Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange Registration Rules in General 4, 15286-15292 [2022-05597]
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Federal Register / Vol. 87, No. 52 / Thursday, March 17, 2022 / Notices
19(b)(3)(A) of the Act 19 and Rule 19b–
4(f)(6) 20 thereunder.21
A proposed rule change filed under
Rule 19b–4(f)(6) 22 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),23 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposed
rule change may take effect upon filing.
The Exchange represents that the Funds
will continue to comply with the
requirements of BZX Rule 14.11(m). The
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest because the proposed
rule change does not raise any new or
novel issues.24 Accordingly, the
Commission waives the 30-day
operative delay and designates the
proposal operative upon filing.25
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change 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:
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
satisfied this requirement.
22 17 CFR 240.19b–4(f)(6).
23 17 CFR 240.19b–4(f)(6)(iii).
24 See Securities Exchange Act Release Nos.
93147, supra note 9, and 93546, supra note 10.
25 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2022–016 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–CboeBZX–2022–016. 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–CboeBZX–2022–016 and
should be submitted on or before April
7, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2022–05601 Filed 3–16–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94400; File No. SR–
NASDAQ–2022–021]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Exchange Registration Rules in
General 4
March 11, 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 March 7,
2022, 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
substantially 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
General 4, Rule 1240 (Continuing
Education Requirements). While these
amendments are effective upon filing,
the Exchange has designated the
proposed amendments to be operative
on March 15, 2022.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.listingcenter.nasdaq.com/
rulebook/nasdaq/rules, 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
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
26 17
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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a. Regulatory Element
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
continuing education requirements in
General 4, Rule 1240. This proposed
rule change is based on a filing recently
submitted by the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’),
and is intended to harmonize the
Exchange’s continuing education rules
with those of FINRA so as to promote
uniform standards across the securities
industry.3 The Exchange also proposes
to amend its manual signature
requirements in General 4, Rule 1250
(Form U4 Filing Requirements) to align
with changes FINRA has made to
similar rules.4 Each change is discussed
in detail below.
The proposed changes are based on
the changes approved by the
Commission in the approval order for
SR–FINRA–2021–015 and as noticed in
SR–FINRA–2021–003.5 The Exchange is
proposing to adopt such changes
substantially in the same form as
proposed by FINRA, with only minor
changes necessary to conform to the
Exchange’s existing rules such as to
remove cross-references and rules that
are applicable to FINRA members but
not to Exchange members.
Continuing Education Rules
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(i) Background
The continuing education program for
registered persons of broker-dealers
(‘‘CE Program’’) currently requires
registered persons to complete
continuing education consisting of a
Regulatory Element and a Firm Element.
The Regulatory Element, which is
administered by FINRA, focuses on
regulatory requirements and industry
standards, while the Firm Element is
provided by each firm and focuses on
securities products, services and
strategies the firm offers, firm policies
and industry trends. The CE Program is
codified under the rules of the selfregulatory organizations (‘‘SROs’’). The
CE Program for registered persons of
Exchange members is codified under
General 4, Rule 1240.6
3 See Securities Exchange Act Release No. 93097
(September 21, 2021), 86 FR 53358 (September 27,
2021) (SR–FINRA–2021–015) (‘‘FINRA Rule
Change’’).
4 See Securities Exchange Release No. 91262
(March 5, 2021), 86 FR 13935 (March 11, 2021) (SR–
FINRA–2021–003).
5 See supra notes 3 and 4.
6 See also General 4, Rule 1210.07 (All Registered
Persons Must Satisfy the Regulatory Element of
Continuing Education).
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General 4, Rule 1240(a) (Regulatory
Element) currently requires a registered
person to complete the applicable
Regulatory Element initially within 120
days after the person’s second
registration anniversary date and,
thereafter, within 120 days after every
third registration anniversary date.7 The
Exchange may extend these time frames
for good cause shown.8 Registered
persons who have not completed the
Regulatory Element within the
prescribed time frames will have their
Exchange registrations deemed inactive
and will be designated as ‘‘CE inactive’’
in the CRD system until the
requirements of the Regulatory Element
have been satisfied.9 A CE inactive
person is prohibited from performing, or
being compensated for, any activities
requiring FINRA registration, including
supervision. Moreover, if registered
persons remain CE inactive for two
consecutive years, they must requalify
by retaking required examinations (or
obtain a waiver of the applicable
qualification examinations).10
7 See General 4, Rules 1240(a)(1) (Requirements)
and (a)(4) (Reassociation in a Registered Capacity).
An individual’s registration anniversary date is
generally the date they initially registered with the
Exchange in the Central Registration Depository
(‘‘CRD®’’) system. However, an individual’s
registration anniversary date would be reset if the
individual has been out of the industry for two or
more years and is required to requalify by
examination, or obtain an examination waiver, in
order to reregister. An individual’s registration
anniversary date would also be reset if the
individual obtains a conditional examination
waiver that requires them to complete the
Regulatory Element by a specified date. Nonregistered individuals who are participating in the
waiver program under General 4, Rule 1210.09
(Waiver of Examinations for Individuals Working
for a Financial Services Industry Affiliate of a
Member) (‘‘FSAWP participants’’) are also subject to
the Regulatory Element. See also General 4, Rule
1240(a)(5) (Definition of Covered Person). The
Regulatory Element for FSAWP participants
correlates to their most recent registration(s), and it
must be completed based on the same cycle had
they remained registered. FSAWP participants are
eligible for a single, fixed seven-year waiver period
from the date of their initial designation, subject to
specified conditions. Registered persons who
become subject to a significant disciplinary action,
as specified in General 4, Rule 1240(a)(3)
(Disciplinary Actions), may be required to retake
the Regulatory Element within 120 days of the
effective date of the disciplinary action, if they
remain registered. Further, their cycle for
participation in the Regulatory Element may be
adjusted to reflect the effective date of the
disciplinary action rather than their registration
anniversary date.
8 See General 4, Rule 1240(a)(2) (Failure to
Complete).
9 See supra note 8. Individuals must complete the
entire Regulatory Element session to be considered
to have ‘‘completed’’ the Regulatory Element;
partial completion is the same as non-completion.
10 This CE inactive two-year period is calculated
from the date such persons become CE inactive, and
it continues to run regardless of whether they
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The Regulatory Element consists of a
subprogram for registered persons
generally, and a subprogram for
principals and supervisors.11 While
some of the current Regulatory Element
content is unique to particular
registration categories, most of the
content has broad application to both
representatives and principals.12
The Regulatory Element was
originally designed at a time when most
individuals had to complete the
Regulatory Element at a test center, and
its design was shaped by the limitations
of the test center-based delivery model.
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. This online delivery provides
the Exchange with much greater
flexibility in updating content in a
timelier fashion, developing content
tailored to each registration category
and presenting the material in an
optimal learning format.
b. Firm Element
General 4, Rule 1240(b) (Firm
Element) currently requires each firm to
develop and administer an annual Firm
Element training program for covered
registered persons.13 The rule requires
firms to conduct an annual needs
analysis to determine the appropriate
training.14 Currently, at a minimum, the
Firm Element must cover training in
ethics and professional responsibility as
well as the following items concerning
securities products, services and
strategies offered by the member: (1)
General investment features and
associated risk factors; (2) suitability
and sales practice considerations; and
terminate their registrations before the end of the
two-year period. Therefore, if registered persons
terminate their registrations while in a CE inactive
status, they must satisfy all outstanding Regulatory
Element prior to the end of the CE inactive two-year
period in order to reregister with a member without
having to requalify by examination or having to
obtain an examination waiver.
11 The S101 (General Program for Registered
Persons) and the S201 (Registered Principals and
Supervisors).
12 The current content is presented in a single
format leading individuals through a case that
provides a story depicting situations that they may
encounter in the course of their work.
13 The rule defines ‘‘covered registered persons’’
as any registered person who has direct contact
with customers in the conduct of a member’s
securities sales and trading activities, and the
immediate supervisors of any such persons. See
General 4, Rule 1240(b)(1) (Persons Subject to the
Firm Element).
14 See General 4, Rule 1240(b)(2) (Standards for
the Firm Element).
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(3) applicable regulatory
requirements.15
A firm, consistent with its needs
analysis, may determine to apply
toward the Firm Element other required
training. The current rule does not
expressly recognize other required
training, such as training relating to the
anti-money laundering (‘‘AML’’)
compliance program and training
relating to the annual compliance
meeting,16 for purposes of satisfying
Firm Element training.
c. Termination of a Registration
Currently, individuals whose
registrations as representatives or
principals have been terminated for two
or more years may reregister as
representatives or principals only if they
requalify by retaking and passing the
applicable representative- or principallevel examination or if they obtain a
waiver of such examination(s) (the
‘‘two-year qualification period’’).17 The
two-year qualification period was
adopted prior to the creation of the CE
Program and was intended to ensure
that individuals who reregister are
relatively current on their regulatory
and securities knowledge.
(ii) Proposed Rule Change
After extensive work with the
Securities Industry/Regulatory Council
15 See
supra note 14.
General 9, Sections 20 and 37.
17 See General 4, Rule 1210.08 (Lapse of
Registration and Expiration of SIE). The two-year
qualification period is calculated from the date
individuals terminate their registration and the date
the Exchange receives a new application for
registration. The two-year qualification period does
not apply to individuals who terminate a limited
registration category that is a subset of a broader
registration category for which they remain
qualified. For instance, it would not apply to an
individual who maintains his registration as a
General Securities Representative but who
terminates his registration as an Investment
Company and Variable Contracts Products
Representative. Such individuals have the option of
reregistering in the more limited registration
category without having to requalify by
examination or obtain an examination waiver so
long as they continue to remain qualified for the
broader registration category. Further, the two-year
qualification period only applies to the
representative- and principal-level examinations; it
does not extend to the Securities Industry Essentials
(‘‘SIE’’) examination. The SIE examination is valid
for four years, but having a valid SIE examination
alone does not qualify an individual for registration
as a representative or principal. Individuals whose
registrations as representatives or principals have
been revoked pursuant to General 5, Rule 8310
(Sanctions for Violation of the Rules) may only
requalify by retaking the applicable representativeor principal-level examination in order to reregister
as representatives or principals, in addition to
satisfying the eligibility conditions for association
with a firm. Waivers are granted either on a caseby-case basis under General 4, Rule 1210.03
(Qualification Examinations and Waivers of
Examinations) or as part of the waiver program
under General 4, Rule 1210.09.
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on Continuing Education (‘‘CE
Council’’) and discussions with
stakeholders, including industry
participants and the North American
Securities Administrators Association
(‘‘NASAA’’), FINRA adopted the
following changes to the CE Program
under its rules.18 In order to promote
uniform standards across the securities
industry, the Exchange now proposes to
adopt the same changes to its
continuing education rules.
a. Transition to Annual Regulatory
Element for Each Registration Category
As noted above, currently, the
Regulatory Element generally must be
completed every three years, and the
content is broad in nature. Based on
changes in technology and learning
theory, the Regulatory Element content
can be updated and delivered in a
timelier fashion and tailored to each
registration category, which would
further the goals of the Regulatory
Element.19 Therefore, to provide
registered persons with more timely and
relevant training on significant
regulatory developments, the Exchange
proposes amending General 4, Rule
1240(a) to require registered persons to
complete the Regulatory Element
annually by December 31.20 The
proposed amendment would also
require registered persons to complete
Regulatory Element content for each
representative or principal registration
category that they hold, which would
18 See supra note 3. FINRA’s changes are based
on the CE Council’s September 2019
recommendations to enhance the CE Program. See
Recommended Enhancements for the Securities
Industry Continuing Education Program, available
at https://cecouncil.org/media/266634/councilrecommendations-final-.pdf. The CE Council is
composed of securities industry representatives and
representatives of SROs. The CE Council was
formed in 1995 upon a recommendation from the
Securities Industry Task Force on Continuing
Education and was tasked with facilitating the
development of uniform continuing education
requirements for registered persons of brokerdealers.
19 When the CE Program was originally adopted
in 1995, registered persons were required to
complete the Regulatory Element on their second,
fifth and 10th registration anniversary dates. See
Securities Exchange Act Release No. 35341
(February 8, 1995), 60 FR 8426 (February 14, 1995)
(Order Approving File Nos. SR–AMEX–94–59; SR–
CBOE–94–49; SR–CHX–94–27; SR–MSRB–94–17;
SR–NASD–94–72; SR–NYSE–94–43; SR–PSE–94–
35; and SR–PHLX–94–52). The change to the
current three-year cycle was made in 1998 to
provide registered persons more timely and
effective training, consistent with the overall
purpose of the Regulatory Element. See Securities
Exchange Act Release No. 39712 (March 3, 1998),
63 FR 11939 (March 11, 1998) (Order Approving
File Nos. SR–CBOE–97–68; SR–MSRB–98–02; SR–
NASD–98–03; and SR–NYSE–97–33).
20 See proposed General 4, Rules 1240(a)(1) and
(a)(4).
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also further the goals of the Regulatory
Element.21
Under the proposed rule change,
firms would have the flexibility to
require their registered persons to
complete the Regulatory Element sooner
than December 31, which would allow
firms to coordinate the timing of the
Regulatory Element with other training
requirements, including the Firm
Element.22 For example, a firm could
require its registered persons to
complete both their Regulatory Element
and Firm Element by October 1 of each
year.
Individuals who would be registering
as a representative or principal for the
first time on or after the implementation
date of the proposed rule change would
be required to complete their initial
Regulatory Element for that registration
category in the next calendar year
following their registration.23 In
addition, subject to specified
conditions, individuals who would be
reregistering as a representative or
principal on or after the implementation
date of the proposed rule change would
also be required to complete their initial
Regulatory Element for that registration
category in the next calendar year
following their reregistration.24
Consistent with current requirements,
individuals who fail to complete their
Regulatory Element within the
prescribed period would be
automatically designated as CE
inactive.25 However, the proposed rule
change preserves the Exchange’s ability
to extend the time by which a registered
person must complete the Regulatory
Element for good cause shown.26
The Exchange also proposes
amending General 4, Rule 1240(a) to
clarify that: (1) Individuals who are
designated as CE inactive would be
required to complete all of their pending
and upcoming annual Regulatory
Element, including any annual
Regulatory Element that becomes due
during their CE inactive period, to
return to active status; 27 (2) the twoyear CE inactive period is calculated
from the date individuals become CE
inactive, and it continues to run
regardless of whether individuals
21 See proposed General 4, Rules 1210.07 and
1240(a)(1).
22 See proposed General 4, Rules 1240(a)(1) and
(a)(4).
23 See proposed General 4, Rule 1240(a)(1).
24 See proposed General 4, Rule 1240(a)(4).
25 See proposed General 4, Rule 1240(a)(2).
26 See supra note 25. The proposed rule change
clarifies that the request for an extension of time
must be in writing and include supporting
documentation, which is consistent with current
practice.
27 See supra note 25.
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terminate their registrations; 28 (3)
individuals who become subject to a
significant disciplinary action may be
required to complete assigned
continuing education content as
prescribed by the Exchange; 29 (4)
individuals who have not completed
any Regulatory Element content for a
registration category in the calendar
year(s) prior to reregistering would not
be approved for registration for that
category until they complete that
Regulatory Element content, pass an
examination for that registration
category or obtain an unconditional
examination waiver for that registration
category, whichever is applicable; 30 and
(5) the Regulatory Element requirements
apply to individuals who are registered,
or in the process of registering, as a
representative or principal.31 In
addition, the Exchange proposes making
conforming amendments to General 4,
Rule 1210.07.
Under the proposed rule change, the
amount of content that registered
persons would be required to complete
in a three-year, annual cycle for a
particular registration category is
expected to be comparable to what most
registered persons are currently
completing every three years. In some
years, there may be more required
content for some registration categories
depending on the volume of rule
changes and regulatory issues. In
addition, an individual who holds
multiple registrations may be required
to complete additional content
compared to an individual who holds a
single registration because, as noted
above, individuals would be required to
complete content specific to each
registration category that they hold.32
However, individuals with multiple
registrations would not be subject to
duplicative regulatory content in any
given year. The more common
registration combinations would likely
share much of their relevant regulatory
content each year. For example,
individuals registered as General
Securities Representatives and General
Securities Principals would receive the
same content as individuals solely
registered as General Securities
Representatives, supplemented with a
likely smaller amount of supervisory28 See
supra note 25.
proposed General 4, Rule 1240(a)(3). As
previously noted, General 4, Rule 1240(a)(3)
currently provides that such individuals may be
required to retake the Regulatory Element. See
supra note 7.
30 See proposed General 4, Rule 1240(a)(4).
31 See proposed General 4, Rule 1240(a)(5).
32 As discussed in the economic impact
assessment in the FINRA Rule Change, individuals
with multiple registrations represent a smaller
percentage of the population of registered persons.
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specific content on the same topics. The
less common registration combinations
may result in less topic overlap and
more content overall.
b. Recognition of Other Training
Requirements for Firm Element and
Extension of Firm Element to All
Registered Persons
To better align the Exchange’s
rulebook with FINRA’s rulebook, and,
in addition, to better align the Firm
Element requirement with other
required training, the Exchange
proposes amending General 4, Rule
1240(b) to expressly allow firms to
consider training relating to the AML
compliance program and the annual
compliance meeting toward satisfying
an individual’s annual Firm Element
requirement.33 The Exchange also
proposes amending the rule to extend
the Firm Element requirement to all
registered persons, including
individuals who maintain solely a
permissive registration consistent with
General 4, Rule 1210.02 (Permissive
Registrations), thereby further aligning
the Firm Element requirement with
other broadly-based training
requirements.34 In conjunction with this
proposed change, the Exchange
proposes modifying the current
minimum training criteria under
General 4, Rule 1240(b) to instead
provide that the training must cover
topics related to the role, activities or
responsibilities of the registered person
and to professional responsibility.35
c. Maintenance of Qualification After
Termination of Registration
The Exchange proposes adopting
paragraph (c) under General 4, Rule
1240 and Supplementary Material .01
and .02 to General 4, Rule 1240 to
provide eligible individuals who
terminate any of their representative or
principal registrations the option of
maintaining their qualification for any
of the terminated registrations by
completing continuing education.36 The
33 See
proposed General 4, Rule 1240(b)(2)(D).
proposed General 4, Rule 1240(b)(1). As
noted earlier, the current requirement only applies
to ‘‘covered registered persons’’ and not all
registered persons.
35 See proposed General 4, Rule 1240(b)(2)(B).
36 The proposed option would also be available to
individuals who terminate any permissive
registrations as provided under General 4, Rule
1210.02. However, the proposed option would not
be available to individuals who terminate a limited
registration category that is a subset of a broader
registration category for which they remain
qualified. As previously noted, such individuals
currently have the option of reregistering in the
more limited registration category without having to
requalify by examination or obtain an examination
waiver so long as they continue to remain qualified
for the broader registration category. In addition,
34 See
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proposed rule change would not
eliminate the two-year qualification
period. Rather, it would provide such
individuals an alternative means of
staying current on their regulatory and
securities knowledge following the
termination of a registration(s). Eligible
individuals who elect not to participate
in the proposed continuing education
program would continue to be subject to
the current two-year qualification
period. The proposed rule change is
generally aligned with other
professional continuing education
programs that allow individuals to
maintain their qualification to work in
their respective fields during a period of
absence from their careers (including an
absence of more than two years) by
satisfying continuing education
requirements for their credential.
The proposed rule change would
impose the following conditions and
limitations:
• Individuals would be required to be
registered in the terminated registration
category for at least one year
immediately prior to the termination of
that category; 37
• individuals could elect to
participate when they terminate a
registration or within two years from the
termination of a registration; 38
• individuals would be required to
complete annually all prescribed
continuing education; 39
the proposed option would not be available to
individuals who are maintaining an eliminated
registration category, such as the category for
Corporate Securities Representative, or individuals
who have solely passed the Securities Industry
Essentials examination, which does not, in and of
itself, confer registration.
37 See proposed General 4, Rule 1240(c)(1).
38 See proposed General 4, Rule 1240(c)(2).
Individuals who elect to participate at the later date
would be required to complete, within two years
from the termination of their registration, any
continuing education that becomes due between the
time of their Form U5 (Uniform Termination Notice
for Securities Industry Registration) submission and
the date that they commence their participation. In
addition, FINRA would enhance its systems to
notify individuals of their eligibility to participate,
enable them to affirmatively opt in, and notify them
of their annual continuing education requirement if
they opt in.
39 See proposed General 4, Rule 1240(c)(3).
However, upon a participant’s request and for good
cause shown, the Exchange would have the ability
to grant an extension of time for the participant to
complete the prescribed continuing education. A
participant who is also a registered person must
directly request an extension of the prescribed
continuing education from the Exchange. The
continuing education content for participants
would consist of a combination of Regulatory
Element content and content selected by FINRA
and the CE Council from the Firm Element content
catalog discussed below. The content would
correspond to the registration category for which
individuals wish to maintain their qualifications.
Participants who are maintaining their qualification
status for a principal registration category that
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• individuals would have a maximum
of five years in which to reregister; 40
• individuals who have been CE
inactive for two consecutive years, or
who become CE inactive for two
consecutive years during their
participation, would not be eligible to
participate or continue; 41 and
• individuals who are subject to a
statutory disqualification, or who
become subject to a statutory
disqualification following the
termination of their registration or
during their participation, would not be
eligible to participate or continue.42
The proposed rule change also
includes a look-back provision that
would, subject to specified conditions,
extend the proposed option to
individuals who have been registered as
a representative or principal within two
years immediately prior to the
implementation date of the proposed
rule change and individuals who have
been FSAWP participants immediately
prior to the implementation date of the
proposed rule change.43
includes one or more corequisite representative
registrations must also complete required annual
continuing education for the corequisite
registrations in order to maintain their qualification
status for the principal registration category. The
proposed rule change clarifies that the prescribed
continuing education must be completed by
December 31 of the calendar year, which is
consistent with the timing for the proposed annual
Regulatory Element.
40 See proposed General 4, Rule 1240(c). In
addition, individuals applying for reregistration
must satisfy all other requirements relating to the
registration process (e.g., submit a Form U4
(Uniform Application for Securities Industry
Registration or Transfer) and undergo a background
check).
41 See proposed General 4, Rules 1240(c)(4) and
(c)(5).
42 See proposed General 4, Rules 1240(c)(1) and
(c)(6). Further, any content completed by
participants would be retroactively nullified upon
disclosure of the statutory disqualification. The
following example illustrates the application of the
proposed rule change to individuals who become
subject to a statutory disqualification while
participating in the proposed continuing education
program. Individual A participates in the proposed
continuing education program for four years and
completes the prescribed content for each of those
years. During year five of his participation, he
becomes subject to a statutory disqualification
resulting from a foreign regulatory action. In that
same year, the Exchange receives a Form U4
submitted by a member on behalf of Individual A
requesting registration with the Exchange. The
Form U4 discloses the statutory disqualification
event. The Exchange would then retroactively
nullify any content that Individual A completed
while participating in the proposed continuing
education program. Therefore, in this example, in
order to become registered with the Exchange, he
would be required to requalify by examination. This
would be in addition to satisfying the eligibility
conditions for association with an Exchange
member firm. See Exchange Act Sections 3(a)(39)
and 15(b)(4) and General 3, Rule 1002.
43 See proposed Supplementary Material .01 to
General 4, Rule 1240. Such individuals would be
required to elect whether to participate by the
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In addition, the proposed rule change
includes a re-eligibility provision that
would allow individuals to regain
eligibility to participate each time they
reregister with a firm for a period of at
least one year and subsequently
terminate their registration, provided
that they satisfy the other participation
conditions and limitations.44 Finally,
the Exchange proposes making
conforming amendments to General 4,
Rule 1210, including adding references
to proposed Rule 1240(c) under General
4, Rule 1210.08.
The proposed rule change will have
several important benefits. It will
provide individuals with flexibility to
address life and career events and
necessary absences from registered
functions without having to requalify
each time. It will also incentivize them
to stay current on their respective
securities industry knowledge following
the termination of any of their
registrations. The continuing education
under the proposed option will be as
rigorous as the continuing education of
registered persons, which promotes
investor protection. Further, the
proposed rule change will enhance
diversity and inclusion in the securities
industry by attracting and retaining a
broader and diverse group of
professionals.
implementation date of the proposed rule change.
If such individuals elect to participate, they would
be required to complete their initial annual content
by the end of the calendar year in which the
proposed rule change is implemented. In addition,
if such individuals elect to participate, their initial
participation period would be adjusted based on the
date that their registration was terminated. The
current waiver program for FSAWP participants
would not be available to new participants upon
implementation of the proposed rule change. See
proposed General 4, Rule 1210.09. However,
individuals who are FSAWP participants
immediately prior to the implementation date of the
proposed rule change could elect to continue in that
waiver program until the program has been retired.
As noted above, FSAWP participants may
participate for up to seven years in that waiver
program, subject to specified conditions. See supra
note 7. As discussed above, the proposed rule
change provides a five-year participation period for
participants in the proposed continuing education
program. So as not to disadvantage FSAWP
participants, the Exchange has determined to
preserve that waiver program for individuals who
are participating in the FSAWP immediately prior
to the implementation date of the proposed rule
change. Because the proposed rule change
transitions the Regulatory Element to an annual
cycle, FSAWP participants who remain in that
waiver program following the implementation of
the proposed rule change would be subject to an
annual Regulatory Element requirement. See
proposed General 4, Rule 1240(a)(1). Finally, the
proposed rule change preserves the Exchange’s
ability to extend the time by which FSAWP
participants must complete the Regulatory Element
for good cause shown. See proposed General 4, Rule
1240(a)(2).
44 See proposed Supplementary Material .02 to
General 4, Rule 1240.
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Significantly, the proposed rule
change will be of particular value to
women, who continue to be the primary
caregivers for children and aging family
members and, as a result, are likely to
be absent from the industry for longer
periods.45 In addition, the proposed rule
change will provide longer-term relief
for women, individuals with low
incomes and other populations,
including older workers, who are at a
higher risk of a job loss during certain
economic downturns and who are likely
to remain unemployed for longer
periods.46
d. CE Program Implementation
As stated in the FINRA Rule Change,
FINRA and the CE Council also plan to
enhance the CE Program in other ways,
and these additional enhancements do
not require any changes to the FINRA
rules.47 As it relates to the rule changes
themselves, the changes relating to the
Maintaining Qualifications Program
(paragraph (c) of General 4, Rule 1240)
and the Financial Services Affiliate
Waiver Program (FSAWP)
(Supplementary Material .09 to General
4, Rule 1210) will become effective
March 15, 2022. All other changes
related to the FINRA Rule Change,
including the changes relating to the
Regulatory Element, Firm Element and
the two-year qualification period, will
become effective January 1, 2023.48
Manual Signature
General 4, Rule 1250(c) currently
provides that every initial and transfer
electronic Form U4 filing and any
amendments to the disclosure
information on Form U4 must be based
on a manually signed Form U4 provided
to the member or applicant for
membership by the person on whose
behalf the Form U4 is being filed,
consistent with FINRA Rule 1010(c).
Similarly, the Exchange’s
Supplementary Material .03 currently
45 See The Female Face of Family Caregiving
(November 2018), available at https://www.national
partnership.org/our-work/resources/economicjustice/female-face-family-caregiving.pdf.
46 See The COVID–19 Recession is the Most
Unequal in Modern U.S. History (September 30,
2020), available at https://www.washington
post.com/graphics/2020/business/coronavirusrecession-equality/ and Unemployment’s Toll on
Older Workers Is Worst in Half a Century (October
21, 2020), available at https://www.aarp.org/work/
working-at-50-plus/info-2020/pandemicunemployment-older-workers.
47 See supra note 3. As described in more detail
in the FINRA Rule Change, FINRA will work with
the CE Council to develop and incorporate
additional resources in connection with the
Regulatory and Firm Elements. Similar to FINRA,
these additional enhancements do not require any
changes to the Exchange rules.
48 See FINRA Regulatory Notice 21–41 at https://
www.finra.org/rules-guidance/notices/21-41.
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provides that in the event a member is
not able to obtain an associated person’s
manual signature or written
acknowledgement of amended
disclosure information on that person’s
Form U4 prior to filing of such
amendment reflecting the information
pursuant to Rule 1250(c)(3), the member
must enter ‘‘Representative Refused to
Sign/Acknowledge’’ or ‘‘Representative
Not Available’’ or a substantially similar
entry in the electronic Form U4 field for
the associated person’s signature.
However, FINRA has since amended
their Rule 1010(c) to permit firms to
choose to rely on electronic signatures
to satisfy the signature requirements
when filing Form U4.49 Cboe Exchange,
Inc. (‘‘CBOE’’) has also updated its Rule
3.34 to reflect FINRA’s updated Rule
1010(c).50
The Exchange proposes to amend
Rule 1250(c) and Supplementary
Material .03 to similarly allow firms to
rely on electronic signatures when filing
Form U4, consistent with FINRA Rule
1010(c). Specifically, the Exchange
proposes to remove the term ‘‘manual’’
from ‘‘manual signature’’ and the term
‘‘manually’’ from ‘‘manually signed.’’
The proposed rule change provides
members, and applicants for
membership, with an opportunity to
better manage operational challenges.
Particularly, the COVID–19 pandemic
amplified the need to better manage
operational challenges like those that
arose during the pandemic and that may
continue to arise in the future.
Additionally, the proposed rule change
would not require the use of a particular
type of technology to obtain a valid
electronic signature from the associated
person. The Exchange believes that
some firms may be unable to obtain the
manual signature of applicants for
registration resulting in a significant
operational backlog. By permitting these
firms to rely on electronic signatures to
satisfy the signature requirements of
Exchange Rule 1250 and Supplementary
Material .03, the proposed rule change
may reduce or eliminate this backlog.
For purposes of the proposed rule
change, a valid electronic signature
would be any electronic mark that
clearly identifies the signatory and is
otherwise in compliance with the
Electronic Signatures in Global and
National Commerce Act (‘‘E-Sign Act’’)
49 See
Securities Exchange Release No. 91262
(March 5, 2021), 86 FR 13935 (March 11, 2021) (SR–
FINRA–2021–003).
50 See Securities Exchange Release No. 92562
(August 4, 2021), 86 FR 143701 (August 10, 2021)
(SR–CBOE–2021–043).
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and the guidance issued by the SEC
relating to the E-Sign Act.51
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,52 in general, and furthers the
objectives of Section 6(b)(5) of the Act,53
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
The Exchange believes that the
proposed changes to the Regulatory
Element and Firm Element will ensure
that all registered persons receive timely
and relevant training, which will, in
turn, enhance compliance and investor
protection. Further, the Exchange
believes that establishing a path for
individuals to maintain their
qualification following the termination
of a registration will reduce unnecessary
impediments to requalification and
promote greater diversity and inclusion
in the securities industry without
diminishing investor protection.
As it relates to the proposed changes
to General 4, Rule 1250(c), the Exchange
believes the proposed rule change
provides firms with the flexibility to
rely on electronic signatures to satisfy
the signature requirements of Rule
1250(c). Specifically, the Exchange
proposes to amend Exchange Rule
1250(c) and Supplementary Material
.03, similar to the amendments made by
FINRA and CBOE, to provide the option
of filing an initial or a transfer Form U4
based on a manually or an electronically
signed copy of the form provided to the
member, or applicant for membership,
by the individual on whose behalf the
form is being filed. Considering the
technological advancements that
provide for enhanced authentication
and security of electronic signatures, the
Exchange believes that it is appropriate
to amend Rule 1250(c) and
Supplementary Material .03 to provide
such flexibility. The proposed rule
change also addresses the ongoing
public health risks stemming from the
outbreak of COVID–19 and the
operational challenges that firms
continue to face as a result of pandemic
repercussions. By permitting these firms
to rely on electronic signatures to satisfy
the signature requirements of Rule
51 See accord Securities Exchange Act Release
No. 85282 (March 11, 2019), 84 FR 9573 (March 15,
2019) (Order Approving File No. SR–FINRA–2018–
040) (discussing valid electronic signatures under
existing guidance).
52 15 U.S.C. 78f(b).
53 15 U.S.C. 78f(b)(5).
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15291
1250(c) and Supplementary Material
.03, the proposed rule change may
reduce or eliminate an operational
backlog due to the difficulty firms may
have faced in obtaining the manual
signature of applicants for registration
as a result of the impact of the pandemic
on daily work environments.
The Exchange believes the proposal is
consistent with the Act for the reasons
described above and for the reasons
outlined in the approval order for SR–
FINRA–2021–015 and as noticed in SR–
FINRA–2021–003.54
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. All members
would be subject to the proposed rule
change. The proposed rule change
relating to the Exchange’s CE Program,
which is materially identical to the
FINRA Rule Change, is designed to
result in a more efficient CE Program
that addresses relevant regulatory
requirements and provides individuals
with improved tools and resources to
understand and comply with such
requirements, enhancing investor
protection. Moreover, the proposed rule
change would provide new channels for
individuals to maintain their
qualification status for a terminated
registration category and, in so doing,
could increase the likelihood that
professionals who need to step away
from the industry for a period could
return, subject to satisfying all other
requirements relating to the registration
process.
As it relates to the proposed
amendments to General 4, Rule 1250,
the proposed rule change relating to
manual signatures is, in all material
respects, substantively identical to
recent rule changes adopted by FINRA
and CBOE. The Exchange believes the
proposed change will reduce a
regulatory filing burden for members by
allowing them to rely on Form U4
copies with an electronic signature. All
members will have the option to rely on
such forms with an electronic signature
(or continue to rely on forms with a
manual signature).
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
54 See
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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 55 and Rule 19b–
4(f)(6) thereunder.56
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii), the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
this proposed rule change may become
operative immediately upon filing. Rule
19b–4(f)(6)(iii) 57 requires a selfregulatory organization to give the
Commission written notice of its intent
to file a proposed rule change under that
subsection at least five business days
prior to the date of filing, or such
shorter time as designated by the
Commission. The Exchange has
provided such notice.
Waiver of the 30-day operative delay
would allow the Exchange to implement
proposed changes to the Maintaining
Qualifications Program and the FSAWP
by March 15, 2022 to coincide with
FINRA’s announced implementation
date, thereby eliminating the possibility
of a significant regulatory gap between
the FINRA and Nasdaq rules and
providing more uniform standards
across the securities industry. For the
proposal related to the manual signature
requirement, waiver of the 30-day
operative delay would provide
immediate relief to firms currently
experiencing a significant operational
backlog because of the requirement to
obtain manual signatures, ultimately
benefitting the investing public. The
proposed rule change to Rule 1250(c)
and Supplementary Material .03 will
provide immediate relief to these firms
by allowing them to rely on electronic
signatures to clear the backlog.
Moreover, as noted above, the proposed
manual signature rule change is based
on a similar rule change by FINRA that
has already taken effect. For these
reasons, the Commission believes that
waiver of the 30-day operative delay for
55 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
57 17 CFR 240.19b–4(f)(6)(iii).
56 17
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this proposal is consistent with the
protection of investors and the public
interest. Accordingly, the Commission
hereby waives the 30-day operative
delay and designates the proposal
operative upon filing.58
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.
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 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–NASDAQ–2022–021 and
should be submitted on or before April
7, 2022.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.59
Eduardo Aleman,
Assistant Secretary.
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–
NASDAQ–2022–021 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–NASDAQ–2022–021. 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
58 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. See 15 U.S.C.
78c(f).
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[FR Doc. 2022–05597 Filed 3–16–22; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–94405; File No. SR–
CboeEDGX–2022–008]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Modify the
External Subscriber Fees Applicable
To Cboe One Summary Derived Data
API Service
March 11, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 1,
2022, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III 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
Cboe EDGX Exchange, Inc. (‘‘EDGX’’
or the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to modify the External
59 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 87, Number 52 (Thursday, March 17, 2022)]
[Notices]
[Pages 15286-15292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05597]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94400; File No. SR-NASDAQ-2022-021]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Exchange Registration Rules in General 4
March 11, 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 March 7, 2022, 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 substantially prepared by
the Exchange. 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 Exchange proposes to amend General 4, Rule 1240 (Continuing
Education Requirements). While these amendments are effective upon
filing, the Exchange has designated the proposed amendments to be
operative on March 15, 2022.
The text of the proposed rule change is available on the Exchange's
website at https://www.listingcenter.nasdaq.com/rulebook/nasdaq/rules,
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 forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 15287]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its continuing education
requirements in General 4, Rule 1240. This proposed rule change is
based on a filing recently submitted by the Financial Industry
Regulatory Authority, Inc. (``FINRA''), and is intended to harmonize
the Exchange's continuing education rules with those of FINRA so as to
promote uniform standards across the securities industry.\3\ The
Exchange also proposes to amend its manual signature requirements in
General 4, Rule 1250 (Form U4 Filing Requirements) to align with
changes FINRA has made to similar rules.\4\ Each change is discussed in
detail below.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 93097 (September 21,
2021), 86 FR 53358 (September 27, 2021) (SR-FINRA-2021-015) (``FINRA
Rule Change'').
\4\ See Securities Exchange Release No. 91262 (March 5, 2021),
86 FR 13935 (March 11, 2021) (SR-FINRA-2021-003).
---------------------------------------------------------------------------
The proposed changes are based on the changes approved by the
Commission in the approval order for SR-FINRA-2021-015 and as noticed
in SR-FINRA-2021-003.\5\ The Exchange is proposing to adopt such
changes substantially in the same form as proposed by FINRA, with only
minor changes necessary to conform to the Exchange's existing rules
such as to remove cross-references and rules that are applicable to
FINRA members but not to Exchange members.
---------------------------------------------------------------------------
\5\ See supra notes 3 and 4.
---------------------------------------------------------------------------
Continuing Education Rules
(i) Background
The continuing education program for registered persons of broker-
dealers (``CE Program'') currently requires registered persons to
complete continuing education consisting of a Regulatory Element and a
Firm Element. The Regulatory Element, which is administered by FINRA,
focuses on regulatory requirements and industry standards, while the
Firm Element is provided by each firm and focuses on securities
products, services and strategies the firm offers, firm policies and
industry trends. The CE Program is codified under the rules of the
self-regulatory organizations (``SROs''). The CE Program for registered
persons of Exchange members is codified under General 4, Rule 1240.\6\
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\6\ See also General 4, Rule 1210.07 (All Registered Persons
Must Satisfy the Regulatory Element of Continuing Education).
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a. Regulatory Element
General 4, Rule 1240(a) (Regulatory Element) currently requires a
registered person to complete the applicable Regulatory Element
initially within 120 days after the person's second registration
anniversary date and, thereafter, within 120 days after every third
registration anniversary date.\7\ The Exchange may extend these time
frames for good cause shown.\8\ Registered persons who have not
completed the Regulatory Element within the prescribed time frames will
have their Exchange registrations deemed inactive and will be
designated as ``CE inactive'' in the CRD system until the requirements
of the Regulatory Element have been satisfied.\9\ A CE inactive person
is prohibited from performing, or being compensated for, any activities
requiring FINRA registration, including supervision. Moreover, if
registered persons remain CE inactive for two consecutive years, they
must requalify by retaking required examinations (or obtain a waiver of
the applicable qualification examinations).\10\
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\7\ See General 4, Rules 1240(a)(1) (Requirements) and (a)(4)
(Reassociation in a Registered Capacity). An individual's
registration anniversary date is generally the date they initially
registered with the Exchange in the Central Registration Depository
(``CRD[supreg]'') system. However, an individual's registration
anniversary date would be reset if the individual has been out of
the industry for two or more years and is required to requalify by
examination, or obtain an examination waiver, in order to
reregister. An individual's registration anniversary date would also
be reset if the individual obtains a conditional examination waiver
that requires them to complete the Regulatory Element by a specified
date. Non-registered individuals who are participating in the waiver
program under General 4, Rule 1210.09 (Waiver of Examinations for
Individuals Working for a Financial Services Industry Affiliate of a
Member) (``FSAWP participants'') are also subject to the Regulatory
Element. See also General 4, Rule 1240(a)(5) (Definition of Covered
Person). The Regulatory Element for FSAWP participants correlates to
their most recent registration(s), and it must be completed based on
the same cycle had they remained registered. FSAWP participants are
eligible for a single, fixed seven-year waiver period from the date
of their initial designation, subject to specified conditions.
Registered persons who become subject to a significant disciplinary
action, as specified in General 4, Rule 1240(a)(3) (Disciplinary
Actions), may be required to retake the Regulatory Element within
120 days of the effective date of the disciplinary action, if they
remain registered. Further, their cycle for participation in the
Regulatory Element may be adjusted to reflect the effective date of
the disciplinary action rather than their registration anniversary
date.
\8\ See General 4, Rule 1240(a)(2) (Failure to Complete).
\9\ See supra note 8. Individuals must complete the entire
Regulatory Element session to be considered to have ``completed''
the Regulatory Element; partial completion is the same as non-
completion.
\10\ This CE inactive two-year period is calculated from the
date such persons become CE inactive, and it continues to run
regardless of whether they terminate their registrations before the
end of the two-year period. Therefore, if registered persons
terminate their registrations while in a CE inactive status, they
must satisfy all outstanding Regulatory Element prior to the end of
the CE inactive two-year period in order to reregister with a member
without having to requalify by examination or having to obtain an
examination waiver.
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The Regulatory Element consists of a subprogram for registered
persons generally, and a subprogram for principals and supervisors.\11\
While some of the current Regulatory Element content is unique to
particular registration categories, most of the content has broad
application to both representatives and principals.\12\
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\11\ The S101 (General Program for Registered Persons) and the
S201 (Registered Principals and Supervisors).
\12\ The current content is presented in a single format leading
individuals through a case that provides a story depicting
situations that they may encounter in the course of their work.
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The Regulatory Element was originally designed at a time when most
individuals had to complete the Regulatory Element at a test center,
and its design was shaped by the limitations of the test center-based
delivery model. 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. This online delivery
provides the Exchange with much greater flexibility in updating content
in a timelier fashion, developing content tailored to each registration
category and presenting the material in an optimal learning format.
b. Firm Element
General 4, Rule 1240(b) (Firm Element) currently requires each firm
to develop and administer an annual Firm Element training program for
covered registered persons.\13\ The rule requires firms to conduct an
annual needs analysis to determine the appropriate training.\14\
Currently, at a minimum, the Firm Element must cover training in ethics
and professional responsibility as well as the following items
concerning securities products, services and strategies offered by the
member: (1) General investment features and associated risk factors;
(2) suitability and sales practice considerations; and
[[Page 15288]]
(3) applicable regulatory requirements.\15\
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\13\ The rule defines ``covered registered persons'' as any
registered person who has direct contact with customers in the
conduct of a member's securities sales and trading activities, and
the immediate supervisors of any such persons. See General 4, Rule
1240(b)(1) (Persons Subject to the Firm Element).
\14\ See General 4, Rule 1240(b)(2) (Standards for the Firm
Element).
\15\ See supra note 14.
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A firm, consistent with its needs analysis, may determine to apply
toward the Firm Element other required training. The current rule does
not expressly recognize other required training, such as training
relating to the anti-money laundering (``AML'') compliance program and
training relating to the annual compliance meeting,\16\ for purposes of
satisfying Firm Element training.
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\16\ See General 9, Sections 20 and 37.
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c. Termination of a Registration
Currently, individuals whose registrations as representatives or
principals have been terminated for two or more years may reregister as
representatives or principals only if they requalify by retaking and
passing the applicable representative- or principal-level examination
or if they obtain a waiver of such examination(s) (the ``two-year
qualification period'').\17\ The two-year qualification period was
adopted prior to the creation of the CE Program and was intended to
ensure that individuals who reregister are relatively current on their
regulatory and securities knowledge.
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\17\ See General 4, Rule 1210.08 (Lapse of Registration and
Expiration of SIE). The two-year qualification period is calculated
from the date individuals terminate their registration and the date
the Exchange receives a new application for registration. The two-
year qualification period does not apply to individuals who
terminate a limited registration category that is a subset of a
broader registration category for which they remain qualified. For
instance, it would not apply to an individual who maintains his
registration as a General Securities Representative but who
terminates his registration as an Investment Company and Variable
Contracts Products Representative. Such individuals have the option
of reregistering in the more limited registration category without
having to requalify by examination or obtain an examination waiver
so long as they continue to remain qualified for the broader
registration category. Further, the two-year qualification period
only applies to the representative- and principal-level
examinations; it does not extend to the Securities Industry
Essentials (``SIE'') examination. The SIE examination is valid for
four years, but having a valid SIE examination alone does not
qualify an individual for registration as a representative or
principal. Individuals whose registrations as representatives or
principals have been revoked pursuant to General 5, Rule 8310
(Sanctions for Violation of the Rules) may only requalify by
retaking the applicable representative- or principal-level
examination in order to reregister as representatives or principals,
in addition to satisfying the eligibility conditions for association
with a firm. Waivers are granted either on a case-by-case basis
under General 4, Rule 1210.03 (Qualification Examinations and
Waivers of Examinations) or as part of the waiver program under
General 4, Rule 1210.09.
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(ii) Proposed Rule Change
After extensive work with the Securities Industry/Regulatory
Council on Continuing Education (``CE Council'') and discussions with
stakeholders, including industry participants and the North American
Securities Administrators Association (``NASAA''), FINRA adopted the
following changes to the CE Program under its rules.\18\ In order to
promote uniform standards across the securities industry, the Exchange
now proposes to adopt the same changes to its continuing education
rules.
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\18\ See supra note 3. FINRA's changes are based on the CE
Council's September 2019 recommendations to enhance the CE Program.
See Recommended Enhancements for the Securities Industry Continuing
Education Program, available at https://cecouncil.org/media/266634/council-recommendations-final-.pdf. The CE Council is composed of
securities industry representatives and representatives of SROs. The
CE Council was formed in 1995 upon a recommendation from the
Securities Industry Task Force on Continuing Education and was
tasked with facilitating the development of uniform continuing
education requirements for registered persons of broker-dealers.
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a. Transition to Annual Regulatory Element for Each Registration
Category
As noted above, currently, the Regulatory Element generally must be
completed every three years, and the content is broad in nature. Based
on changes in technology and learning theory, the Regulatory Element
content can be updated and delivered in a timelier fashion and tailored
to each registration category, which would further the goals of the
Regulatory Element.\19\ Therefore, to provide registered persons with
more timely and relevant training on significant regulatory
developments, the Exchange proposes amending General 4, Rule 1240(a) to
require registered persons to complete the Regulatory Element annually
by December 31.\20\ The proposed amendment would also require
registered persons to complete Regulatory Element content for each
representative or principal registration category that they hold, which
would also further the goals of the Regulatory Element.\21\
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\19\ When the CE Program was originally adopted in 1995,
registered persons were required to complete the Regulatory Element
on their second, fifth and 10th registration anniversary dates. See
Securities Exchange Act Release No. 35341 (February 8, 1995), 60 FR
8426 (February 14, 1995) (Order Approving File Nos. SR-AMEX-94-59;
SR-CBOE-94-49; SR-CHX-94-27; SR-MSRB-94-17; SR-NASD-94-72; SR-NYSE-
94-43; SR-PSE-94-35; and SR-PHLX-94-52). The change to the current
three-year cycle was made in 1998 to provide registered persons more
timely and effective training, consistent with the overall purpose
of the Regulatory Element. See Securities Exchange Act Release No.
39712 (March 3, 1998), 63 FR 11939 (March 11, 1998) (Order Approving
File Nos. SR-CBOE-97-68; SR-MSRB-98-02; SR-NASD-98-03; and SR-NYSE-
97-33).
\20\ See proposed General 4, Rules 1240(a)(1) and (a)(4).
\21\ See proposed General 4, Rules 1210.07 and 1240(a)(1).
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Under the proposed rule change, firms would have the flexibility to
require their registered persons to complete the Regulatory Element
sooner than December 31, which would allow firms to coordinate the
timing of the Regulatory Element with other training requirements,
including the Firm Element.\22\ For example, a firm could require its
registered persons to complete both their Regulatory Element and Firm
Element by October 1 of each year.
---------------------------------------------------------------------------
\22\ See proposed General 4, Rules 1240(a)(1) and (a)(4).
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Individuals who would be registering as a representative or
principal for the first time on or after the implementation date of the
proposed rule change would be required to complete their initial
Regulatory Element for that registration category in the next calendar
year following their registration.\23\ In addition, subject to
specified conditions, individuals who would be reregistering as a
representative or principal on or after the implementation date of the
proposed rule change would also be required to complete their initial
Regulatory Element for that registration category in the next calendar
year following their reregistration.\24\
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\23\ See proposed General 4, Rule 1240(a)(1).
\24\ See proposed General 4, Rule 1240(a)(4).
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Consistent with current requirements, individuals who fail to
complete their Regulatory Element within the prescribed period would be
automatically designated as CE inactive.\25\ However, the proposed rule
change preserves the Exchange's ability to extend the time by which a
registered person must complete the Regulatory Element for good cause
shown.\26\
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\25\ See proposed General 4, Rule 1240(a)(2).
\26\ See supra note 25. The proposed rule change clarifies that
the request for an extension of time must be in writing and include
supporting documentation, which is consistent with current practice.
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The Exchange also proposes amending General 4, Rule 1240(a) to
clarify that: (1) Individuals who are designated as CE inactive would
be required to complete all of their pending and upcoming annual
Regulatory Element, including any annual Regulatory Element that
becomes due during their CE inactive period, to return to active
status; \27\ (2) the two-year CE inactive period is calculated from the
date individuals become CE inactive, and it continues to run regardless
of whether individuals
[[Page 15289]]
terminate their registrations; \28\ (3) individuals who become subject
to a significant disciplinary action may be required to complete
assigned continuing education content as prescribed by the Exchange;
\29\ (4) individuals who have not completed any Regulatory Element
content for a registration category in the calendar year(s) prior to
reregistering would not be approved for registration for that category
until they complete that Regulatory Element content, pass an
examination for that registration category or obtain an unconditional
examination waiver for that registration category, whichever is
applicable; \30\ and (5) the Regulatory Element requirements apply to
individuals who are registered, or in the process of registering, as a
representative or principal.\31\ In addition, the Exchange proposes
making conforming amendments to General 4, Rule 1210.07.
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\27\ See supra note 25.
\28\ See supra note 25.
\29\ See proposed General 4, Rule 1240(a)(3). As previously
noted, General 4, Rule 1240(a)(3) currently provides that such
individuals may be required to retake the Regulatory Element. See
supra note 7.
\30\ See proposed General 4, Rule 1240(a)(4).
\31\ See proposed General 4, Rule 1240(a)(5).
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Under the proposed rule change, the amount of content that
registered persons would be required to complete in a three-year,
annual cycle for a particular registration category is expected to be
comparable to what most registered persons are currently completing
every three years. In some years, there may be more required content
for some registration categories depending on the volume of rule
changes and regulatory issues. In addition, an individual who holds
multiple registrations may be required to complete additional content
compared to an individual who holds a single registration because, as
noted above, individuals would be required to complete content specific
to each registration category that they hold.\32\ However, individuals
with multiple registrations would not be subject to duplicative
regulatory content in any given year. The more common registration
combinations would likely share much of their relevant regulatory
content each year. For example, individuals registered as General
Securities Representatives and General Securities Principals would
receive the same content as individuals solely registered as General
Securities Representatives, supplemented with a likely smaller amount
of supervisory-specific content on the same topics. The less common
registration combinations may result in less topic overlap and more
content overall.
---------------------------------------------------------------------------
\32\ As discussed in the economic impact assessment in the FINRA
Rule Change, individuals with multiple registrations represent a
smaller percentage of the population of registered persons.
---------------------------------------------------------------------------
b. Recognition of Other Training Requirements for Firm Element and
Extension of Firm Element to All Registered Persons
To better align the Exchange's rulebook with FINRA's rulebook, and,
in addition, to better align the Firm Element requirement with other
required training, the Exchange proposes amending General 4, Rule
1240(b) to expressly allow firms to consider training relating to the
AML compliance program and the annual compliance meeting toward
satisfying an individual's annual Firm Element requirement.\33\ The
Exchange also proposes amending the rule to extend the Firm Element
requirement to all registered persons, including individuals who
maintain solely a permissive registration consistent with General 4,
Rule 1210.02 (Permissive Registrations), thereby further aligning the
Firm Element requirement with other broadly-based training
requirements.\34\ In conjunction with this proposed change, the
Exchange proposes modifying the current minimum training criteria under
General 4, Rule 1240(b) to instead provide that the training must cover
topics related to the role, activities or responsibilities of the
registered person and to professional responsibility.\35\
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\33\ See proposed General 4, Rule 1240(b)(2)(D).
\34\ See proposed General 4, Rule 1240(b)(1). As noted earlier,
the current requirement only applies to ``covered registered
persons'' and not all registered persons.
\35\ See proposed General 4, Rule 1240(b)(2)(B).
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c. Maintenance of Qualification After Termination of Registration
The Exchange proposes adopting paragraph (c) under General 4, Rule
1240 and Supplementary Material .01 and .02 to General 4, Rule 1240 to
provide eligible individuals who terminate any of their representative
or principal registrations the option of maintaining their
qualification for any of the terminated registrations by completing
continuing education.\36\ The proposed rule change would not eliminate
the two-year qualification period. Rather, it would provide such
individuals an alternative means of staying current on their regulatory
and securities knowledge following the termination of a
registration(s). Eligible individuals who elect not to participate in
the proposed continuing education program would continue to be subject
to the current two-year qualification period. The proposed rule change
is generally aligned with other professional continuing education
programs that allow individuals to maintain their qualification to work
in their respective fields during a period of absence from their
careers (including an absence of more than two years) by satisfying
continuing education requirements for their credential.
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\36\ The proposed option would also be available to individuals
who terminate any permissive registrations as provided under General
4, Rule 1210.02. However, the proposed option would not be available
to individuals who terminate a limited registration category that is
a subset of a broader registration category for which they remain
qualified. As previously noted, such individuals currently have the
option of reregistering in the more limited registration category
without having to requalify by examination or obtain an examination
waiver so long as they continue to remain qualified for the broader
registration category. In addition, the proposed option would not be
available to individuals who are maintaining an eliminated
registration category, such as the category for Corporate Securities
Representative, or individuals who have solely passed the Securities
Industry Essentials examination, which does not, in and of itself,
confer registration.
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The proposed rule change would impose the following conditions and
limitations:
Individuals would be required to be registered in the
terminated registration category for at least one year immediately
prior to the termination of that category; \37\
---------------------------------------------------------------------------
\37\ See proposed General 4, Rule 1240(c)(1).
---------------------------------------------------------------------------
individuals could elect to participate when they terminate
a registration or within two years from the termination of a
registration; \38\
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\38\ See proposed General 4, Rule 1240(c)(2). Individuals who
elect to participate at the later date would be required to
complete, within two years from the termination of their
registration, any continuing education that becomes due between the
time of their Form U5 (Uniform Termination Notice for Securities
Industry Registration) submission and the date that they commence
their participation. In addition, FINRA would enhance its systems to
notify individuals of their eligibility to participate, enable them
to affirmatively opt in, and notify them of their annual continuing
education requirement if they opt in.
---------------------------------------------------------------------------
individuals would be required to complete annually all
prescribed continuing education; \39\
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\39\ See proposed General 4, Rule 1240(c)(3). However, upon a
participant's request and for good cause shown, the Exchange would
have the ability to grant an extension of time for the participant
to complete the prescribed continuing education. A participant who
is also a registered person must directly request an extension of
the prescribed continuing education from the Exchange. The
continuing education content for participants would consist of a
combination of Regulatory Element content and content selected by
FINRA and the CE Council from the Firm Element content catalog
discussed below. The content would correspond to the registration
category for which individuals wish to maintain their
qualifications. Participants who are maintaining their qualification
status for a principal registration category that includes one or
more corequisite representative registrations must also complete
required annual continuing education for the corequisite
registrations in order to maintain their qualification status for
the principal registration category. The proposed rule change
clarifies that the prescribed continuing education must be completed
by December 31 of the calendar year, which is consistent with the
timing for the proposed annual Regulatory Element.
---------------------------------------------------------------------------
[[Page 15290]]
individuals would have a maximum of five years in which to
reregister; \40\
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\40\ See proposed General 4, Rule 1240(c). In addition,
individuals applying for reregistration must satisfy all other
requirements relating to the registration process (e.g., submit a
Form U4 (Uniform Application for Securities Industry Registration or
Transfer) and undergo a background check).
---------------------------------------------------------------------------
individuals who have been CE inactive for two consecutive
years, or who become CE inactive for two consecutive years during their
participation, would not be eligible to participate or continue; \41\
and
---------------------------------------------------------------------------
\41\ See proposed General 4, Rules 1240(c)(4) and (c)(5).
---------------------------------------------------------------------------
individuals who are subject to a statutory
disqualification, or who become subject to a statutory disqualification
following the termination of their registration or during their
participation, would not be eligible to participate or continue.\42\
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\42\ See proposed General 4, Rules 1240(c)(1) and (c)(6).
Further, any content completed by participants would be
retroactively nullified upon disclosure of the statutory
disqualification. The following example illustrates the application
of the proposed rule change to individuals who become subject to a
statutory disqualification while participating in the proposed
continuing education program. Individual A participates in the
proposed continuing education program for four years and completes
the prescribed content for each of those years. During year five of
his participation, he becomes subject to a statutory
disqualification resulting from a foreign regulatory action. In that
same year, the Exchange receives a Form U4 submitted by a member on
behalf of Individual A requesting registration with the Exchange.
The Form U4 discloses the statutory disqualification event. The
Exchange would then retroactively nullify any content that
Individual A completed while participating in the proposed
continuing education program. Therefore, in this example, in order
to become registered with the Exchange, he would be required to
requalify by examination. This would be in addition to satisfying
the eligibility conditions for association with an Exchange member
firm. See Exchange Act Sections 3(a)(39) and 15(b)(4) and General 3,
Rule 1002.
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The proposed rule change also includes a look-back provision that
would, subject to specified conditions, extend the proposed option to
individuals who have been registered as a representative or principal
within two years immediately prior to the implementation date of the
proposed rule change and individuals who have been FSAWP participants
immediately prior to the implementation date of the proposed rule
change.\43\
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\43\ See proposed Supplementary Material .01 to General 4, Rule
1240. Such individuals would be required to elect whether to
participate by the implementation date of the proposed rule change.
If such individuals elect to participate, they would be required to
complete their initial annual content by the end of the calendar
year in which the proposed rule change is implemented. In addition,
if such individuals elect to participate, their initial
participation period would be adjusted based on the date that their
registration was terminated. The current waiver program for FSAWP
participants would not be available to new participants upon
implementation of the proposed rule change. See proposed General 4,
Rule 1210.09. However, individuals who are FSAWP participants
immediately prior to the implementation date of the proposed rule
change could elect to continue in that waiver program until the
program has been retired. As noted above, FSAWP participants may
participate for up to seven years in that waiver program, subject to
specified conditions. See supra note 7. As discussed above, the
proposed rule change provides a five-year participation period for
participants in the proposed continuing education program. So as not
to disadvantage FSAWP participants, the Exchange has determined to
preserve that waiver program for individuals who are participating
in the FSAWP immediately prior to the implementation date of the
proposed rule change. Because the proposed rule change transitions
the Regulatory Element to an annual cycle, FSAWP participants who
remain in that waiver program following the implementation of the
proposed rule change would be subject to an annual Regulatory
Element requirement. See proposed General 4, Rule 1240(a)(1).
Finally, the proposed rule change preserves the Exchange's ability
to extend the time by which FSAWP participants must complete the
Regulatory Element for good cause shown. See proposed General 4,
Rule 1240(a)(2).
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In addition, the proposed rule change includes a re-eligibility
provision that would allow individuals to regain eligibility to
participate each time they reregister with a firm for a period of at
least one year and subsequently terminate their registration, provided
that they satisfy the other participation conditions and
limitations.\44\ Finally, the Exchange proposes making conforming
amendments to General 4, Rule 1210, including adding references to
proposed Rule 1240(c) under General 4, Rule 1210.08.
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\44\ See proposed Supplementary Material .02 to General 4, Rule
1240.
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The proposed rule change will have several important benefits. It
will provide individuals with flexibility to address life and career
events and necessary absences from registered functions without having
to requalify each time. It will also incentivize them to stay current
on their respective securities industry knowledge following the
termination of any of their registrations. The continuing education
under the proposed option will be as rigorous as the continuing
education of registered persons, which promotes investor protection.
Further, the proposed rule change will enhance diversity and inclusion
in the securities industry by attracting and retaining a broader and
diverse group of professionals.
Significantly, the proposed rule change will be of particular value
to women, who continue to be the primary caregivers for children and
aging family members and, as a result, are likely to be absent from the
industry for longer periods.\45\ In addition, the proposed rule change
will provide longer-term relief for women, individuals with low incomes
and other populations, including older workers, who are at a higher
risk of a job loss during certain economic downturns and who are likely
to remain unemployed for longer periods.\46\
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\45\ See The Female Face of Family Caregiving (November 2018),
available at https://www.nationalpartnership.org/our-work/resources/economic-justice/female-face-family-caregiving.pdf.
\46\ See The COVID-19 Recession is the Most Unequal in Modern
U.S. History (September 30, 2020), available at https://www.washingtonpost.com/graphics/2020/business/coronavirus-recession-equality/ and Unemployment's Toll on Older Workers Is Worst in Half
a Century (October 21, 2020), available at https://www.aarp.org/work/working-at-50-plus/info-2020/pandemic-unemployment-older-workers.
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d. CE Program Implementation
As stated in the FINRA Rule Change, FINRA and the CE Council also
plan to enhance the CE Program in other ways, and these additional
enhancements do not require any changes to the FINRA rules.\47\ As it
relates to the rule changes themselves, the changes relating to the
Maintaining Qualifications Program (paragraph (c) of General 4, Rule
1240) and the Financial Services Affiliate Waiver Program (FSAWP)
(Supplementary Material .09 to General 4, Rule 1210) will become
effective March 15, 2022. All other changes related to the FINRA Rule
Change, including the changes relating to the Regulatory Element, Firm
Element and the two-year qualification period, will become effective
January 1, 2023.\48\
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\47\ See supra note 3. As described in more detail in the FINRA
Rule Change, FINRA will work with the CE Council to develop and
incorporate additional resources in connection with the Regulatory
and Firm Elements. Similar to FINRA, these additional enhancements
do not require any changes to the Exchange rules.
\48\ See FINRA Regulatory Notice 21-41 at https://www.finra.org/rules-guidance/notices/21-41.
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Manual Signature
General 4, Rule 1250(c) currently provides that every initial and
transfer electronic Form U4 filing and any amendments to the disclosure
information on Form U4 must be based on a manually signed Form U4
provided to the member or applicant for membership by the person on
whose behalf the Form U4 is being filed, consistent with FINRA Rule
1010(c). Similarly, the Exchange's Supplementary Material .03 currently
[[Page 15291]]
provides that in the event a member is not able to obtain an associated
person's manual signature or written acknowledgement of amended
disclosure information on that person's Form U4 prior to filing of such
amendment reflecting the information pursuant to Rule 1250(c)(3), the
member must enter ``Representative Refused to Sign/Acknowledge'' or
``Representative Not Available'' or a substantially similar entry in
the electronic Form U4 field for the associated person's signature.
However, FINRA has since amended their Rule 1010(c) to permit firms to
choose to rely on electronic signatures to satisfy the signature
requirements when filing Form U4.\49\ Cboe Exchange, Inc. (``CBOE'')
has also updated its Rule 3.34 to reflect FINRA's updated Rule
1010(c).\50\
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\49\ See Securities Exchange Release No. 91262 (March 5, 2021),
86 FR 13935 (March 11, 2021) (SR-FINRA-2021-003).
\50\ See Securities Exchange Release No. 92562 (August 4, 2021),
86 FR 143701 (August 10, 2021) (SR-CBOE-2021-043).
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The Exchange proposes to amend Rule 1250(c) and Supplementary
Material .03 to similarly allow firms to rely on electronic signatures
when filing Form U4, consistent with FINRA Rule 1010(c). Specifically,
the Exchange proposes to remove the term ``manual'' from ``manual
signature'' and the term ``manually'' from ``manually signed.'' The
proposed rule change provides members, and applicants for membership,
with an opportunity to better manage operational challenges.
Particularly, the COVID-19 pandemic amplified the need to better manage
operational challenges like those that arose during the pandemic and
that may continue to arise in the future. Additionally, the proposed
rule change would not require the use of a particular type of
technology to obtain a valid electronic signature from the associated
person. The Exchange believes that some firms may be unable to obtain
the manual signature of applicants for registration resulting in a
significant operational backlog. By permitting these firms to rely on
electronic signatures to satisfy the signature requirements of Exchange
Rule 1250 and Supplementary Material .03, the proposed rule change may
reduce or eliminate this backlog. For purposes of the proposed rule
change, a valid electronic signature would be any electronic mark that
clearly identifies the signatory and is otherwise in compliance with
the Electronic Signatures in Global and National Commerce Act (``E-Sign
Act'') and the guidance issued by the SEC relating to the E-Sign
Act.\51\
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\51\ See accord Securities Exchange Act Release No. 85282 (March
11, 2019), 84 FR 9573 (March 15, 2019) (Order Approving File No. SR-
FINRA-2018-040) (discussing valid electronic signatures under
existing guidance).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\52\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\53\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\52\ 15 U.S.C. 78f(b).
\53\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed changes to the Regulatory
Element and Firm Element will ensure that all registered persons
receive timely and relevant training, which will, in turn, enhance
compliance and investor protection. Further, the Exchange believes that
establishing a path for individuals to maintain their qualification
following the termination of a registration will reduce unnecessary
impediments to requalification and promote greater diversity and
inclusion in the securities industry without diminishing investor
protection.
As it relates to the proposed changes to General 4, Rule 1250(c),
the Exchange believes the proposed rule change provides firms with the
flexibility to rely on electronic signatures to satisfy the signature
requirements of Rule 1250(c). Specifically, the Exchange proposes to
amend Exchange Rule 1250(c) and Supplementary Material .03, similar to
the amendments made by FINRA and CBOE, to provide the option of filing
an initial or a transfer Form U4 based on a manually or an
electronically signed copy of the form provided to the member, or
applicant for membership, by the individual on whose behalf the form is
being filed. Considering the technological advancements that provide
for enhanced authentication and security of electronic signatures, the
Exchange believes that it is appropriate to amend Rule 1250(c) and
Supplementary Material .03 to provide such flexibility. The proposed
rule change also addresses the ongoing public health risks stemming
from the outbreak of COVID-19 and the operational challenges that firms
continue to face as a result of pandemic repercussions. By permitting
these firms to rely on electronic signatures to satisfy the signature
requirements of Rule 1250(c) and Supplementary Material .03, the
proposed rule change may reduce or eliminate an operational backlog due
to the difficulty firms may have faced in obtaining the manual
signature of applicants for registration as a result of the impact of
the pandemic on daily work environments.
The Exchange believes the proposal is consistent with the Act for
the reasons described above and for the reasons outlined in the
approval order for SR-FINRA-2021-015 and as noticed in SR-FINRA-2021-
003.\54\
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\54\ See supra notes 3 and 4.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. All members would be subject to
the proposed rule change. The proposed rule change relating to the
Exchange's CE Program, which is materially identical to the FINRA Rule
Change, is designed to result in a more efficient CE Program that
addresses relevant regulatory requirements and provides individuals
with improved tools and resources to understand and comply with such
requirements, enhancing investor protection. Moreover, the proposed
rule change would provide new channels for individuals to maintain
their qualification status for a terminated registration category and,
in so doing, could increase the likelihood that professionals who need
to step away from the industry for a period could return, subject to
satisfying all other requirements relating to the registration process.
As it relates to the proposed amendments to General 4, Rule 1250,
the proposed rule change relating to manual signatures is, in all
material respects, substantively identical to recent rule changes
adopted by FINRA and CBOE. The Exchange believes the proposed change
will reduce a regulatory filing burden for members by allowing them to
rely on Form U4 copies with an electronic signature. All members will
have the option to rely on such forms with an electronic signature (or
continue to rely on forms with a manual signature).
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
[[Page 15292]]
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 \55\ and Rule 19b-
4(f)(6) thereunder.\56\
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\55\ 15 U.S.C. 78s(b)(3)(A)(iii).
\56\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has asked the
Commission to waive the 30-day operative delay so that this proposed
rule change may become operative immediately upon filing. Rule 19b-
4(f)(6)(iii) \57\ requires a self-regulatory organization to give the
Commission written notice of its intent to file a proposed rule change
under that subsection at least five business days prior to the date of
filing, or such shorter time as designated by the Commission. The
Exchange has provided such notice.
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\57\ 17 CFR 240.19b-4(f)(6)(iii).
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Waiver of the 30-day operative delay would allow the Exchange to
implement proposed changes to the Maintaining Qualifications Program
and the FSAWP by March 15, 2022 to coincide with FINRA's announced
implementation date, thereby eliminating the possibility of a
significant regulatory gap between the FINRA and Nasdaq rules and
providing more uniform standards across the securities industry. For
the proposal related to the manual signature requirement, waiver of the
30-day operative delay would provide immediate relief to firms
currently experiencing a significant operational backlog because of the
requirement to obtain manual signatures, ultimately benefitting the
investing public. The proposed rule change to Rule 1250(c) and
Supplementary Material .03 will provide immediate relief to these firms
by allowing them to rely on electronic signatures to clear the backlog.
Moreover, as noted above, the proposed manual signature rule change is
based on a similar rule change by FINRA that has already taken effect.
For these reasons, the Commission believes that waiver of the 30-day
operative delay for this proposal is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the 30-day operative delay and designates the proposal operative
upon filing.\58\
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\58\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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. 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 [email protected]. Please include
File Number SR-NASDAQ-2022-021 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-NASDAQ-2022-021. 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 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-NASDAQ-2022-021 and should be submitted
on or before April 7, 2022.
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\59\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\59\
Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2022-05597 Filed 3-16-22; 8:45 am]
BILLING CODE 8011-01-P
