[Federal Register Volume 62, Number 90 (Friday, May 9, 1997)]
[Notices]
[Pages 25683-25685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12079]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38566; File No. SR-NASD-97-23]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by National Association of Securities Dealers, Inc. Relating to
Registration Category, Study Outline and Specification for Series 72
Examination, Government Securities Representative.
May 1, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ notice is hereby given that on April 11, 1997, the NASD
Regulation, Inc. (``NASD Regulation'') filed with the Securities
Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change as described in items I, II, and III below, which Items have
been prepared by NASD Regulation. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organizations Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) of the Act, NASD
Regulation is herewith filing a proposed rule change to create a new
category of representative registration, the Government Securities
Representative (Series 72), and to conform the registration
requirements of the existing Registered Options Representative (Series
42) category to take into consideration this new category. Below is the
text of the proposed rule change. Proposed new language is in italics;
proposed deletions are in brackets.
Rule 1032. Categories of Representative Registration
[(d) Registered Options Representative]
[Each person associated with a member whose activities in the
investment banking or securities business include the solicitation and/
or sale of option contracts shall be required to be certified as a
Registered Options Representative and to pass an appropriate
certification examination for such or an equivalent examination
acceptable to the Association. Registered Options Representatives
qualified in either put or call options shall not engage in both put
and call option transactions until such time as they are qualified in
both such options. Members shall be required to report to
[[Page 25684]]
the Association the names of any associated persons certified as
Registered Options Representatives pursuant to an examination approved
by the Association. Registered Options Representatives must also be
qualified with the Association as either General Securities
Representatives or as Limited Representatives--Corporate Securities;
provided, however, Registered Options Representatives of members that
are members of a national securities exchange which has standards of
approval acceptable to the Association may be deemed to be approved by
and certified with the Association, so long as such representatives are
approved by an registered with such exchange.]
(d) Limited Representative--Options
(1) Each person associated with a member who is included within the
definition of a representative as defined in Rule 1031 may register
with the Association as a Limited Representative--Option if:
(A) such person's activities in the investment banking or
securities business of the member involve the solicitation or sale or
option contracts, including option contracts on government securities
as that term is defined in Section 3(a)(42)(D) of the Act, for the
account of a broker, dealer or public customer; and
(B) such person passes an appropriate qualification examination for
Limited Representative--Options.
(2) Each person seeking to register and qualify as a Limited
Representative--Options must, concurrent with or before such
registration may become effective, become registered pursuant to the
Rule 1032 Series, either as a Limited Representative--Corporate
Securities or Limited Representative--Government Securities.
(3) A person registered as a Limited Representative--Options shall
not be qualified to function in any area not prescribed by subparagraph
(1)(A) hereof.
* * * * *
(g) Limited Representative--Government Securities
(1) Each person associated with a member who is included within the
definition of a representative as defined in Rule 1031 may register
with the Association as a Limited Representative--Government Securities
if:
(A) such person's activities in the investment banking or
securities business involve the solicitation, purchase or sale of
``government securities,'' as that term is defined in Section 3(a)(42)
(A) through (C) of the Act, for the account of a broker, dealer or
public customer, and
(B) such person passes an appropriate qualification examination for
Limited Representative--Government Securities.
(2) A person registered solely as a Limited Representative--
Government Securities shall not be qualified to function in any area
not prescribed by subparagraph (1)(A) hereof.
(3) A person who has been performing the functions of a Limited
Representative--Government Securities on or before [insert date two
years before effective date of this rule change] may register as such
without first meeting the requirement of subparagraph (1)(B) above
unless (A) such person is currently subject to a statutory disqualified
as defined in Section 3(a)(39) of the Act or (B) during the past ten
years before the effective date of that requirement was the subject of
a suspension or fine of $5,000 or more by the Association, the
Securities and Exchange Commission, the Commodity Futures Trading
Commission, state securities commission, foreign financial regulatory
authority, or any other regulatory organization responsible for the
investment banking or securities business.
[1112. Registration of Representatives]
[All persons associated with a member who are to function as
government securities representatives who have not previously been
registered shall be registered as such with the Association.
(a) Definition of Representative
Persons associated with a member, including assistant officers
other than principals, who are engaged in the government securities
business for the member including:
(1) underwriting, trading or sales of government securities;
(2) financial advisory or consultant services for issuers in
connection with the issuance of government securities;
(3) research or investment advice, other than general economic
information or advice, with respect to government securities in
connection with the activities described in subparagraphs (1) and (2)
above;
(4) activities other than those specifically mentioned that involve
communication, directly or indirectly, with public investors in
government securities in connection with the activities described in
subparagraphs (1) and (2) above; are designated as representatives.
(b) Notification of Representative Status
A member shall promptly notify the Association of the assumption by
an individual not previously registered with the member of
representative status on the form designated by the Board of Governors
accompanied by the applicable fees.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASD Regulation 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. NASD Regulation 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
The National Association of Securities Dealers, Inc. (``NASD'') is
responsible under Section 15A(g)(3) of the Act to prescribe standards
of training, experience and competence for persons associated with NASD
members. Pursuant to this statutory obligation, NASD Regulation
administers examinations developed by NASD Regulation and other self-
regulatory organizations to establish that persons associated with NASD
members have attained specified levels of competence and knowledge.
The Government Securities Act of 1986 (``1986 Act''), an amendment
to the Act, required sole government securities broker-dealers to
register with the SEC for the first time. The 1986 Act also granted the
NASD authority to require associated persons of such firms to register
with the NASD. However, the 1986 Act did not allow the NASD to apply
its qualification examination standards to associated persons of
government securities broker-dealers. Since January 1989, such
associated persons have been required to register as Government
Securities Representatives or Government Securities Principals, but
have not been required to pass a qualification examination. Under a
1993 amendment to the Act, the NASD was given authority to apply its
qualification standards to Government Securities Representatives and
Government Securities Principals.
The proposed rule change will establish an examination
qualification
[[Page 25685]]
requirement for government securities representatives. A person may
qualify to sell government securities by passing the existing Series 7
examination or the new Series 72 examination. The proposed rule change
replaces current Rule 1112, which was adopted in 1989. The proposed
rule change is consistent with the format of the other NASD limited
registration categories.
NASD Regulation has determined to adopt a ``grandfather'' provision
for this examination requirement. Persons who have been registered with
the NASD as a government securities representative for two years prior
to the effective date of the rule will not have to take the examination
unless they are subject to a statutory disqualification as defined in
Section 3(a)(39) of the Act or in the last ten years have been subject
to a suspension or fine of $5,000 or more imposed by a securities or
commodities regulator. This provision is consistent with previous
practice in permitting persons who have achieved a certain level of
experience in a segment of the securities industry to be
``grandfathered'' if a new qualification examination is adopted for
that particular industry segment.
Currently, individuals who sell OTC options on government
securities are not required to pass a qualification examination. The
proposed rule change also will amend Rule 1032(d) for Registered
Options Representatives to establish registration and qualification
requirements for such individuals, and to add the Series 72 Examination
to the list of those examinations which prequalify an individual to
take the Limited Representative--Options (Series 42) Examination. A
person selling OTC options on government securities would be required
to pass the new Series 72 examination and the existing Series 42
examination. This proposed rule change will change the language of Rule
1032(d) Registered Option Representative so that it is similar to the
language used in the other registration categories in Rule 1032.
The Series 72 examination will consist of one hundred (100)
questions. Candidates will have three hours to complete the
examination. The passing score for the examination will be 70%.
The NASD believes that the proposed rule change is consistent with
the provisions of Sections 15A(b)(6) and 15A(g)(3) of the Act in that
the NASD is required to prescribe standards of training, experience and
competence for persons associated with NASD members. Pursuant to this
statutory obligation, the NASD develops and administers examinations to
establish that persons associated with NASD members have attained
specified levels of competence and knowledge.
B. Self-Regulatory Organization's Statement on Burden on Competition
NASD Regulation does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
Wriftten 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 date of 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 NASD 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. Sec. 552, will be available for inspection and copying in
the Commission's Public Reference Room. Copies of such filing will also
be available for inspection and copying at the principal office of the
NASD. All submissions should refer to File No. NASD-97-23 and should be
submitted by May 30, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\2\
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\2\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12079 Filed 5-8-97; 8:45 am]
BILLING CODE 8010-01-M
