[Federal Register Volume 78, Number 209 (Tuesday, October 29, 2013)]
[Notices]
[Pages 64566-64569]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25443]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70744; File No. SR-FINRA-2013-045]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Revise the Series 6 Examination Program
October 23, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``SEA'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on October 16, 2013, Financial Industry Regulatory
Authority, Inc. (``FINRA'') 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 FINRA. FINRA has designated the proposed rule change as
``constituting a stated policy, practice, or interpretation with
respect to the meaning, administration, or enforcement of an existing
rule'' under Section 19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1)
thereunder,\4\ which renders the proposal effective upon receipt of
this filing by the Commission. 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).
\4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is filing revisions to the content outline and selection
specifications for the Investment Company and Variable Contracts
Products Representative (Series 6) examination program.\5\ The proposed
revisions update the material to reflect changes to the laws, rules and
regulations covered by the examination and to incorporate the functions
and associated tasks currently performed by an Investment Company and
Variable Contracts Products Representative. In addition, FINRA is
proposing to make
[[Page 64567]]
changes to the format of the content outline. FINRA is not proposing
any textual changes to the By-Laws, Schedules to the By-Laws or Rules
of FINRA.
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\5\ FINRA also is proposing corresponding revisions to the
Series 6 question bank. Based on instruction from SEC staff, FINRA
is submitting this filing for immediate effectiveness pursuant to
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(1) thereunder, and
is not filing the question bank for review. See Letter to Alden S.
Adkins, Senior Vice President and General Counsel, NASD Regulation,
from Belinda Blaine, Associate Director, Division of Market
Regulation, SEC, dated July 24, 2000. The question bank is available
for SEC review.
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The revised content outline is attached.\6\ The Series 6 selection
specifications have been submitted to the Commission under separate
cover with a request for confidential treatment pursuant to SEA Rule
24b-2.\7\
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\6\ The Commission notes that the revised content outline is
attached to the filing as Exhibit 3a, not to this Notice.
\7\ 17 CFR 240.24b-2.
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The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA 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. FINRA 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
Section 15A(g)(3) of the Act \8\ authorizes FINRA to prescribe
standards of training, experience, and competence for persons
associated with FINRA members. In accordance with that provision, FINRA
has developed examinations that are designed to establish that persons
associated with FINRA members have attained specified levels of
competence and knowledge, consistent with applicable registration
requirements under FINRA rules. FINRA periodically reviews the content
of the examinations to determine whether revisions are necessary or
appropriate in view of changes pertaining to the subject matter covered
by the examinations.
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\8\ 15 U.S.C. 78o-3(g)(3).
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Pursuant to NASD Rule 1032(b) \9\ (Limited Representative--
Investment Company and Variable Contracts Products), if a
representative's activities are limited solely to redeemable securities
of companies registered under the Investment Company Act of 1940
(``Investment Company Act''), securities of closed-end companies
registered under the Investment Company Act during the period of
original distribution, and variable contracts and insurance premium
funding programs and other contracts issued by an insurance company
(except contracts that are exempt securities pursuant to Section
3(a)(8) of the Securities Act of 1933), the representative may register
and qualify as an Investment Company and Variable Contracts Products
Representative instead of registering and qualifying as a General
Securities Representative (Series 7) pursuant to NASD Rule 1032(a)
(General Securities Representative).\10\ The Series 6 examination
qualifies an individual to function as an Investment Company and
Variable Contracts Products Representative.
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\9\ The current FINRA rulebook consists of (1) FINRA Rules; (2)
NASD Rules; and (3) rules incorporated from NYSE (``Incorporated
NYSE Rules'') (together, the NASD Rules and Incorporated NYSE Rules
are referred to as the ``Transitional Rulebook''). While the NASD
Rules generally apply to all FINRA members, the Incorporated NYSE
Rules apply only to those members of FINRA that are also members of
the NYSE (``Dual Members''). The FINRA Rules apply to all FINRA
members, unless such rules have a more limited application by their
terms. For more information about the rulebook consolidation
process, see Information Notice, March 12, 2008 (Rulebook
Consolidation Process).
\10\ See also Incorporated NYSE Rule 345.15(3) and Incorporated
NYSE Rule Interpretation 345.15/02.
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In consultation with a committee of industry representatives, FINRA
recently undertook a review of the Series 6 examination program. As a
result of this review, FINRA is proposing to make revisions to the
content outline to reflect changes to the laws, rules and regulations
covered by the examination and to incorporate the functions and
associated tasks currently performed by an Investment Company and
Variable Contracts Products Representative. FINRA also is proposing to
make changes to the format of the content outline.
Current Outline
The current content outline is divided into six sections. The
following are the six sections and the number of questions associated
with each of the sections, denoted Section 1 through Section 6:
1. Securities Markets, Investment Securities and Economic Factors,
8 questions;
2. Securities and Tax Regulation, 23 questions;
3. Marketing, Prospecting and Sales Presentation, 18 questions;
4. Evaluation of Customers, 13 questions;
5. Product Information; Investment Company Securities and Variable
Contracts, 26 questions; and
6. Opening and Servicing Customer Accounts, 12 questions.
Each section also includes the applicable laws, rules and
regulations associated with that section. The current outline also
includes a preface (addressing, among other things, the purpose,
administration and scoring of the examination), sample questions and
reference materials.
Proposed Revisions
FINRA is proposing to divide the content outline into four major
job functions that are performed by an Investment Company and Variable
Contracts Products Representative. The following are the four major job
functions, denoted Function 1 through Function 4, with the associated
number of questions:
Function 1: Regulatory fundamentals and business development, 22
questions;
Function 2: Evaluates customers' financial information, identifies
investment objectives, provides information on investment products, and
makes suitable recommendations, 47 questions;
Function 3: Opens, maintains, transfers and closes accounts and
retains appropriate account records, 21 questions; and
Function 4: Obtains, verifies, and confirms customer purchase and
sale instructions, 10 questions.
Each function also includes specific tasks describing activities
associated with performing that function. There are four tasks (1.1-
1.4) associated with Function 1; four tasks (2.1-2.4) associated with
Function 2; three tasks (3.1-3.3) associated with Function 3; and two
tasks (4.1-4.2) associated with Function 4.\11\ By way of example, one
such task (Task 2.1) is to gather customers' financial and non-
financial information to identify, analyze, and assess risk tolerance,
investment experience and sophistication level.\12\ Further, the
outline lists the knowledge required to perform each function and
associated tasks (e.g., account authorizations and legal
documents).\13\ In addition, where applicable, the outline lists the
laws, rules and regulations a candidate is expected to know to perform
each function and associated tasks. These include the applicable FINRA
Rules (e.g., FINRA Rule 1250), NASD Rules (e.g., NASD
[[Page 64568]]
Rule 1070) and SEC rules (e.g., SEA Rule 17f-2).\14\ FINRA conducted a
job analysis study of Investment Company and Variable Contracts
Products Representatives, which included the use of a survey, in
developing each function and associated tasks and updating the required
knowledge set forth in the revised outline. The functions and
associated tasks, which appear in the revised outline for the first
time, reflect the day-to-day activities of an Investment Company and
Variable Contracts Products Representative.
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\11\ See Exhibit 3a, Outline Pages 6-18.
\12\ See Exhibit 3a, Outline Page 10.
\13\ See Exhibit 3a, Outline Page 15.
\14\ See Exhibit 3a, Outline Pages 6-7.
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As noted above, FINRA also is proposing to revise the content
outline to reflect changes to the laws, rules and regulations covered
by the examination. Among other revisions, FINRA is proposing to revise
the content outline to reflect the adoption of rules in the
consolidated FINRA rulebook (e.g., NASD Rule 2310 (Recommendations to
Customers (Suitability)) and NASD Rule 3110 (Books and Records) were
adopted as FINRA Rule 2111 (Suitability) and FINRA Rule 4510 Series
(Books and Records), respectively).\15\
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\15\ See Rule Conversion Chart, available at http://www.finra.org/Industry/Regulation/FINRARules/p085560.
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FINRA is proposing similar changes to the Series 6 selection
specifications and question bank.
Finally, FINRA is proposing to make changes to the format of the
content outline, including the preface, sample questions and reference
materials. Among other changes, FINRA is proposing to: (1) Add a table
of contents; \16\ (2) provide more details regarding the purpose of the
examination; \17\ (3) provide more details on the application
procedures; \18\ (4) provide more details on the development and
maintenance of the content outline and examination; \19\ (5) explain
that the passing scores are established by FINRA staff, in consultation
with a committee of industry representatives, using a standard setting
procedure and that the scores are an absolute standard independent of
the performance of candidates taking the examination; \20\ and (6) note
that each candidate will receive a score report at the end of the test
session, which will indicate a pass or fail status and include a score
profile listing the candidate's performance on each major content area
covered on the examination.\21\
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\16\ See Exhibit 3a, Outline Page 2.
\17\ See Exhibit 3a, Outline Page 3.
\18\ See Exhibit 3a, Outline Page 3.
\19\ See Exhibit 3a, Outline Page 4.
\20\ See Exhibit 3a, Outline Page 5.
\21\ See Exhibit 3a, Outline Page 5.
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The number of questions on the Series 6 examination will remain at
100 multiple-choice questions,\22\ and candidates will continue to have
135 minutes to complete the examination. Currently, a score of 70
percent is required to pass the examination. The passing score will
remain the same.
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\22\ Consistent with FINRA's practice of including ``pre-test''
questions on certain qualification examinations, which is designed
to ensure that new examination questions meet acceptable testing
standards prior to use for scoring purposes, the examination
includes five additional, unidentified pre-test questions that do
not contribute towards the candidate's score. Therefore, the
examination actually consists of 105 questions, 100 of which are
scored. The five pre-test questions are randomly distributed
throughout the examination.
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Availability of Content Outlines
The current Series 6 content outline is available on FINRA's Web
site, at www.finra.org/brokerqualifications/exams. The revised Series 6
content outline will replace the current content outline on FINRA's Web
site.
FINRA is filing the proposed rule change for immediate
effectiveness. FINRA proposes to implement the revised Series 6
examination program on December 16, 2013. FINRA will announce the
proposed rule change and the implementation date in a Regulatory
Notice.
2. Statutory Basis
FINRA believes that the proposed revisions to the Series 6
examination program are consistent with the provisions of Section
15A(b)(6) of the Act,\23\ which requires, among other things, that
FINRA 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, and
Section 15A(g)(3) of the Act,\24\ which authorizes FINRA to prescribe
standards of training, experience, and competence for persons
associated with FINRA members. FINRA believes that the proposed
revisions will further these purposes by updating the examination
program to reflect changes to the laws, rules and regulations covered
by the examination and to incorporate the functions and associated
tasks currently performed by an Investment Company and Variable
Contracts Products Representative.
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\23\ 15 U.S.C. 78o-3(b)(6).
\24\ 15 U.S.C. 78o-3(g)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA 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. The updated examination aligns
with the functions and associated tasks currently performed by an
Investment Company and Variable Contracts Products Representative and
tests knowledge of the most current laws, rules, regulations and skills
relevant to those functions and associated tasks. As such, the proposed
revisions would make the examination more efficient and effective.
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 has become effective pursuant to Section
19(b)(3)(A) of the Act \25\ and paragraph (f)(1) of Rule 19b-4
thereunder.\26\ At any time within 60 days of the filing of the
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 shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
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\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f)(1).
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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-FINRA-2013-045 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-FINRA-2013-045. This
file
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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 inspection and copying at the principal office of FINRA. 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-FINRA-2013-045 and should be
submitted on or before November 19, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25443 Filed 10-28-13; 8:45 am]
BILLING CODE 8011-01-P