[Federal Register Volume 63, Number 19 (Thursday, January 29, 1998)]
[Notices]
[Pages 4509-4510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2184]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39576; File No. SR-MSRB-98-2]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Municipal Securities Rulemaking Board Relating to Rule G-
3 on Professional Qualifications
January 23, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1935
(``Act''),\1\ notice is hereby given that on January 21, 1998, the
Municipal Securities Rulemaking Board (``Board'' or ``MSRB'') filed
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change (File No. SR-MSRB-98-2). The proposed rule
change is described in Items I, II, and III below, which Items have
been prepared by the Board. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested
persons.\2\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ The Commission is concurrently publishing notice of parallel
proposed rule changes from other self-regulatory organizations
relating to continuing education for registered persons. See
Securities Exchange Act Releases Nos. 39574 (NASD); 39575 (CBOE);
and 39577 (NYSE).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Board is filing herewith an amendment to rule G-3, on
professional qualifications (hereinafter referred to as the ``proposed
rule change''). The proposed rule change consists of an amendment to
rule G-3 regarding the Board's continuing education requirements. The
text of the proposed rule change may be examined at the places
specified in Item IV below.
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 Board 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
texts of these statements may be examined at the places specified in
Item IV below. The Board 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 is to revise the Board's continuing
education requirements contained in rule G-3(h). Rule G-3(h) provides
for a continuing education program for registered persons of brokers,
dealers and municipal securities dealers. The program, which is uniform
within the securities industry, consists of two parts--a Regulatory
Element and a Firm Element. The Regulatory Element requires registered
persons to participate in interactive computer-based training at
specified intervals and encompasses regulatory and compliance issues,
sales practice concerns and business ethics.
The Regulatory Element program applies generally to all registered
persons and currently does not discern between registration types or
categories. The exiting program contains content common to registered
representatives, supervisory persons as well as other registration
categories. The Securities Industry/Regulatory Council on Continuing
Education (a council of broker-dealer and self-regulatory organization
(``SRO'') \3\ representatives that oversees and provides ongoing
development and operation of the program) has recommended development
of a new program component specifically for supervisors. In addition,
it is contemplated that in the future, specific programs may be
implemented for other registration categories. The proposed rule change
will allow for the Board to require new programs as appropriate with
customized training for various registration categories, with the
supervisor's program being the first such initiative. For purposes of
Board rules, the following registration categories shall be deemed to
be included in the supervisory categories: Series 8 (Municipal
Securities Sales Supervisor Examination); Series 27 (Financial and
Operations Principal Examination); and Series 53 (Municipal Securities
Principal Qualification Examination).
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\3\ In addition to the Board, SROs represented on the Council
include the American Stock Exchange, Chicago Board Options Exchange,
National Association of Securities Dealers, New York Stock Exchange
and Philadelphia Stock Exchange.
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The proposed rule change also addresses the time-frames at which
registered persons must participate in the Regulatory Element computer-
based training. Rule G-3(h) currently requires all registered persons
to complete the training on three occasions, i.e., their second, fifth
and tenth registration anniversaries, and also when they are the
subject of significant disciplinary action(s). Once persons are
registered for more than ten years, they are graduated from the program
and are not required to participate further in the Regulatory Element
unless they become subject to significant disciplinary action. The
Council has recommended that this requirement be revised to require
ongoing participation in the program by registered persons. In
accordance with that recommendation, the proposed rule change will
require participation in the Regulatory Element throughout a registered
person's career, specifically on the second registration anniversary
and every three years thereafter (i.e, the fifth, eight, eleventh, etc,
anniversaries), with no graduation from the program.
The proposed rule change will allow a one-time exemption for
persons currently graduated from the program by providing that those
persons who have been registered for more than ten years as of the
effective date of the rule amendments, and who have not been the
subject of a disciplinary action during the past ten years, will
continue to be excluded from required ongoing participation in the
Regulatory Element. However, persons registered in a
[[Page 4510]]
supervisory capacity will have to have been registered in a supervisory
capacity for more than 10 years in order to be covered by this one-time
provision for graduation from participation in the program. Therefore,
those supervisors who have graduated from the program requirements
based on their initial registration date who have not completed 10
years as a supervisor, will be required to re-enter the program.
The Firm Element requires that each broker, dealer and municipal
securities dealer conduct annually an analysis of their training needs
and administer such training, as is appropriate, to their registered
persons who have direct contact with customers and the immediate
supervisors of such registered persons, on an ongoing basis in topics
specifically related to their business such as new products, sales
practices, risk disclosure and new regulatory requirements and
concerns. The proposed rule change will require brokers, dealers and
municipal securities dealers to specifically focus on supervisory
training needs in conducting their analysis of training needs and, if
it is determined that there is a specific need for supervisory
training, it must be addressed in the Firm Element training plan.
These amendments, which will be adopted uniformly with rule changes
of the other SRO Council members, will significantly enhance the
continuing education program by requiring all registered persons to
participate in the Regulatory Element on an ongoing basis throughout
their securities industry careers. In addition, the Board believes that
rule amendments allowing for the implementation of a program
specifically geared towards supervisors and the issues that may arise
in that role will result in more effective regulatory training of
supervisors as well as improved front-line supervision overall of
brokers, dealers and municipal securities dealers.
2. Statutory Basis
The Board believes the proposed rule change is consistent with the
Act and the rules and regulations thereunder. The Board believes that
the proposed rule change is consistent with Section 15B(b)(2)(A) of the
Act,\4\ which states that the rules of the Board, as a minimum, shall
provide such standards of training, experience, competence, and such
other qualifications as the Board finds necessary or appropriate in the
public interest or for the protection of investors. The proposed rule
change is also consistent with Section 15B(b)(2)(C) of the Act,\5\
which requires, in pertinent part, that the Board's rules be designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principals of trade, to remove impediments to and
perfect the mechanism of a free and open market in municipal
securities, and, in general, to protect investors and the public
interest. Pursuant to this statutory obligation, the Board has proposed
this rule change in order to enhance the established continuing
education program for registered persons.
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\4\ 15 U.S.C. 78o-4.
\5\ 15 U.S.C. 78o-4.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act, since it would apply equally to
all brokers, dealers and municipal securities dealers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the self-regulatory organization consents, the Commission will:
A. By order approve such proposed rule change, or
B. Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested people are invited to submit written data, views, and
arguments concerning the foregoing. People making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submissions, 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 inspection and copying in the
Commission's Public Reference Room. Copies of the filing will also be
available for inspection and copying at the Board's principal offices.
All submissions should refer to File No. SR-MSRB-98-2 and should be
submitted by February 19, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200-30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-2184 Filed 1-28-98; 8:45 am]
BILLING CODE 8010-01-M