[Federal Register Volume 63, Number 61 (Tuesday, March 31, 1998)]
[Notices]
[Pages 15474-15476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8362]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39802; File No. SR-PHLX 98-13]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the
Philadelphia Stock Exchange, Inc., Relating to the Continuing Education
Requirements of Registered Persons
March 25, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 11, 1998, the
Philadelphia Stock Exchange, Inc. (``Phlx'' or ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commision is publishing this notice to
solicit comments on the proposed rule change from interested persons
and to grant accelerated approval of the proposed rule change.\2\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ The Commission has already published for comment rule
proposals by four other self-regulatory organizations which are
virtually identical to this Phlx filing. See Securities Exchange Act
Release Nos. 39574 (January 23, 1998), 63 FR 4510 (January 29,
1998)(SR-NASD-98-03); 39575 (January 23, 1998), 63 FR 4507 (January
29, 1998) (SR-CBOE-97-68); 39576 (January 23 1998), 63 FR 4509
(January 29, 1998) (SR-MSRB-98-02); and 39577 (January 23, 1998), 63
FR 4513 (January 29, 1998) (SR-NYSE-97-33). The Commission received
5 comment letters, which were discussed in the order approving the
other proposals. See Securities Exchange Act Release No. 39712
(March 3, 1998).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Phlx, in support of the recommendations of The Securities
Industry/Regulatory Council on Continuing Education, proposes to amend
both the regulatory and firm element requirements of Rule 640.
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 III 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 640 to
strengthen the Continuing Education Requirements for registered persons
and implement a new program specifically designed for managers and
supervisors. Exchange Rule 640 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, sale 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 640 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 de deemed to be included in the
supervisory category: Series 4 (Registered Options Principal
Examination); Series 8 (General Securities Sales Supervisor
Examination); Series 27 (Financial and Operations Principal
Examination); Series 28 (Introducing Broker-Dealer Financial and
Operational Principal Examination); the Series 53 (Municipal
[[Page 15475]]
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 the Phlx.
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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 640 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 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
640 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 640 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 participations 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 to
participate in the supervisory 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 640 will required 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.
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 establishment continuing education program for
registered persons.
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\4\ 15 U.S.C. 78f(c)(3).
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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
No written comments were solicited or received with respect to the
proposed ruled change.
III. 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. 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
Phlx. All submissions should refer to the file number SR-Phlx-98-13 and
should be submitted by April 21, 1998.
IV. Commission's Findings and Order Granting Accelerated Approval
of Proposed Rule Change
The Commission finds that the Exchange's proposal is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange. Specifically,
the Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\5\ which 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. The Commission
further believes that the proposed rule change is consistent with the
provisions of Section 6(c)(3)(B) of the Act,\6\ which makes it the
responsibility of an exchange to prescribe standards of training,
experience, and competence for persons associated with SRO members.
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\5\ 15 U.S.C. 78f(b)(5).
\6\ 15 U.S.C. 78f(c)(3)(B).
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The Commission also believes that the proposed rule change is
consistent with the purposes underlying Section 15(b)(7) of the Act,
which generally prohibits a registered person from effecting any
transaction in, or inducing the purchase or sale of, any security
unless such registered person meets the standard of training,
competence and other qualifications as the Commission finds necessary
or appropriate in the public interest or for the protection of
investors. The Commission believes that the Exchange's proposed rule
change is an appropriate means of maintaining and reinforcing the
initial qualification standards required of a registered person and
will significantly enhance the continuing education program by
requiring all registered persons to participate in the Regulatory
Element throughout their securities industry careers.\7\
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\7\ These amendments proposed by the Phlx on continuing
education have been uniformly adopted by the other SRO Council
members. See Securities Exchange Act Release Nos. 39711 (March 3,
1998) and 39712 (March 3, 1998).
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The Commission therefore finds good cause for approving the
proposed rule change (SR-Phlx-98-13) prior to the
[[Page 15476]]
thirtieth day after the date of publication of notice of filing thereof
in the Federal Register.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-Phlx-98-13) be, and
hereby is, approved. The rule change shall become effective on July 1,
1998.
\8\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-8362 Filed 3-30-98; 8:45 am]
BILLING CODE 8010-01-M
