[Federal Register Volume 78, Number 175 (Tuesday, September 10, 2013)]
[Notices]
[Pages 55302-55305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21934]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70316; File No. SR-NASDAQ-2013-108]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Rule 1120 and To Adopt a Corresponding Fee
September 4, 2013.
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 August 22, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. NASDAQ has
designated the proposed rule change as constituting a non-controversial
rule change under Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders the proposal effective upon filing
with the Commission. 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)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NASDAQ is proposing to amend Rule 1120 as described below, and to
adopt a corresponding fee.
The text of the proposed rule change is below. Proposed new
language is italicized; proposed deletions are in brackets.
* * * * *
1120. Continuing Education Requirements
This Rule prescribes requirements regarding the continuing
education of certain registered persons subsequent to their initial
qualification and registration with Nasdaq. The requirements shall
consist of a Regulatory Element and a Firm Element as set forth below.
(a) Regulatory Element
(1) Requirements
No member shall permit any registered person to continue to, and no
registered person shall continue to, perform duties as a registered
person unless such person has complied with the requirements of
paragraph (a) hereof.
Each registered person shall complete the Regulatory Element on the
occurrence of their second registration anniversary date and every
three years thereafter, or as otherwise prescribed by Nasdaq. 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. The content of
the Regulatory Element shall be determined by Nasdaq and shall be
appropriate to either the registered representative or principal status
of the person subject to the Rule. The following Regulatory Elements
administered by FINRA shall be required:
Persons registered solely as Proprietary Traders pursuant to Rule
1032(c) must complete the S501.
Persons registered as General Securities Representatives pursuant
to Rule 1032(a) must complete the S101.
Persons registered in a supervisory capacity pursuant to Rules 1021
and 1022 must complete the S201.
* * * * *
[[Page 55303]]
7003. Registration and Processing Fees
(a) The following fees will be collected and retained by FINRA via
the Web CRD registration system for the registration of associated
persons of Nasdaq members that are not also FINRA members:
(1)-(6) No change
(7) a $[75]100 session fee for each individual who is required to
complete the Regulatory Element of the Continuing Education
Requirements pursuant to Nasdaq Rule 1120 (S101 and S201) and a $60
session fee for each individual who is required to complete the
Proprietary Trader Regulatory Element (S501).
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NASDAQ 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to codify in Rule 1120
the specific continuing education requirements that currently apply and
to adopt a continuing education requirement for persons registered as
Proprietary Traders. NASDAQ also proposes to adopt a fee in Rule 7003
for the new continuing education program applicable to Proprietary
Traders.
NASDAQ adopted the Proprietary Trader \5\ registration in 2011,\6\
working with various other exchanges and Financial Industry Regulatory
Authority (``FINRA''). At that time, NASDAQ stated that persons
registered in the new category would be subject to its continuing
education requirements in Rule 1120.
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\5\ A Proprietary Trader is a person whose activities in the
investment banking and securities business are limited solely to
proprietary trading. NASDAQ Rule 1032(c).
\6\ See Securities Exchange Act Release No. 64958 (July 25,
2011), 76 FR 45629 (July 29, 2011) (SR-NASDAQ-2011-095).
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At this time, the new continuing education program for Proprietary
Traders will soon become available and will be administered by FINRA.
The new program, the S501, is intended to address the specific
continuing education of Proprietary Traders, based on the content
outline for the Series 56 exam, which covers the main categories of
rules and regulations generally applicable to such persons.\7\ The
Continuing Education Regulatory Element is a computer-based education
program administered by FINRA to help ensure that registered persons
are kept current on regulatory, compliance and trading practice matters
in the industry.
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\7\ These generally include recordkeeping and recording
requirements, types and characteristics of securities and
investments, trading practices and display execution and trading
systems. See Securities Exchange Act Release No. 65040 (August 5,
2011), 76 FR 49809 (August 11, 2011) (SR-NASDAQ-2011-108).
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NASDAQ proposes to amend Rule 1120(a)(1) to specify the required
Regulatory Element for each category of registered persons. Currently,
Rule 1120(a)(1) provides that no member shall permit any registered
person to continue to, and no registered person shall continue to,
perform duties as a registered person, unless such person has complied
with the continuing education requirements of paragraph (a). 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 NASDAQ. 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. This applies to persons
registered as Proprietary Traders as well.
The Rule further provides that the content of the Regulatory
Element of the program shall be determined by NASDAQ for each
registration category of persons subject to the Rule. NASDAQ now
proposes to make clear which specific programs are required, including
both existing programs (S101 and S201) as well as the new Proprietary
Trader continuing education program (S501). NASDAQ has determined that
the following Regulatory Elements administered by FINRA shall be
required:
Persons registered solely as Proprietary Traders pursuant
to Rule 1032(b) [sic] must complete the S501.
Persons registered as General Securities Representatives
pursuant to Rule 1032(a) must complete the S101.
Persons registered in a supervisory capacity pursuant to
Rules 1021 and 1022 must complete the S201.
NASDAQ believes that specifying the applicable Regulatory Element
in the Rule should be helpful to members in complying with the Rule.
Only one Regulatory Element is required. For example, members
registered as supervisors are subject to the S201 only; they do not
also have to complete the Regulatory Element applicable to their
prerequisite registration, such as the S501 or the S101.\8\ This
proposal does not change the registration requirements.
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\8\ In the event that a person is registered both as a
Proprietary Trader and a General Securities Representative, only one
Regulatory Element is required--the ``higher'' of the two, which is
the S101.
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NASDAQ also proposes to adopt a fee applicable to Proprietary
Trader Regulatory Element. Currently, the applicable fee for the
Regulatory Element (S101 and S201) is $100.\9\ NASDAQ proposes to adopt
a $60 fee for the S501. FINRA administers these programs on behalf of
the exchanges and therefore the fees are payable directly to FINRA.\10\
The $60 fee will only be used for the administration of the S501 versus
the S101 which utilizes the $100 fee for both development and
administration. The costs associated with the development of the S501
are included in the examination fee.
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\9\ The Commission notes that the Exchange is correcting its fee
schedule to reflect the $100 fee for the S101 and the S201
continuing education.
\10\ The S501 was established for those registrants who have
passed the Series 56 Qualification Exam as reflected in WebCRD.
WebCRD is the central licensing and registration system for the U.S.
securities industry. The CRD system enables individuals and firms
seeking registration with multiple states and self-regulatory
organizations to do so by submitting a single form, fingerprint card
and a combined payment of fees to FINRA. Through the CRD system,
FINRA maintains the qualification, employment and disciplinary
histories of registered associated persons of broker-dealers.
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2. Statutory Basis
NASDAQ believes that its proposal is consistent with Section 6(b)
of the Act \11\ in general, and furthers the objectives of: (1) Section
6(c)(3)(B) of the Act,\12\ pursuant to which a national securities
exchange prescribes standards of training, experience and competence
for members and their associated persons; and (2) Section 6(b)(5) of
the Act,\13\ in that it is designed, among other things, to prevent
fraudulent and manipulative acts and practices, to promote just and
[[Page 55304]]
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, by requiring
registered persons to complete the applicable continuing education
program. NASDAQ believes that a strong continuing education program
should bolster the integrity of NASDAQ by helping to ensure that all
associated persons engaged in a securities business are, and will
continue to be, properly trained and qualified to perform their
functions. The Exchange does not believe that the proposal is unfairly
discriminatory with respect to persons registered as a General
Securities Representative who function in their current job as a
Proprietary Trader, even though these persons are subject to the more
stringent S101 rather than the S501; such persons are registered and
qualified (Series 7) in a ``higher'' capacity and are therefore
qualified to function in a capacity other than a Proprietary Trader,
whether they choose to or not. Accordingly, requiring the S101 for such
persons is appropriate and facilitates them being able to maintain
their ``higher'' registration. The Exchange also believes that
permitting General Securities Representatives functioning as
Proprietary Traders to complete the S501 would be confusing and
difficult to monitor.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78(c)(3)(B).
\13\ 15 U.S.C. 78f(b)(5).
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NASDAQ also believes that the proposal furthers the objectives of
Section 6(b)(4) of the Act,\14\ in that it provides for an equitable
allocation of reasonable fees and other charges among exchange members
and other persons using its facilities. Specifically, the new $60 fee
is applicable to persons registered as a Proprietary Trader, which is a
limited registration under NASDAQ rules. Accordingly, the proposed S501
Regulatory Element specifically correlates to the rules and obligations
applicable to Proprietary Traders, which are fewer than those
applicable to persons registered in other categories. Thus, the S501 is
a more limited form of continuing education. Therefore, NASDAQ believes
that the lower fee ($60 rather than $100) is reasonable.\15\ The
proposed fee is equitable, because it applies equally to all persons
registered solely as Proprietary Traders.
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\14\ 15 U.S.C. 78f(b)(4).
\15\ The Commission notes that in the Purpose section of this
filing, NASDAQ correctly represents that the $100 fee for the S101
covers costs associated with both development and administration of
the program, but the $60 fee for the S501 covers only the cost to
administer the continuing education.
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ 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. All of the exchanges that recognize the
Proprietary Trader registration category are expected to adopt the same
continuing education fee and all Proprietary Traders, regardless of
where they are registered, will be subject to same continuing education
requirements and the same continuing education fees. Thus, the proposal
treats similarly situated persons in the same way.
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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the Act
\16\ and Rule 19b-4(f)(6) thereunder.
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\16\ 15 U.S.C. 78s(b)(3)(A).
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The Exchange has requested that the Commission waive the 30-day
operative delay. The proposed rule change: specifies the continuing
education requirements that currently apply to registered persons;
adopts a continuing education requirement, the S501, and a related fee
for persons registered as Proprietary Traders; and corrects the
Exchange's fee schedule to reflect the proper fee, $100 rather than
$75, for the S101 and S201. Waiver of the operative delay would allow
the Exchange to clarify and correct its rules and implement the
proposed rule change at once, enabling its members to comply with their
continuing education requirements in a timely manner, and thus is
consistent with the protection of investors and the public interest.
Therefore, the Commission designates the proposal operative upon
filing.\17\
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\17\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of this 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 will institute proceedings 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 [email protected]. Please include
File Number SR-NASDAQ-2013-108 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-108. 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 such filing also will be available
for
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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-NASDAQ-2013-108 and should
be submitted on or before October 1, 2013
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
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\18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-21934 Filed 9-9-13; 8:45 am]
BILLING CODE 8011-01-P