an examination listed above or
a test center-based Regulatory Element session, fails to timely
appear for such appointment or cancels or reschedules such
appointment within two business days prior to the [test center]
appointment date.
(4) There shall be a service charge equal to one-half of the
examination or Regulatory Element session fee assessed to each
individual who, having made an appointment for [a specific time and
place for] an [test center-based] administration of an examination
listed above or a test center-based Regulatory Element session,
cancels or reschedules such appointment three to 10 business days
prior to the [test center] appointment date.
(d) through (e) No Change.
(f)(1) There shall be a session fee of $18 [$55] assessed to
each individual who completes the Regulatory Element of the
Continuing Education requirements pursuant to FINRA rules.
(2) There shall be assessed to each individual electing to
participate in the continuing education program under Rule 1240(c) a
fee of $100 for each year that such individual is participating in
the program. Individuals who elect to participate in the program
within two years from the termination of a registration would also
be assessed any accrued annual fee.
(g) through (i) No Change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On September 21, 2021, the SEC approved amendments to FINRA Rules
1210 (Registration Requirements) and 1240 (Continuing Education
Requirements) to, among other things, require registered persons to
complete the Regulatory Element of CE annually by December 31 of each
year, rather than every three years, and to complete Regulatory Element
content for each representative or principal registration category that
they hold.\5\ In addition, the amendments provide eligible individuals
who terminate any of their representative or principal registration
categories the option of maintaining their qualification for any
terminated registration categories by completing annual CE through a
new program, the MQP.\6\ The annual Regulatory Element requirement will
become effective on January 1, 2023; eligible individuals can make
their election to participate in the MQP beginning on January 31,
2022.\7\
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\5\ See Securities Exchange Act Release No. 93097 (September 21,
2021), 86 FR 53358 (September 27, 2021) (Order Approving File No.
SR-FINRA-2021-015). The Regulatory Element is administered by FINRA
and focuses on regulatory requirements and industry standards. The
proposed rule change also included amendments to the Firm Element
training, which is provided by each firm annually to its registered
persons and focuses on securities products, services and strategies
the firm offers, firm policies and industry trends.
\6\ See supra note 5. Currently, individuals must requalify by
examination if they have not reregistered within two years after
their registrations have been terminated (``the two-year
qualification period''). Individuals may also seek to obtain a
waiver of the applicable qualification examination(s). MQP
participants will have a maximum of five years following the
termination of a representative or principal registration category
to reregister with FINRA without having to requalify by examination
or having to obtain an examination waiver, subject to satisfying the
conditions of the MQP. Among other conditions, MQP participants will
be required to complete annual MQP content consisting of a
combination of Regulatory Element content and Practical Element
content developed by FINRA and the Securities Industry/Regulatory
Council on Continuing Education.
\7\ See Regulatory Notice 21-41 (November 17, 2021) announcing
the SEC approval and effective dates of the amendments.
---------------------------------------------------------------------------
FINRA currently charges a fee of $55 to each individual who
completes the Regulatory Element. In conjunction with the amendments to
transition to an annual Regulatory Element requirement, FINRA is
proposing amendments to Section 4 of Schedule A to the FINRA By-Laws to
revise the fee for the Regulatory Element from $55 to $18.\8\ The
proposed $18 annual fee is comparable to the current $55 fee over a
three-year period. Moreover, the proposed fee for the annual Regulatory
Element would be the same for all registered persons, regardless of the
amount of annual content that they would be required to complete (that
is, an individual who holds multiple registrations would be subject to
the same proposed $18 annual fee as an individual who holds a single
registration).
---------------------------------------------------------------------------
\8\ The annual Regulatory Element fee is set forth in proposed
Section 4(f)(1) of Schedule A to the FINRA By-Laws. See also FINRA
Rule 1240(a) (Regulatory Element).
---------------------------------------------------------------------------
Further, in conjunction with the amendments to adopt the MQP, FINRA
is proposing amendments to Section 4 of Schedule A to the FINRA By-Laws
to charge an annual fee of $100 to each MQP participant.\9\ The
proposed annual fee would be a flat fee, regardless of the number of
registrations for which an individual elects to remain qualified under
the MQP (that is, an individual who elects to remain qualified for
multiple registrations under the MQP would be subject to the same
proposed $100 annual fee as an individual who elects to remain
qualified for a single registration under the MQP). The proposed annual
fee would be assessed at the time an eligible individual elects to
participate in the MQP and thereafter annually each year that the
individual continues in the MQP. Eligible individuals who elect to
participate in the MQP within two years from the termination of a
registration category would be assessed any accrued annual fee.\10\
---------------------------------------------------------------------------
\9\ The annual MQP fee is set forth in proposed Section 4(f)(2)
of Schedule A to the FINRA By-Laws. See also FINRA Rule 1240(c)
(Continuing Education Program for Persons Maintaining Their
Qualification Following the Termination of a Registration Category).
\10\ Eligible individuals must make their election to
participate in the MQP at the time of their Form U5 (Uniform
Termination Notice for Securities Industry Registration) submission
or within two years from the termination of a registration category.
Individuals who elect to participate in the MQP at the later date
will be required to complete, within two years from the termination
of the registration category, any CE that becomes due under the MQP
between the time of their Form U5 submission and the date that they
commence their participation in the MQP.
---------------------------------------------------------------------------
Finally, FINRA is proposing amendments to Section 4 of Schedule A
to the FINRA By-Laws to make a technical change to clarify that the
administrative fee for failing to timely appear for a scheduled
appointment and for cancelling or rescheduling a qualification
examination close to the scheduled appointment date equally applies to
online administrations of qualification examinations. FINRA
qualification examinations are currently administered in test centers
as well as online. Similar to test-center
[[Page 2195]]
administrations of qualification examinations, candidates must schedule
an appointment and satisfy other requirements to take a qualification
examination online.\11\ Likewise, there is an administrative fee for
failing to timely appear for a scheduled online appointment and for
cancelling or rescheduling a qualification examination close to the
scheduled online appointment date.\12\
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\11\ Additional information regarding the online appointment
process is available at https://www.finra.org/registration-exams-ce/qualification-exams/testonline.
\12\ Further information regarding the rescheduling and
cancellation policy is available at https://www.finra.org/registration-exams-ce/qualification-exams/cancellation-policy.
---------------------------------------------------------------------------
FINRA has filed the proposed rule change for immediate
effectiveness. However, the proposed annual MQP fee will be implemented
on January 31, 2022 to coincide with the date that eligible individuals
can begin making their election to participate in the MQP. In addition,
the proposed revised fee for the Regulatory Element will be implemented
on January 1, 2023 to coincide with the effective date of the
transition to an annual Regulatory Element requirement.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\13\ which requires, among
other things, that FINRA rules provide for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility or system that FINRA operates or
controls.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78o-3(b)(5).
---------------------------------------------------------------------------
Proposed Fees
As described above, FINRA is proposing to charge an annual fee of
$18 for completing the Regulatory Element requirement and an annual fee
of $100 to each MQP participant.\14\ The proposed fees are based on the
use of a particular service by registered persons and are therefore
use-based fees as that term was used in FINRA's 2020 comprehensive fee
filing.\15\ FINRA employs use-based fees for some of the specific
services and data it provides to members and the public in support of
its regulatory mission.\16\
---------------------------------------------------------------------------
\14\ The $100 fee would provide each MQP participant with all
the content required of that participant, including the Regulatory
Element content.
\15\ See Securities Exchange Act Release No. 90176 (October 14,
2020), 85 FR 66592, 66594 (October 20, 2020) (Notice of Filing and
Immediate Effectiveness of File No. SR-FINRA-2020-032).
\16\ See 85 FR 66594 n.14.
---------------------------------------------------------------------------
With respect to the Regulatory Element, in 2019, FINRA delivered
approximately 202,600 Regulatory Element sessions and charged a fee of
$55 per session.\17\ These sessions produced approximately $11.1
million in (gross) revenue. In 2023, when the annual Regulatory Element
requirement is in effect, FINRA anticipates delivering approximately
626,000 annual sessions. Assuming the proposed $18 fee is in effect,
the annual Regulatory Element requirement would produce approximately
$11.3 million in revenue. Revenue is nearly the same in 2019 as is
anticipated for 2023 since the reduction in the session fee and the
increase in the number of sessions are expected to balance each other.
---------------------------------------------------------------------------
\17\ The analysis uses data from 2019 and expected for 2023. The
year 2019 was indicative of historical program performance. The year
2019 also pre-dates a change from FINRA's proprietary delivery
platform to a vendor-supplied learning management system and one-
time costs associated with changes to the format, content and
frequency of the Regulatory Element. The year 2023 is the first year
that the annual Regulatory Element requirement will be in effect.
---------------------------------------------------------------------------
With respect to the MQP, in 2023, when the MQP has been in effect
for an entire year,\18\ FINRA expects that approximately 38,000
individuals would be enrolled in the MQP.\19\ Assuming the proposed
$100 fee is in effect, the MQP would produce approximately $3.8 million
in revenue. Changes in the assumptions, for example concerning the
projected number of program participants, may have a significant impact
on the projected aggregate revenue over time.
---------------------------------------------------------------------------
\18\ Given that eligible individuals can begin making their
election to participate in the MQP on January 31, 2022, 2023 will be
the first fiscal year that the proposed annual MQP fee would be in
effect for the entire year.
\19\ FINRA estimates that approximately 90,000 individuals end
their registration with all firms with which they are registered in
a typical year. Among them, FINRA estimates that approximately
40,500 individuals (or 45 percent) do not reregister within two
years of terminating their registrations and would therefore need to
participate in the MQP to be able to reregister with FINRA without
having to requalify by examination or having to obtain an
examination waiver. FINRA expects that out of these individuals,
approximately 8,100 individuals (or 20 percent) would likely choose
to participate in the MQP to maintain their qualification. After
adding approximately 15,000 individuals who may terminate their
permissive registrations in 2023 and instead elect to participate in
the program, as well as approximately 14,850 individuals who may
have terminated their registrations between 2020 to 2022 and who
elect to join the program, FINRA estimates that the total number of
individuals who would participate in the program in 2023 to be
approximately 38,000 individuals.
---------------------------------------------------------------------------
Reasonableness of the Proposed Fees
FINRA believes that the proposed fees are reasonable. With respect
to the Regulatory Element, as discussed above, revenue is nearly the
same in 2019 as is anticipated for 2023 since the reduction in the
session fee and the increase in the number of sessions are expected to
balance each other. Further, FINRA's annual costs for developing,
maintaining and delivering the Regulatory Element are also expected to
remain fairly constant over this period. Thus, the proposed annual fee
of $18 will produce similar annual revenues and provide a similar
annual contribution to FINRA's overall regulatory operations as the
current Regulatory Element program for which member firms pay $55 every
three years on behalf of their registered persons. The annual
Regulatory Element will serve the same function as the current
Regulatory Element program, and the amount of content completed in a
three-year, annual cycle, is expected to be comparable to what most
registered persons are currently completing every three years.
With respect to the MQP, the proposed fee is designed to recover
the systems and operational costs of establishing the annual MQP, and
the annual costs for developing, maintaining and delivering the annual
MQP content, which, as noted earlier, will include a combination of
Regulatory Element content and Practical Element content.\20\ The
proposed fee is also expected to provide a contribution to FINRA's
overall regulatory operations as with the Regulatory Element fee. As
explained in FINRA's 2020 comprehensive fee filing, it is not feasible
to associate a direct affiliated revenue stream for each of FINRA's
programs, and thus numerous operations and services must be funded by
other revenue sources, which include both general regulatory
assessments and use-based fees.\21\ The contribution from the proposed
MQP fee in each year is anticipated to be similar to or less than that
of the current (and proposed) Regulatory Element program as a share of
revenue raised. For comparison purposes, FINRA reviewed state-level
information on the annual cost of continuing education for other
financial service providers and found that the
[[Page 2196]]
proposed annual fee of $100 is generally lower.
---------------------------------------------------------------------------
\20\ See supra note 6. FINRA expects that the number of
individuals who will participate in the MQP each year (approximately
38,000 individuals in 2023) will be significantly smaller than the
population of registered persons, which, as noted below, is
currently approximately 620,000 individuals.
\21\ See 85 FR 66599-600 (including the discussion of the role
of oversight, transparency and rebates in providing cost
discipline). A portion of the proposed annual fee for the MQP will
replace the contribution to FINRA's overall regulatory operations
from qualification examinations that will no longer be taken.
---------------------------------------------------------------------------
The Proposed Fees are Equitable and Not Unfairly Discriminatory
FINRA believes that the proposed fees are equitable and not
unfairly discriminatory. With respect to the Regulatory Element, the
requirement to complete Regulatory Element content on an annual basis
will be applicable to every registered person based on the same terms
and they will pay the same proposed fee. With respect to the MQP, all
eligible individuals who elect to participate in the MQP to maintain
their qualification for a terminated registration category will be
subject to the same terms and will pay the same proposed fee. In
addition, FINRA believes that the proposed fee for the MQP is low
enough that individuals who expect to obtain meaningful benefits from
the MQP will not be discouraged from participating due to the fee.
Further, as explained above, the proposed fees are use-based fees.
The SEC has stated its belief that a ``use-based approach is consistent
with equitable distribution of fees'' and approved use-based fees when
reasonably related to costs.\22\ As discussed above, the proposed use-
based fees are reasonably related to costs. The proposed fees will
cover the cost of developing, maintaining and delivering the annual
Regulatory Element content and the annual MQP content and the systems
and operational costs of establishing and managing the annual
Regulatory Element and the annual MQP. The proposed fees in each year
are anticipated to provide a contribution to FINRA's overall regulatory
operations as a share of revenue raised that is similar to or less than
that of the current Regulatory Element program.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release No. 72280 (May 29,
2014), 79 FR 32351, 32353 (June 4, 2014) (Order Approving File No.
SR-FINRA-2014-018) (approving fees for ATS data that varied
according to use and discussing the SEC's prior approval of similar
use-based TRACE fees).
---------------------------------------------------------------------------
B.Self-Regulatory Organization's Statement on Burden on Competition
FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
Economic Impact Assessment
FINRA has undertaken an economic impact assessment, as set forth
below, to analyze the regulatory need for the proposed rule change, its
potential economic impacts, including anticipated costs, benefits, and
distributional and competitive effects, relative to the current
baseline, and the alternatives FINRA considered in assessing how best
to meet FINRA's regulatory objectives.
Regulatory Need
FINRA previously established the regulatory need for the annual
Regulatory Element and the annual MQP.\23\ This filing addresses the
fees for those programs.
---------------------------------------------------------------------------
\23\ See Securities Exchange Act Release No. 92183 (June 15,
2021), 86 FR 33427, 33432-33436 (June 24, 2021) (Notice of File No.
SR-FINRA-2021-015).
---------------------------------------------------------------------------
Regulatory Element
Economic Baseline
All FINRA registered persons must take the Regulatory Element two
years after they initially became registered and then every three years
ongoing. In 2015, FINRA transitioned the delivery of the Regulatory
Element to an online platform (CE Online), which allows individuals to
complete the content online at a location of their choosing, including
their private residence.\24\ The transition in 2015 to CE Online
reduced the associated Regulatory Element fee from $100 to $55 per
individual, which is the current fee.
---------------------------------------------------------------------------
\24\ See Regulatory Notice 15-28 (August 2015).
---------------------------------------------------------------------------
The population of FINRA registered persons is approximately 620,000
individuals.\25\ FINRA delivered approximately 202,600 Regulatory
Element sessions in 2019. FINRA expects to deliver approximately
204,000 Regulatory Element sessions in 2021.
---------------------------------------------------------------------------
\25\ See 2020 FINRA Industry Snapshot, available at https://www.finra.org/sites/default/files/2020-07/2020-industry-snapshot.pdf.
---------------------------------------------------------------------------
Economic Impacts
FINRA previously considered the economic impacts of the Regulatory
Element program.\26\ The proposed fee is slightly less than one-third
of the $55 fee that is currently paid every three years for the
Regulatory Element. Thus, the proposed rule change impacts the timing
of payments but leaves the total collected over three years essentially
unchanged. In addition, instead of taking the Regulatory Element two
years after first becoming registered, individuals would be required to
complete the Regulatory Element one year after first becoming
registered. This would result in an extra one-time fee.
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\26\ See supra note 23.
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The change in timing may necessitate some small adjustments among
certain firms and individuals. For example, small firms with a stable
number of registered persons for which previously no registered persons
took the Regulatory Element in some years will see a shift from a
varying annual expense to a flat annual expense. Large firms are less
likely to see this effect, since they are more likely to have
registered persons taking the Regulatory Element every year under the
current program. If firms pay the Regulatory Element fee and do not
reduce compensation or other benefits, there would be no financial
impact on individuals from these changes. If individuals pay the
Regulatory Element fee, then they will see a shift from a varying
annual expense to a flat annual expense.
Alternatives Considered
In establishing the proposed fee, FINRA sought to minimize changes
in the fees paid over three years by firms and individuals while
covering program costs and maintaining the contribution of the
Regulatory Element to FINRA's overall regulatory operations. FINRA
considered a range of possible fees and found that the proposed fee and
annual revenue come within narrow ranges of meeting these goals.
MQP
Economic Baseline
The economic baseline for the proposed fee is the existing
requalification requirements and the fees and costs to individuals and
their potential employers relating to those requirements.\27\ As stated
earlier, under the current regime, individuals generally have a two-
year window from the termination of their registration(s) to reregister
without having to requalify by examination or having to obtain an
examination waiver. Requalification imposes costs in the form of time
spent preparing for and taking the applicable examinations, potential
limitations to the activities permitted to be conducted until the
requalification is completed, opportunity costs for the individual and
the potential employers in terms of lost business, and the direct
registration costs.\28\ Member firms may also
[[Page 2197]]
experience material costs when they are not able to retain qualified
experienced persons because of professional and personal events that
require such individuals to take an extended leave of absence from the
industry.
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\27\ See FINRA Rule 1210.08 (Lapse of Registration and
Expiration of SIE).
\28\ The current fees for FINRA qualification examinations are
available at https://www.finra.org/registration-exams-ce/qualification-exams. In order to requalify for a registration, an
individual may need to repeat the Securities Industry Essentials
(SIE) examination as well as a representative- or principal-level
qualification examination. Thus, the direct cost of requalifying for
a single registration, such as the General Securities Representative
registration, could range from $300 to $380 (for both the SIE and
Series 7); requalifying for two registrations, such as the General
Securities Representative and Investment Banking Representative
registrations, could range from $600 to $680 (for the SIE, Series 7
and Series 79). The qualification examination fees used in the
examples above are based on the revised fees that will go into
effect on January 1, 2022. See supra note 15.
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As noted above, the population of FINRA-registered persons is
approximately 620,000 individuals.\29\ In recent years, out of the
approximately 620,000 individuals, approximately 90,000 individuals end
their registration with all firms with which they are registered at
some point during the year. Out of these, approximately half do not
reregister and are considered to have left the securities industry.
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\29\ See 2020 FINRA Industry Snapshot, available at https://www.finra.org/sites/default/files/2020-07/2020-industry-snapshot.pdf.
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Economic Impacts
FINRA previously considered the economic impacts of the MQP.\30\ As
discussed above, the proposed fee of $100 will permit recovery of the
costs for the development, maintenance and delivery of the MQP content
and the systems and operational costs of establishing and managing the
MQP. The proposed fee will also provide for a contribution to FINRA's
overall regulatory operations.
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\30\ See supra note 23.
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The proposed $100 annual fee is imposed on individuals following
the termination of a registration category.\31\ As such, FINRA
anticipates that the proposed fee will not impose costs on member
firms.
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\31\ In the event of a partial termination, some firms may
determine to reimburse individuals who elect to remain qualified for
a terminated registration through the MQP.
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Participating in the MQP is voluntary, so individuals will pay the
fee when the anticipated benefits outweigh the costs. Potential
beneficiaries are not limited to individuals who under the current
baseline requalify and reregister between two and five years after
their registrations are terminated. Some individuals who currently do
not terminate their registrations, and others who terminate their
registrations and never reregister, may also benefit from the option
provided by the MQP and paying the proposed $100 fee.
Alternatives Considered
In establishing the proposed fee, FINRA sought to minimize the
burden to individuals who would elect to participate in the MQP while
covering program costs and maintaining the contribution of the testing
and CE programs to FINRA's overall regulatory operations. FINRA
considered a range of possible fees and found that the proposed fee and
annual revenue come within narrow ranges of meeting these goals.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \32\ and paragraph (f)(2) of Rule 19b-4
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. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
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\32\ 15 U.S.C. 78s(b)(3)(A).
\33\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-FINRA-2021-034 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2021-034. 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 such filing also will be available for inspection
and copying at the principal office of FINRA. All comments received
will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-FINRA-2021-034 and should be submitted
on or before February 3, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00490 Filed 1-12-22; 8:45 am]
BILLING CODE 8011-01-P
