[Federal Register Volume 80, Number 60 (Monday, March 30, 2015)]
[Notices]
[Pages 16713-16716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-07133]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74568; File No. SR-FINRA-2015-006]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Section 4(c) of Schedule A to the FINRA
By-Laws To Increase Qualification Examination Fees
March 24, 2015.
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 March 10, 2015, 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 ``establishing or changing a
due, fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\
and Rule 19b-4(f)(2) 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)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to amend Section 4(c) of Schedule A to the FINRA
By-Laws to increase qualification examination fees.
Below is the text of the proposed rule change. Proposed new
language is in italics; proposed deletions are in brackets.
* * * * *
SCHEDULE A TO THE BY-LAWS OF THE CORPORATION
* * * * *
Section 4--Fees
(a) through (b) No Change.
(c) The following fees shall be assessed to each individual who
registers to take an examination as described below. These fees are in
addition to the registration fee described in paragraph (b) and any
other fees that the owner of an examination that FINRA administers may
assess.
Series 4 Registered Options Principal.......... [$100] $105
Series 6 Investment Company Products/Variable [$95] $100
Contracts Representative.
Series 7 General Securities Representative..... [$290] $305
Series 9 General Securities Sales Supervisor-- [$75] $80
Options Module.
Series 10 General Securities Sales Supervisor-- [$120] $125
General Module.
Series 11 Assistant Representative--Order [$75] $80
Processing.
Series 14 Compliance Official.................. [$335] $350
Series 16 Supervisory Analyst.................. [$230] $240
Series 17 Limited Registered Representative.... [$75] $80
Series 22 Direct Participation Programs [$95] $100
Representative.
Series 23 General Securities Principal Sales [$95] $100
Supervisor Module.
Series 24 General Securities Principal......... [$115] $120
Series 26 Investment Company Products/Variable [$95] $100
Contracts Principal.
Series 27 Financial and Operations Principal... [$115] $120
[[Page 16714]]
Series 28 Introducing Broker-Dealer Financial [$95] $100
and Operations Principal.
Series 37 Canada Module of S7 (Options [$175] $185
Required).
Series 38 Canada Module of S7 (No Options [$175] $185
Required).
Series 39 Direct Participation Programs [$90] $95
Principal.
Series 42 Registered Options Representative.... [$70] $75
Series 51 Municipal Fund Securities Limited [$95] $105
Principal.
Series 52 Municipal Securities Representative.. [$120] $130
Series 53 Municipal Securities Principal....... [$105] $115
Series 55 Limited Representative--Equity Trader [$105] $110
Series 62 Corporate Securities Limited [$90] $95
Representative.
Series 72 Government Securities Representative. [$105] $110
Series 79 Investment Banking Qualification [$290] $305
Examination.
Series 82 Limited Representative--Private [$90] $95
Securities Offering.
Series 86 Research Analyst--Analysis........... [$175] $185
Series 87 Research Analyst--Regulatory......... [$125] $130
Series 99 Operations Professional.............. [$125] $130
(1) through (4) No Change.
(d) through (i) No Change.
* * * * *
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
The proposed rule change amends Section 4(c) of Schedule A of the
FINRA By-Laws to increase qualification examination fees. Persons
engaged in the investment banking or securities business of a FINRA
member who function as principals or representatives are required to
register with FINRA in each category of registration appropriate to
their functions.\5\ Such individuals must pass an appropriate
qualification examination before their registration can become
effective. These mandatory qualification examinations cover a broad
range of subjects regarding financial markets and products, individual
responsibilities, securities industry rules, and regulatory structure.
FINRA develops, maintains, and delivers all qualification examinations
for individuals who are registered or seeking registration with FINRA.
FINRA also administers and delivers examinations sponsored (i.e.,
developed) by the Municipal Securities Rulemaking Board (``MSRB'') and
other self-regulatory organizations, the North American Securities
Administrators Association, the National Futures Association, and the
Federal Deposit Insurance Corporation.
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\5\ See NASD Rules 1021(a) and 1031(a), and NASD Rules 1022 and
1032. See also NASD Rules 1041 and 1050 and FINRA Rule 1230(b)(6)
regarding the qualification and registration requirements for Order
Processing Assistant Representatives, Research Analysts and
Operations Professionals, respectively.
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FINRA currently administers examinations electronically through the
PROCTOR[supreg] system \6\ at testing centers operated by vendors under
contract with FINRA. FINRA charges an examination fee to candidates for
FINRA-sponsored and co-sponsored examinations to cover the development,
maintenance and delivery of these examinations. For qualification
examinations sponsored by a FINRA client and administered by FINRA,
FINRA charges a delivery fee that represents either a portion of or the
entire examination fee for the examination.\7\
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\6\ PROCTOR is a computer system that is specifically designed
for the administration and delivery of computer-based testing and
training.
\7\ The delivery fee represents a portion of the entire
examination fee when a FINRA client has established an additional
fee for an examination that it sponsors. For example, the fee to
take the Series 51 (Municipal Fund Securities Limited Principal)
examination is currently $155. Of this amount, $95 is the FINRA
administration and delivery fee, and $60 is the development fee
determined by the FINRA client, the MSRB. See MSRB Rule A-16.
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FINRA regularly conducts a comprehensive review of the examination
fee structure, including an analysis of the costs associated with
developing, administering, and delivering each examination, so that
FINRA may better understand whether pricing changes are warranted and
evaluate the financial condition of each qualification examination
program. Based on the results of the review, FINRA may propose changes
to better align the examination fee structure with the costs associated
with the programs. When changes are warranted, fees are set at levels
that are expected to meet cost and revenue objectives over a two-to-
three year period to provide firms and examination candidates with a
predictable cost environment.
In this regard, the most recent review revealed that certain
operational costs have increased and, based on current information,
will continue to increase over the next few years. In particular, these
increased costs consist of: (1) Fees that vendors charge FINRA for
delivering qualification examinations through their networks of test
delivery centers; (2) staff labor associated with the development and
maintenance of the qualification examinations; and (3) PROCTOR system
maintenance and enhancement expenses.\8\ FINRA believes that the
proposed rule change will help to better align the examination program
fees with these increased costs. Therefore, FINRA is proposing to amend
Section 4(c) of Schedule A to the FINRA By-Laws to increase the fees
for the qualification examinations set forth in Section 4(c).
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\8\ While delivery costs for examinations have increased over
the last three years, delivery costs for qualification examinations
are scheduled to stabilize in 2015 and 2016 based on FINRA's
recently negotiated agreements with vendors that deliver the
qualification examinations through their networks of test delivery
centers.
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FINRA has filed the proposed rule change for immediate
effectiveness. FINRA is proposing that the implementation date of the
proposed rule change will be April 1, 2015. Specifically, the proposed
qualification examination fees would become effective for examination
requests made in the CRD system on or after April 1, 2015.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\9\ which requires, among
other things, that FINRA rules provide for the equitable
[[Page 16715]]
allocation of reasonable dues, fees and other charges among members and
issuers and other persons using any facility or system that FINRA
operates or controls.
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\9\ 15 U.S.C. 78o-3(b)(5).
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FINRA believes that the proposed rule change constitutes an
equitable allocation of fees as the qualification examination fees will
be assessed only on those individuals who take qualification
examinations. In addition, all candidates who register for a particular
qualification examination will be charged the same amount.
FINRA further believes that the proposed qualification examination
changes are reasonable because they will more closely align the overall
examination program fees with the overall costs associated with the
programs. In this regard, FINRA notes that the last time that it
increased fees for any of the qualification examinations set forth in
Schedule A to the FINRA By-Laws was April 2012.\10\ Since that time,
FINRA's examination program expenses have increased and, based on
current information, will continue to increase over the next few years.
Specifically, FINRA has experienced cost increases relating to: (1)
Fees that vendors charge FINRA for delivering qualification
examinations through their networks of test delivery centers; (2) staff
labor associated with the development and maintenance of the
qualification examinations; and (3) PROCTOR system maintenance and
enhancement expenses. \11\
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\10\ See Securities Exchange Act Release No. 66465 (February 24,
2012), 77 FR 12635 (March 1, 2012) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2012-009).
\11\ See supra note 8.
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To better align the fees and costs associated with the examination
programs, FINRA is proposing modest fee increases. In this regard,
FINRA notes that no qualification examination fee will increase by more
than $15 and the majority of examination fees will increase by only $5.
Accordingly, FINRA believes that the proposed qualification examination
fee changes are equitably allocated and reasonable.
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. FINRA believes that the
proposed qualification examination fee changes have limited economic
impacts on the industry.
Economic Impact Assessment
(a) Need for the Rule
FINRA seeks to set the qualification examination fees in such a
manner as to meet expected program costs and revenues over a two-to-
three year period in order to provide firms and examination candidates
with a predicable cost environment. FINRA has determined that
operational costs for the program have increased since FINRA last
adjusted the fees in April 2012. FINRA also projects that these
operational costs will continue to increase. As a result, FINRA has
determined that a fee increase is needed to better align the
examination program fees to meet these increased costs.
(b) Economic Baseline
The current examination fee structure and expected costs associated
with the examination programs serve as an economic baseline for the
proposed rule change. Qualification examination fees are charged
directly to members that act as sponsors for individuals seeking to
obtain qualifications through the examination programs. While some
members may choose to absorb these costs directly, other members
directly pass on the costs of taking qualification examinations to the
sponsored individual. FINRA's qualification examination program
expenses have increased over the past three years and are expected to
continue to rise in the next few years. Specifically, the following
expenses have increased and are expected to further increase in the
next few years: (1) Fees that vendors charge FINRA for delivering
qualification examinations through their networks of test delivery
centers; (2) FINRA staff labor expenses associated with the development
and maintenance of the qualification examinations; and (3) technology
maintenance and enhancement expenses.\12\
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\12\ See supra note 8.
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In 2014, the total volume of qualification examinations was
130,830, sponsored by 2,813 member firms. The average volume per member
firm was 47 qualification examinations. The median volume per member
firm was four qualification examinations, as large member firms that
employed more representatives contributed to the majority of the
qualification examination enrollments. For example, the top 25 member
firms with the highest qualification examination enrollments accounted
for 52% of the total volume with an average of 2,704 enrollments per
firm. In contrast, 70% of the overall member firms had less than 10
qualification examination enrollments. Equivalently in 2014, the number
of persons enrolling for qualification examinations was 95,306, and the
average number of enrollments per person was 1.4.
Historically, the fees collected by the qualification examination
programs have provided a limited but stable contribution to FINRA's
overall revenue. In the absence of the proposed rule change, the
qualification examination programs would not be able to meet the target
contribution margin, in addition to, covering increased costs in the
coming years.
(c) Economic Impacts
Assuming stable qualification examination delivery volumes (defined
by the number and type of qualification examinations provided), the
contribution margin of the qualification examination programs is
estimated to reach the target level in 2015 and 2016 if the proposed
fee increases become effective in April 2015. Compared to 2014, the
total increase in qualification examination fees is estimated to be
$0.94 million in 2015 and $1.25 million in 2016. At the individual
examination level, no qualification examination fee will increase by
more than $15 and the majority of qualification examination fees will
increase by $5.
The increases in the qualification examination fees would impose a
burden on members or individuals that pay for these examinations.
Compared to the current fee structure, the average increase in
qualification examination fees per member firm is estimated to be $334
in 2015 and $446 in 2016. The median fee increase per member firm is
estimated to be $34 in 2015 and $45 in 2016, as large member firms are
expected to account for the majority of the examination enrollments.
For example, the top 25 member firms with the highest enrollments are
estimated to have an average increase of $18,459 in 2015 and $24,612 in
2016. For the member firms with less than 10 enrollments (which
accounted for 70% of the overall member firms), the average increase
per firm is estimated to be $26 in 2015 and $35 in 2016. In contrast
with the dollar amount increases, assuming stable qualification
examination delivery volumes, the percentage increases in qualification
examination fees for member firms vary in a narrow range of 3% to 5%
with an average of 4% in 2015 and 4% to 7% with an average of 5% in
2016. At the individual level, compared to 2014, the average
qualification examination fee increase per person is estimated to be
$10 in 2015 and $13 in 2016.
[[Page 16716]]
FINRA does not believe that the proposed rule change would impact
the competition among member firms, those who seek qualifications, or
to the provision of member services. Based on the economic impact
assessment, the proposed increases in qualification examination fees
are limited. Moreover, they do not impose significantly different
impacts on member firms with different sizes or business models.
Furthermore, FINRA does not believe that the proposed rule change will
create any competitive advantage for any individuals as all candidates
who register for a particular qualification examination will be charged
the same amount.
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 \13\ and paragraph (f)(2) of Rule 19b-4
thereunder. \14\ 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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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(2).
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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-2015-006 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-FINRA-2015-006. 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-2015-006 and should be
submitted on or before April 20, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority. \15\
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\15\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-07133 Filed 3-27-15; 8:45 am]
BILLING CODE 8011-01-P