[Federal Register Volume 63, Number 19 (Thursday, January 29, 1998)]
[Notices]
[Pages 4513-4515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2185]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39577; File No. SR-NYSE-97-33]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to Continuing
Education for Registered Persons
January 23, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 8, 1997, the New
York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.\2\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ The Commission is concurrently publishing notice of parallel
proposed rule changes from other self-regulatory organizations
relating to continuing education for registered persons. See
Securities Exchange Act Releases Nos. 39574 (NASD); 39575 (CBOE);
and 39576 (MSRB).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend Rule 345A (``Continuing
Education for Registered Persons''). Below is the text of the proposed
rule change. Proposed new language is italicized; proposed deletions
are in brackets.
Continuing Education for Registered Persons
Rule 345A
(a) Regulatory Element--No member or member organization shall
permit any registered person to continue to, and no registered person
shall continue to, perform duties as a registered person, unless such
person has complied with the continuing education requirements of
Section (a) of this Rule.
Each registered person shall complete the Regulatory Element of the
continuing education program on [three occasions, after] the occurrence
of their second[, fifth and tenth] registration anniversary date[s] and
every three years thereafter or as otherwise prescribed by the
Exchange. On each [of the three] occasion[s], the Regulatory Element
must be completed within one hundred twenty days after the person's
registration anniversary date. A person's initial registration date
shall establish the cycle of anniversary dates for purposes of this
Rule. The content of the Regulatory Element of the program shall be
[prescribed] determined by the Exchange for each registration category
of persons subject to the rule.
(1) [Registered] Persons who have been continuously registered for
more than ten years as of the effective date of this rule [shall be]
are exempt from the requirements of this rule relative to participation
in the Regulatory Element of the continuing education program, provided
such persons have not been subject to any disciplinary action within
the last ten years as enumerated in subsection (a)(3)(i)-(ii) of this
Rule. However, persons delegated supervisory responsibility or
authority pursuant to Rule 342 and registered in such supervisory
capacity are exempt from participation in the Regulatory Element under
this provision only if they have been continuously registered in a
supervisory capacity for more than ten years as of the effective date
of this rule and provided that such supervisory person has not been
subject to any disciplinary action under subsection (a)(3)(i)-(ii) of
this Rule.
In the event that a registered person who is exempt from
participation in the Regulatory Element subsequently becomes the
subject of a disciplinary action as enumerated in subsection (a)(3)(i)-
(ii), such person shall be required to satisfy the requirements of the
Regulatory Element as if the date the disciplinary action becomes final
is the person's initial registration anniversary date. [Persons who
have been currently registered for ten years or less as of the
effective date of this Rule shall initially participate in the
Regulatory Element of the continuing education program within one
hundred twenty days after the occurrence of the second, fifth or tenth
registration anniversary date, whichever anniversary date first
applies, and on the applicable registration anniversary dates
thereafter. Such persons will have satisfied the requirements of the
Regulatory Element of the program after participation on the tenth
registration anniversary.]
[All registered persons who have satisfied the requirements of the
Regulatory Element shall be exempt from further participation in the
Regulatory Element of the program, subject to re-entry into the program
as set forth in subsection (a)(3) of this Rule.]
(2) No change.
[[Page 4514]]
(3) Re-entry into the program--Unless otherwise determined by the
Exchange, a registered person will be required to re-enter the
Regulatory Element of the program and satisfy the program's
requirements in their entirety in the event such person:
(i)-(iii) No change.
Re-entry shall commence with initial participation within one
hundred twenty days of the registered person becoming subject to the
statutory disqualification, in the case of (i) above, or the completion
of the sanction or the disciplinary action becoming final, in the case
of (ii) and (iii) above. [, and on three additional occasions
thereafter, after the occurrence of their second, fifth and tenth
anniversary dates of re-entry into the program, notwithstanding that
such person has completed all or part of the program requirements based
on length of time as a registered person or completion of ten years of
participation in the program] The date that the disciplinary action
becomes final will be deemed the person's initial registration
anniversary date for purposes of this Rule.
(b) Firm Element:
(1) No change.
(2) Standards
(i) Each member and member organization must maintain a continuing
and current education program for its covered registered persons to
enhance their securities knowledge, skills and professionalism. At a
minimum, each member and member organization shall at least annually
evaluate and prioritize its training needs and develop a written
training plan. The plan must take into consideration the member's or
member organization's size, organizational structure, and scope of
business activities, as well as regulatory developments and the
performance of covered registered persons in the Regulatory Element. If
a member's or member organization's analysis determines a need for
supervisory training for persons with supervisory responsibilities,
such training must be included in the member's or member organization's
training plan.
(ii)-(iii) No Change.
(3) No change.
(4) No change.
* * * Supplementary Material.
.10 No change.
.20 No change.
[.30 A registered person who has been continuously registered for
more than ten years as of the date of implementation of this Rule who
has been subject to a disciplinary action as enumerated in subsections
(a) (3)(i)-(ii) of the Rule within the last ten years, will be required
to satisfy the requirements of the Regulatory Element of the continuing
education program by participation for the period from the date of
implementation of this rule to ten years after the occurrence of the
disciplinary action.]
[.40] .30 Any registered person who has terminated associated with
a registered broker or dealer and who has, within two years of the date
of termination, become reassociated in a registered capacity with a
registered broker or dealer shall participate in the Regulatory Element
of the continuing education program [on three occasions, after the
occurrence of their second, fifth or tenth] at such intervals that
apply (second registration anniversary and every three years
thereafter) based on the initial registration anniversary date, rather
than based on the date of reassociation in a registered capacity.
Any former registered person who becomes reassociated in a
registered capacity with a registered broker or dealer more than two
years after termination as such will be required to satisfy the
program's requirements in their entirety [on three occasions] (second
registration anniversary and every three years thereafter), based on
the most recent registration date.
[.50] .40 No change in text.
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 statutory basis for, 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to revise Rule 345A.
Exchange Rule 345A provides for a continuing education program for
registered persons of Exchange members and member organizations. The
program, which is uniform within the industry, consists of two parts--a
Regulatory Element and a Firm Element. The Regulatory Element requires
registered persons to participate in interactive computer-based
training at specified intervals and encompasses regulatory and
compliance issues, sales practice concerns and business ethics.
The Regulatory Element program applies generally to all registered
persons and currently does not discern between registration types or
categories. The existing program contains content common to registered
representatives, supervisory persons as well as other registration
categories. The Securities Industry/Regulatory Council on Continuing
Education (a council of broker-dealer and Self-Regulatory Organization
(``SRO'') \3\ representatives that oversees and provides ongoing
development and operation of the program) has recommended development
of a new program component specifically for supervisors. In addition,
it is contemplated that in the future, specific programs may be
implemented for other registration categories. The proposed amendments
to Rule 345A will allow for the Exchange to require specific new
programs as appropriate with customized training for various
registration categories, with the supervisor's program, being the first
such initiative. For purposes of Exchange rules, the following
registration categories shall be deemed to be included in the
supervisory category: Series 4 (Registered Options Principal
Examination); Series 8 (General Securities Sales Supervisor
Examination); Series 12 (NYSE Branch Manager Examination); Series 14
(NYSE Compliance Official Examination); Series 16 (NYSE Supervisory
Analyst Examination); Series 27 (Financial and Operations Principal
Examination); Series 28 (Introducing Broker-Dealer Financial and
Operational Principal Examination); and the Series 53 (Municipal
Securities Principal Qualification Examination).
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\3\ SROs represented on the Council include the American Stock
Exchange, Chicago Board Options Exchange, Municipal Securities
Rulemaking Board, National Association of Securities Dealers, New
York Stock Exchange, and Philadelphia Stock Exchange.
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The proposed amendments also address the time-frames at which
registered persons must participate in the Regulatory Element computer-
based training. Rule 345A currently requires all registered persons to
complete the training on three occasions, i.e., their second, fifth and
tenth registration anniversaries, and also when they are the subject of
significant disciplinary action(s). Once persons are registered for
more than ten years they are currently graduated from the program and
are not required to participate further in the Regulatory Element
unless they become subject to significant
[[Page 4515]]
disciplinary action. The Council has recommended that the requirement
be revised to require ongoing participation in the program by
registered persons. In accordance with that recommendation, the
proposed amendments to Rule 345A will require participation in the
Regulatory Element throughout a registered person's career,
specifically, on the second registration anniversary and every three
years thereafter (i.e., the fifth, eighth, eleventh, etc.
anniversaries), with no graduation from the program.
Proposed amended Rule 345A will allow a one-time exemption for
persons currently graduated from the program by providing that those
persons who have been registered for more than ten years as of the
effective date of the rule amendments, and who have not been the
subject of a disciplinary action during the past ten years, will
continue to be excluded from required ongoing participation in the
Regulatory Element. However, persons registered in a supervisory
capacity will have to have been registered in a supervisory capacity
for more than 10 years in order to be covered by this one-time
provision for graduation from participation in the program. Therefore,
those supervisors who have graduated from the program requirements
based on their initial registration date, but who have not completed 10
years as a supervisor, will be required to re-enter the program.
The Firm Element requires that each member and member organization
conduct annually an analysis of their training needs and administer
such training, as is appropriate, to their registered persons who have
direct contact with customers and the immediate supervisors of such
registered persons, on an ongoing basis in topics specifically related
to their business such as new products, sales practices, risk
disclosure and new regulatory requirements and concerns. The proposed
amendments to Rule 345A will require members and member organizations
to additionally focus on supervisory training needs in conducting their
analysis of training needs and, if it is determined that there is a
specific need for supervisory training, address such training needs in
the Firm Element training plan.
These amendments, which will be adopted uniformly with rule changes
of the other SRO Council members, will significantly enhance the
continuing education program by requiring all registered persons to
participate in the Regulatory Element on an ongoing basis throughout
their securities industry careers. In addition, we believe that rule
amendments allowing for the implementation of a program specifically
geared towards supervisors and the issues that may arise in that role
will result in more effective regulatory training of supervisors as
well as improved front-line supervision overall of members and member
organizations.
2. Statutory Basis
The proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities exchange, and in particular, with Section 6(c)(3) of the
Act.\4\ Under that Section, it is the Exchange's responsibility to
prescribe standards of training, experience and competence for persons
associated with Exchange members and member organizations. Pursuant to
this statutory obligation, the Exchange has proposed this rule change
in order to enhance the established continuing education program for
registered persons.
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\4\ 15 U.S.C. 78f(c)(3).
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The proposed rule change is also consistent with the requirements
of Section 6(b)(5) of the Act.\5\ Section 6(b)(5) requires, among other
things, that the rules of an exchange be 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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\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposal does not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 inspection and copying at the
Commission's Public Reference Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
NYSE. All submissions should refer to the file number SR-NYSE-97-33 and
should be submitted by February 19, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-2185 Filed 1-28-98; 8:45 am]
BILLING CODE 8010-01-M
