[Federal Register Volume 79, Number 154 (Monday, August 11, 2014)]
[Notices]
[Pages 46898-46900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18880]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72765; File No. SR-FINRA-2014-034]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Revise the Series 23 Examination Program
August 5, 2014.
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 July 29, 2014, 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 General Securities Principal Sales Supervisor
Module (Series 23) 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 a General Securities
Principal. In addition, FINRA is proposing to make 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 23 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. The Series 23 selection
specifications have been submitted to the Commission under separate
cover with a request for confidential treatment pursuant to SEA Rule
24b-2.\6\
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\6\ 17 CFR 240.24b-2. The Commission notes that the content
outline is an exhibit to the filing, not to this Notice.
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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 \7\ 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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\7\ 15 U.S.C. 78o-3(g)(3).
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NASD Rule 1022(a) (General Securities Principal) sets forth the
registration requirements for a General Securities Principal.\8\ Among
other requirements, a person registering as a General Securities
Principal must pass the General Securities Principal (Series 24)
qualification examination or an alternative examination. The Series 23
examination, in combination with the General Securities Sales
Supervisor (Series 9/10) examination,\9\ is an acceptable qualification
alternative to the Series 24 examination for associated persons who are
required to register and qualify as General Securities Principals with
FINRA. The Series 23 examination tests material from the Series 24
[[Page 46899]]
examination not otherwise tested on the Series 9/10 examination.
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\8\ See SR-FINRA-2014-035 (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Revise the Series 24
Examination Program) for a discussion of the requirements for a
General Securities Principal.
\9\ As a prerequisite to the Series 23 examination, FINRA also
recognizes the Series 8 examination, the historical equivalent to
the Series 9/10 examination, and the former Series 12 examination, a
subset of the Series 9/10 examination omitting questions on options
and municipal securities.
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In consultation with a committee of industry representatives, FINRA
recently undertook a review of the Series 23 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 a General Securities Principal.
FINRA also is proposing to make changes to the format of the content
outline.
Current Outline
The current content outline is divided into five sections. The
following are the five sections and the number of questions associated
with each of the sections, denoted Section 1 through Section 5:
1. Supervision of Investment Banking, Underwriting Activities and
Research, 30 questions;
2. Supervision of Trading and Market Making Activities, 24
questions;
3. Supervision of Brokerage Office Operations, 12 questions;
4. Sales Supervision and General Supervision of Employees, 23
questions; and
5. Compliance with Financial Responsibility Rules, 11 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 five major
job functions that are performed by a General Securities Principal. The
following are the five major job functions, denoted Function 1 through
Function 5, with the associated number of questions:
Function 1: Supervision of Registration of the Broker-Dealer and
Personnel Management Activities, 6 questions;
Function 2: Supervision of General Broker-Dealer Activities, 26
questions;
Function 3: Supervision of Retail and Institutional Customer-
Related Activities, 12 questions;
Function 4: Supervision of Trading and Market Making Activities, 28
questions; and
Function 5: Supervision of Investment Banking and Research, 28
questions.
FINRA is also proposing to adjust the number of questions assigned
to each major job function to ensure that the overall examination
better reflects the key tasks performed by a General Securities
Principal. The questions on the revised Series 23 examination will
place greater emphasis on key tasks such as supervision of registered
persons, sales practices and compliance.
Each function also includes specific tasks describing activities
associated with performing that function. There are two tasks (1.1-1.2)
associated with Function 1; seven tasks (2.1-2.7) associated with
Function 2; three tasks (3.1-3.3) associated with Function 3; three
tasks (4.1-4.3) associated with Function 4; and three tasks (5.1-5.3)
associated with Function 5.\10\ By way of example, one such task (Task
2.1) is to develop, implement and update firm's policies, written
supervisory procedures (WSP) and controls for applicable rules and
regulations; and implement appropriate monitoring and testing.\11\
Further, the outline lists the knowledge required to perform each
function and associated tasks (e.g., business and regulatory
requirements for firm's systems and technologies).\12\ 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
2090), NASD Rules (e.g., NASD Rule 2510) and SEC rules (e.g., SEA Rule
15c1-7).\13\ FINRA conducted a job analysis study of General Securities
Principals, 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 a General Securities Principal.
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\10\ See Exhibit 3a, Outline Pages 6-29. The Commission notes
that Exhibit 3a is an exhibit to the filing, not to this Notice.
\11\ See Exhibit 3a, Outline Page 9.
\12\ See Exhibit 3a, Outline Page 9.
\13\ See Exhibit 3a, Outline Page 19.
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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), NASD Rule 2212 (Telemarketing) and NASD Rule
3110 (Books and Records) were adopted as FINRA Rule 2111 (Suitability),
FINRA Rule 3230 (Telemarketing) and FINRA Rule 4510 Series (Books and
Records Requirements), respectively)).\14\
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\14\ 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 23 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; \15\ (2) provide more details regarding the purpose of the
examination; \16\ (3) provide more details on the application
procedures; \17\ (4) provide more details on the development and
maintenance of the content outline and examination; \18\ (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; \19\ 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.\20\
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\15\ See Exhibit 3a, Outline Page 2.
\16\ See Exhibit 3a, Outline Page 3.
\17\ See Exhibit 3a, Outline Page 3.
\18\ See Exhibit 3a, Outline Page 4.
\19\ See Exhibit 3a, Outline Page 5.
\20\ See Exhibit 3a, Outline Page 5.
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The number of questions on the Series 23 examination will remain at
100 multiple-choice questions, and candidates will continue to have 2
hours and 30 minutes to complete the examination. Currently, a score of
70 percent is required to pass the examination. The passing score will
remain the same.
Availability of Content Outlines
The current Series 23 content outline is available on FINRA's Web
site, at www.finra.org/brokerqualifications/exams. The revised Series
23 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 23
examination program on October 13, 2014. FINRA will announce the
proposed rule change and the implementation date in a Regulatory
Notice.
[[Page 46900]]
2. Statutory Basis
FINRA believes that the proposed revisions to the Series 23
examination program are consistent with the provisions of Section
15A(b)(6) of the Act,\21\ 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,\22\ 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 a General Securities Principal.
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\21\ 15 U.S.C. 78o-3(b)(6).
\22\ 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 a
General Securities Principal 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 \23\ and paragraph (f)(1) of Rule 19b-4
thereunder.\24\ 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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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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-2014-034 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2014-034. 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 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-2014-034 and should be
submitted on or before September 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18880 Filed 8-8-14; 8:45 am]
BILLING CODE 8011-01-P