[Federal Register Volume 63, Number 128 (Monday, July 6, 1998)]
[Notices]
[Pages 36462-36464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17710]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40137; File No. SR-NASD-98-43]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. to Extend the Deadline for Presently
Registered Representatives to Apply for the Equity Trader, Series 55
Examination
June 26, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 12, 1998, the National Association of Securities Dealers, Inc.
(``NASD'' or ``Association'') through its wholly-owned subsidiary, NASD
Regulation, Inc. (``NASDR'') 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 NASDR. The NASDR has designated this proposal as one
constituting a stated policy, practice, or interpretation with respect
to the meaning of an existing rule under Section 19(b)(3)(A)(i) of the
Act,\3\ which renders the rule effective upon the Commission's receipt
of this filing. 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. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(i).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The NASDR is proposing to amend NASD Membership and Registration
Rule 1032 to change the date by which registered representatives who
currently trade equity securities in the Nasdaq Stock Market (Nasdaq)
and/or over-the-counter must apply for Equity Trader registration.
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
* * * * *
(f) Limited Representative--Equity Trader
* * * * *
Before registration as a Limited Representative--Equity Trader as
defined in subparagraph (1) hereof may become effective, an applicant
must:
* * * * *
(B) pass an appropriate Qualification Examination for Limited
Representative-Equity Trader. Any person who was performing any of the
activities described in paragraph (f)(1) above on or prior to May 1,
1998 and who has filed an application to take this examination by
[(date thirty (30) days after the effective date of this rule)] August
31, 1998 must pass the examination by [(24 months after effective date
above)] May 1, 2000. Any person who is eligible for this extended
qualification period and who fails this examination during [such] the
twenty-four (24) month time period commencing on May 1, 1998 and ending
on May 1, 2000 must wait thirty (30) days from the date of failure to
take the examination again. Any person, other than a person who is
eligible for the extended qualification period, who files an
application to take this qualification examination after [(date thirty
(30) days after the effective date of this rule)] May 1, 1998 must pass
this examination before conducting such activities as described in
paragraph (f)(1) above. In no event may a person who is eligible for
the extended qualification period function as an Equity Trader beyond
the 24-month period without having successfully passed the appropriate
qualification examination.
[[Page 36463]]
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 NASDR 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. The NASDR 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
On January 2, 1998, the Commission approved the NASD's proposal to
amend NASD Rule 1032 to add an additional category of representative
registration.\4\ Specifically, Rule 1032(f) requires each registered
representative who engages in proprietary or agency trades of equities,
preferred securities or convertible debt securities otherwise than on a
securities exchange, or who directly supervises such activities (i.e.,
functioning as an ``Equity Trader''), to register as a Limited
Representative-Equity Trader. In order to register as a Limited
Representatives-Equity Trader, the representative must be registered as
a General Securities Representative or as a Limited Representative-
Corporate Securities, and must pass the Series 55 examination.\5\ The
rule contains an exemption for representatives whose principal trading
activities involve executing orders on behalf of an affiliated
investment company that is registered with SEC under the Investment
Company Act of 1940.
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\4\ See Securities Exchange Act Release No. 39516, 63 FR 1520
(January 9, 1998) (order approving File No. SR-NASD-97-21).
\5\ Registered representatives who have been ``grandfathered''
from taking the Series 7 or the Series 62 examinations will not be
required to take either examination in order to take the Series 55
examination.
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The rule provides that presently registered representatives who
file an application to take the Series 55 examination within 30 days of
the effective date of the rule must pass the Series 55 examination
within 2 years of the effective date of the rule. The effective date of
the rule was April 1, 1998, which was announced in Notice to Members
98-17. Accordingly, a presently registered representative had until May
1, 1998 to file an application to take the Series 55 examination and
until May 1, 2000 to receive a passing score on the exam. The rule also
provides that any person, including a presently registered
representative, who files an application to take the Series 55
examination after May 1, 1998 must pass the Series 55 examination
before functioning as an Equity Trader.
It has come to the NASDR's attention that many presently registered
representatives who would have been eligible for the two year grace
period to pass the Series 55 examination failed to file applications by
May 1, 1998. Thus, such registered representatives must immediately
cease functioning as Equity Traders until they pass the Series 55
examination. As discussed above, the original proposal provided
presently registered representatives 30 days from the effective date of
the rule to file applications to take the Series 55 examination. The
NASDR believed this would provide such representatives sufficient time
to file the requisite applications. Unfortunately, this has not been
the case. If the deadline is not extended, those registered
representatives who failed to file applications by the deadline will be
forced to cease certain activities, which could cause disruptions at
NASD member firms and could cause harm to customers. The NASDR does not
believe the markets or customers will be served by a strict application
of this administrative deadline. Consequently, the NASDR is proposing
to extend the deadline for filing an application from May 1, 1998 until
August 31, 1998. This will allow a registered representative who had
been eligible for the two year grace period but failed to file an
application by May 1, 1998 to file an application by August 31, 1998
and continue to function as an Equity Trader until he/she receives a
passing score on the Series 55 examination. However, such registered
representative cannot continue functioning as an Equity Trader after
May 1, 2000 unless he/she receives a passing score on the Series 55
examination before May 1, 2000. Any person not functioning as an Equity
trader on or before May 1, 1998 must pass the Series 55 examination
before functioning as such.
2. Statutory Basis
The NASDR believes the proposed rule change is consistent with
Section 15A(b)(6) of the Act,\6\ which requires, among other things,
that the Association's rules must be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest. The NASDR believes the proposal is consistent with the
Act because it continues to require presently registered
representatives to receive a passing score on the Series 55 examination
before May 1, 2000 and to cease conducting certain specified activities
if a passing score is not received by that date. The proposed change
only allows certain registered representatives additional time to file
applications to take the Series 55 examination.
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\6\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NASDR does not believe that the proposed rule change will
impose a 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
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The foregoing rule change constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration or
enforcement of an existing rule of the Association and, therefore, has
become effective pursuant to Section 19(b)(3)(A) of the Act \7\ and
subparagraph (e) of Rule 19b-4 thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 19b-4(e).
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At any time within 60 days of the filing of such rule change, the
Commission may summarily abrogate 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.
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. Persons making written submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
Copies of the submissions, all subsequent amendments, all written
statements with respect to the proposed rule
[[Page 36464]]
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 in the Commission's Public
Reference Room, 450 Fifth Street, NW., Washington, DC. Copies of such
filing also will be available for inspection and copying at the NASD.
All submissions should refer to File No. SR-NASD-98-43 and should be
submitted by July 27, 1998.
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. 98-17710 Filed 7-2-98; 8:45 am]
BILLING CODE 8010-01-M
