2016-03793. Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 341A(a)(4) To Provide for Web-Based Delivery of the Exchange's Continuing Education Program

February 18, 2016.

Pursuant to Section 19(b)(1) ^[1] of the Securities Exchange Act of 1934 (the “Act”) ^[2] and Rule 19b-4 thereunder,^[3] notice is hereby given that on February 4, 2016, NYSE MKT LLC (the “Exchange” or “NYSE MKT”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend Rule 341A(a)(4) to provide for web-based delivery of the Exchange's continuing education (“CE”) program. The proposed rule change would phase out the current option of completing the Regulatory Element in a test center, delete the current option for in-house delivery of the Regulatory Element of the CE program and also delete the existing text of Rule 341A(a)(4). The Exchange's proposal is materially similar to a recent FINRA filing to amend FINRA Rule 1250, which was recently approved by the Securities and Exchange Commission (“Commission”).^[4] The proposed rule change is available on the Exchange's Web site at www.nyse.com,, at the principal office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the self-regulatory organization 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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change

1. Purpose

The CE requirements under Rule 341A consist of a Regulatory Element ^[5] and a Firm Element.^[6] The Regulatory Element applies to all registered persons and consists of periodic computer-based training on regulatory, compliance, ethical, and supervisory subjects and sales practice standards, which must be completed within prescribed timeframes.^[7] In addition, unless otherwise determined by the Exchange, a registered person is required to re-take the Regulatory Element of the program and satisfy the program's requirements in their entirety in the event such person: (i) Becomes subject to any statutory disqualification as defined in Section 3(a)(39) of the Securities Exchange Act of 1934; (ii) becomes subject to suspension or to the imposition of a fine of $5,000 or more for violation of any provision of any securities law or regulation, or any agreement with or rule or standard of conduct of any securities governmental agency, securities self-regulatory organization, or as imposed by any such regulatory or self-regulatory organization in connection with a disciplinary proceeding; or (iii) is ordered as a sanction in a disciplinary action to re-take the Regulatory Element by any securities governmental agency or securities self-regulatory organization.

Rule 341A(a)(1) provides that the following Regulatory Elements administered by FINRA shall be required: The S201 for registered principals and supervisors; the S106 for persons registered only as Investment Company Products/Variable Contracts Limited Representatives; and the S101 for all other registered persons. Currently, the Regulatory Element may be administered in a test center or in-firm subject to specified procedures.^[8]

Currently, most registered persons complete the Regulatory Element in a test center rather than in-firm. Given the advances in Web-based technology, the Exchange believes that there is diminishing utility in the test center and in-firm delivery methods. Moreover, according to FINRA,^[9] registered persons have raised concerns with the test center delivery method because of the travel involved, the limited time currently available to complete a Regulatory Element session ^[10] and the use of rigorous security measures at test centers, which are appropriate for taking qualification examinations but onerous for a CE program.^[11] Also, according to FINRA, the test center is expensive to operate.^[12]

Based on the recent amendments to FINRA Rule 1250,^[13] the Exchange proposes to amend Rule 341A(a)(4) to provide for a Web-based delivery method for completing the Regulatory Element. Specifically, the Exchange proposes to amend Rule 341A(a)(4) to provide that the continuing education Regulatory Element set forth in paragraph (a) of Rule 341A will be administered through Web-based delivery or such other technological manner and format as specified by the Exchange. Should the Exchange determine to administer the Regulatory Element through a delivery mechanism other than Web-based delivery, however, the Exchange would notify the Commission and would need to file a further rule change with the Commission.

The first phase of the Web-based delivery system was launched October 1, 2015 and includes the Regulatory Element of the S201 for registered principals and supervisors. The second phase of the Web-based delivery system was launched January 4, 2016 and includes the Regulatory Element of the S101 for all registered persons, including, but not limited to Securities Traders. The Exchange is proposing to phase out test-center delivery by no later than six months after January 4, 2016. Registered persons will continue to have the option of completing the Regulatory Element in a test center, but they will be required to use the Web-based system after the test-center delivery is phased out.^[14]

Further, the Exchange is proposing to eliminate the current option for in-firm delivery and is deleting the current text of Rule 341A(a)(4) relating to in-firm delivery of the Regulatory Element of the CE programs. The proposed Web-based delivery method will provide registered persons the flexibility to complete the Regulatory Element at a location of their choosing, including their private residence, at any time during their 120-day window for completion of the Regulatory Element.^[15]

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act ^[16] in general, and furthers the objectives of Section 6(b)(5) of the Act ^[17] in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, 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. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) ^[18] requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers and Section 6(c)(3) ^[19] of the Act, which authorizes the Exchange to, among other things, prescribe standards of financial responsibility or operational capability and standards of training, experience and competence for its members and persons associated with members.

In particular, the Exchange believes that the proposed rule change will improve members' compliance efforts and will allow registered persons to spend a greater amount of time on the review of CE materials and potentially achieve better learning outcomes, which will in turn enhance investor protection. Further, while the proposed rule change will provide more flexibility to members and registered persons, it will maintain the integrity of the Regulatory Element of the CE program and the CE program in general.

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. The Exchange notes that the proposed rule change is specifically intended to reduce the burden on registered persons for complying with the CE requirement while preserving the integrity of the CE program. As described above, the Web-based delivery method will provide registered persons the flexibility to complete the Regulatory Element at any location that they choose. Further, Web-based delivery is efficient and offers significant cost savings over test-center and in-firm deliveries. With respect to the authentication process for Web-based delivery, the CE candidate's personal identifying information will be masked and will be submitted to FINRA through a secure, encrypted, network. The personal identifying information submitted via the Web-based system will be used for authentication purposes only—the information will not be stored in the Web-based system.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

No written comments were solicited or received with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act ^[20] and Rule 19b-4(f)(6) thereunder.^[21] Because the 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 prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder.

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 19b4(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 proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest as it will allow registered persons to immediately complete the Regulatory Element of the Exchange's continuing education requirement through the more flexible Web-based delivery method. Accordingly, the Commission designates the proposed rule change to be operative upon filing.^[24]

At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B) ^[25] of the Act 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:

Electronic Comments

• Use the Commission's Internet comment form (http://www.sec.gov/​rules/​sro.shtml); or
• Send an email to [e-mail]. Please include File Number SR-NYSEMKT-2016-22 on the subject line.

Paper Comments

• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2016-22. 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 Web site (http://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 Web site 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEMKT-2016-22 and should be submitted on or before March 16, 2016.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.^[26]

Robert W. Errett,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  15 U.S.C. 78a.

3.  17 CFR 240.19b-4.

4.  See Securities Exchange Act Release No. 75581 (July 31, 2015), 80 FR 47018 (August 6, 2015) (Order Approving a Proposed Rule Change to Provide a Web-based Delivery Method for Completing the Regulatory Element of the Continuing Education Requirements) (SR-FINRA-2015-015). See also Securities Exchange Act Release No. 76880 (January 12, 2016), 81 FR 2928 (January 19, 2016) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Section (a)(4) of Rule 640, Continuing Education for Registered Persons) (SR-PHLX-2015-118).

5.  See Rule 341A(a) (Regulatory Element).

6.  See Rule 341A(b) (Firm Element).

7.  Pursuant to Rule 341A, each registered person shall complete the Regulatory Element of the continuing education program on the occurrence of their second registration anniversary date(s), and every three years thereafter or as otherwise prescribed by the Exchange. On each occasion, the Regulatory Element must be completed within 120 days after the person's registration anniversary date. A person's initial registration date, also known as the “base date,” shall establish the cycle of anniversary dates for purposes of this Rule.

8.  Under current Rule 341A(a)(4), In-Firm Delivery of the Regulatory Element, members and member organizations are permitted to administer the continuing education Regulatory Element program to their registered persons by instituting an in-firm program acceptable to the Exchange. Among others, the following procedures are required in order to administer the Regulatory Element of the CE program in-house: (1) The firm must designate a principal/officer-in-charge to be responsible for the in-firm delivery of the Regulatory Element; (2) the location of the delivery site must be under the control of the firm; (3) the communication links and firm delivery computer hardware must comply with standards defined by the Exchange or its designated vendor; (4) the firm's written supervisory procedures must contain the procedures implemented to comply with requirements of in-firm delivery of the Regulatory Element continuing education; (5) all sessions must be proctored by an authorized person during the entire Regulatory Element continuing education session and proctors must be present in the session room or must be able to view the person(s) sitting for Regulatory Element continuing education through a window or by video monitor; (6) all appointments must be scheduled in advance using the procedures and software specified by the Exchange to communicate with the Exchange's system and designated vendor; and (7) a Letter of Attestation for In-Firm Delivery of Regulatory Element CE must be delivered.

9.  FINRA is currently responsible for the operation of the test centers used for test center delivery method of the Regulatory Element.

10.  The current session time is three-and-a-half hours.

11.  See Securities Exchange Act Release No. 75154 (June 11, 2015), 80 FR 34777 (June 17, 2015) (Notice of Filing of a Proposed Rule Change To Provide a Web-Based Delivery Method for Completing the Regulatory Element of the Continuing Education Requirements) (SR-FINRA-2015-015).

12.  Id. at 34779.

13.  See FINRA Rule 1250 (Continuing Education Requirements). See also Securities Exchange Act Release No. 75581 (July 31, 2015) 80 FR 47018 (August 6, 2015) (Order Approving a Proposed Rule Change to Provide a Web-based Delivery Method for Completing the Regulatory Element of the Continuing Education Requirements) (SR-FINRA-2015-015).

14.  The Exchange intends to amend its fee schedule to reduce the cost for Regulatory Element CE from $100 to $55 if administered by Web-delivery. Fees for completing the Regulatory Element at a test center will remain $100.

15.  Although the proposed rule change provides flexibility, firms may choose to impose their own conditions based on their supervisory and compliance needs. For instance, a firm that wishes to have registered persons complete CE on the firm's premises can do so by having the registered person access Web-based CE from a firm device and location. Moreover, firms would have to update their written policies and procedures regarding the Regulatory Element to reflect the transition to Web-based CE and communicate the update to registered persons.

16.  15 U.S.C. 78f(b).

17.  15 U.S.C. 78f(b)(5).

18.  15 U.S.C. 78f(b)(5).

19.  15 U.S.C. 78f(c)(3).

20.  15 U.S.C. 78s(b)(3)(A)(iii).

21.  17 CFR 240.19b-4(f)(6).

22.  17 CFR 240.19b-4(f)(6).

23.  17 CFR 240.19b-4(f)(6)(iii).

24.  For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

25.  15 U.S.C. 78s(b)(2)(B).

26.  17 CFR 200.30-3(a)(12).