[Federal Register Volume 60, Number 132 (Tuesday, July 11, 1995)]
[Notices]
[Pages 35757-35759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16924]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35924; File No. SR-NASD-95-22]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Order Granting Accelerated Approval to Proposed Rule
Change Relating to Extending the Continuing Education Requirement for
Registered Persons to Government Securities Principals and
Representatives
June 30, 1995.
I. Introduction
On May 11, 1995, the National Association of Securities Dealers,
Inc.
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(``NASD'') submitted to the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposal to amend Schedule C of the NASD By-Laws to include government
securities principals and representatives in the continuing education
requirement for registered persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on June 9, 1995.\3\ One comment letter was received on the
proposed rule change,\4\ to which the NASD responded.\5\ This order
approves the proposed rule change on an accelerated basis.
\3\ See Securities Exchange Act Release No. 35820 (June 7,
1995), 60 FR 30624.
\4\ Letter from William S. Crews, Senior Vice President/
Securities Compliance Manager, Wachovia Investments, Inc., to
Secretary, Commission, dated June 20, 1995 (``Comment Letter'').
\5\ Letter from Craig L. Landauer, Associate General Counsel,
NASD, to Francois Mazur, Attorney, Division of Market Regulation,
Commission, dated June 28, 1995 (``NASD Response'').
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II. Description of the Proposal
The purpose of the NASD's proposal is to make an amendment to the
definition of ``registered person'' contained in Section (1)(e) of Part
XII of Schedule C of the NASD By-Laws, Continuing Education
Requirements.\6\ The effect of the proposed change will be to require
government securities principals and representatives who are designated
in Part XI of Schedule C of the NASD By-Laws to participate in the
continuing education program.\7\ Such persons, however, were
inadvertently excluded from the definition of ``registered person''
contained in Section (1)(e) of Part XII of Schedule C of the NASD By-
Laws and approved by the Commission on February 8, 1995.\8\
\6\ On February 8, 1995, the Commission approved proposals by
the self-regulatory organizations establishing a two-part continuing
education program that requires uniform periodic training for
registered persons in regulatory matters (``Regulatory Element'')
and job and product-related subjects (``Firm Element''). Securities
Exchange Act Release No. 35341 (February 8, 1995), 60 FR 8426.
\7\ Part XI of Schedule C of the NASD By-Laws currently requires
all persons associated with a member not previously registered as a
principal who are to function as government securities principals to
be registered as government securities principals; and all persons
associated with a member who are to function as government
securities representatives who have not previously been registered
to register as government securities representatives. NASD By-Laws,
Schedule C, Part XI, Secs. 1 & 2.
\8\ Securities Exchange Act Release No. 35341, supra note 6.
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III. Comment Letter
The Comment Letter on the proposed rule change raises two concerns.
First, the commenter states that given that government securities
principals and representatives are not required currently to undergo
professional qualification by examination or experience, such
individuals should not be required to participate in the continuing
education program. Second, the commenter believes that the aggregate
training results reported to firms will be skewed by the performance of
such individuals because they will not have prepared for a professional
qualification examination, and thus may lack industry knowledge.
The NASD Response addresses both of the commenter's concerns. The
NASD notes that the Government Securities Act Amendments of 1993 (``GSA
Amendments'') removed from Section 15A of the Act the restrictions on
the NASD's authority to regulate its members' transactions in
government securities.\9\ Consequently, requiring government securities
principals and representatives to participate in the continuing
education program is a first step in such persons being subject to
regulation comparable to that applicable to other securities industry
professionals. Moreover, the NASD states that it is desirable for all
registered persons to be subject to the continuing education
requirements now, rather than waiting for approval of other rules
affecting government securities registered persons. In response to the
commenter's second concern, the NASD states that the aggregate training
results that it will provide to its members will be broken-down by
registration categories.\10\
\9\ Compare Sections 15A (f) & (g) of the Act, 15 U.S.C. 780-3
(f) & (g), with text prior to enactment of the GSA Amendments.
\10\ The categories that will be provided will be Series 6,
Series 7, all principal registration categories, and ``other.''
Government securities principals and representatives would fall
within the ``other'' category.
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IV. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to the NASD, and, in particular, the requirements
of Section 15A and the rules and regulations thereunder. The Commission
believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act because the proposed change
to Schedule C of the By-Laws will improve the standards of training,
experience, and competence for persons associated with NASD members.
As noted in the NASD Response, the GSA Amendments removed from
Section 15A of the Act the limitations on the ability of the NASD to
regulate its members' transactions in government securities. The
Commission believes that requiring government securities principals and
representatives to participate in the continuing education program is
appropriate in view of the role these persons play in the market for
government securities. The continuing education program has been
designed to impart knowledge regarding existing standards and should
ensure that government securities principals and representatives become
aware of new regulatory developments and concerns.
The Commission also believes that the commenter's concerns have
been adequately addressed. While the Commission recognizes that
government securities principals and representatives have not yet been
required to undergo qualification examinations, the Commission believes
that any concerns that thereby may arise are outweighed by the benefits
to be derived from the participation of such persons in the continuing
education program. It should be emphasized that the Regulatory Element,
which addresses a variety of compliance, ethics, and sales practice
issues, is not a test. Rather, the Regulatory Element requires that a
person complete a prescribed training program, which is administered
using computer-based interactive training techniques that provide
immediate feedback as a person works through a set of scenarios and
problems.
The aggregated information obtained from the Regulatory Element is
one of several factors that a firm should consider in evaluating its
training needs when complying with the Firm Element. Moreover, as
stated in the NASD Response, firms will be provided with a registration
category break-down of the aggregated information.
Pursuant to Section 19(b)(5) of the Act,\11\ the Commission has
consulted with and considered the views of the Department of the
Treasury (``Treasury'').\12\ The Treasury supports the NASD's proposal
that the continuing education program apply to government
[[Page 35759]]
securities principals and representatives.\13\
\11\ 15 U.S.C. 78s(b)(5).
\12\ Section 19(b)(5) of the Act states generally that the
Commission shall consult with and consider the views of the
Secretary of the Treasury prior to approving a proposed rule filed
by a registered securities association that primarily concerns
conduct related to transactions in government securities.
\13\ Telephone conversation between Donald Hammond, Assistant
Director, Government Securities Regulation Staff, Treasury, and Glen
Barrentine, Senior Counsel, Division of Market Regulation,
Commission, on June 29, 1995.
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Finally, the Commission finds good cause for approving the proposed
rule change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. The Commission
believes that accelerated approval of the proposal is appropriate in
order to allow the uniform implementation of the continuing education
program on July 1, 1995. The Commission notes that the 15 day notice
period provided for in the notice has expired. The Commission notes
further that the rule change establishing the continuing education
program was noticed in the Federal Register for the full statutory
period \14\ and that on August 15, 1994, the NASD published Special
Notice to Members 94-59 to request comment regarding the NASD's then
draft rules to create a mandated continuing education program for the
securities industry. As a result, commentators have had an extensive
opportunity to comment on the requirements of the continuing education
program.
\14\ See Securities Exchange Act Release No. 35102 (December 15,
1994), 59 FR 65563.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-NASD-95-22) is approved.
\15\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
\16\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-16924 Filed 7-10-95; 8:45 am]
BILLING CODE 8010-01-M
