80 FR 62139 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Delivery of the Regulatory Element of the Exchange's Continuing Education Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 199 (October 15, 2015)

[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)]
[Notices]
[Pages 62139-62142]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-26155]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76107; File No. SR-CBOE-2015-084]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Delivery of the Regulatory Element of 
the Exchange's Continuing Education Program

October 8, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 30, 2015, Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities 
and Exchange Commission (the ``Commission'') the proposed rule change 
as described in Items I, II, and III below, which Items have been 
prepared by the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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)(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

    The Exchange proposes to amend Rule 9.3A (Continuing Education for 
Registered Persons) to provide for Web-based delivery of the Regulatory 
Element of the Exchange's continuing education (``CE'') program. The 
text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at 
the Exchange's Office of the Secretary, 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, the Exchange 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. The Exchange 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 CE requirements under Rule 9.3A consist of a Regulatory Element 
\5\ and a Firm Element.\6\ The Regulatory Element applies to all 
registered persons \7\ and consists of periodic computer-based training 
on regulatory, compliance, ethical, and supervisory subjects and sales 
practice standards, which must be completed within prescribed 
timeframes.\8\ In addition, a registered person is required to retake 
the Regulatory Element in the event that such person: (i) Becomes 
subject to any statutory disqualification as defined in Section 
3(a)(39) of the Securities Exchange Act of 1934 (the ``Act''); (ii) 
becomes subject to suspension or to the imposition of a fine of $5,000 
or more for violation of any provision of any securities law or 
regulation, or any agreement with or rule or standard of conduct of any 
securities governmental agency, securities self-regulatory 
organization, or as imposed by any such regulatory or self-regulatory 
organization in connection with a disciplinary proceeding; or (iii) is

[[Page 62140]]

ordered as a sanction in a disciplinary action to re-take the 
Regulatory Element by any securities governmental agency or securities 
self-regulatory organization.\9\ Currently, the Exchange offers the 
following Regulatory Elements for Exchange registered persons: The S201 
Supervisor Program for registered principals and supervisors; the S106 
Series 6 Program for Series 6 registered persons; the S501 Series 56 
Proprietary Trader continuing education program for Series 56 
registered persons, and the S101 General Program for Series 7 and all 
other registered persons.\10\ Currently, the Regulatory Element may be 
administered in a test center or in-firm subject to specified 
procedures.\11\
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    \5\ See Rule 9.3A(a) (Regulatory Element).
    \6\ See Rule 9.3A(c) (Firm Element).
    \7\ For purposes of the Regulatory Element, a ``registered 
person'' means a Trading Permit Holder (``TPH''), associated person, 
and/or Representative approved by and registered with the Exchange. 
See Interpretation and Policy .01 to Rule 9.3A.
    \8\ Pursuant to Rule 9.3A(a), each registered person shall 
complete the Regulatory Element of the continuing education program 
beginning with the occurrence of their second registration 
anniversary date and every three years thereafter, or as otherwise 
prescribed by the Exchange. On each occasion, the Regulatory Element 
must be completed within one hundred twenty 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 the Rule. The content of the 
Regulatory Element of the program shall be determined by the 
Exchange for each registration category of persons subject to the 
Rule.
    \9\ See Rule 9.3A(a)(2) (Disciplinary Actions).
    \10\ See Rule 9.3A(a)(3) (Required Programs).
    \11\ Under current Rule 9.3A(b) (In-House Delivery of Regulatory 
Element), TPH organizations are permitted to administer the 
Regulatory Element of the CE program to their registered persons by 
instituting a firm program acceptable to the Exchange. Among others, 
the following procedures are required in order to administer the 
Regulatory Element of the CE program in-house: (1) The TPH 
organization must designate a senior officer or partner to be 
responsible for the firm's delivery of the Regulatory Element of the 
CE program; (2) the location of the delivery site must be under the 
control of the TPH organization; (3) the communication links and 
firm delivery computer hardware must comply with standards defined 
by the Exchange or its designated vendor; (4) the TPH organization's 
written supervisory procedures must contain the procedures 
implemented to comply with the requirements of its delivery of 
Regulatory Element continuing education; (5) all sessions must be 
proctored by an authorized person during the entire Regulatory 
Element continuing education session; (6) all appointments must be 
scheduled in advance using the procedures and software specified by 
the Exchange, its agent or designated vendor; and (7) a Letter of 
Attestation for In-Firm Delivery of Regulatory Element CE must be 
completed.
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    The Firm Element consists of annual, TPH organization-developed and 
administered training programs for covered registered persons,\12\ 
which must be appropriate for the business of the TPH or TPH 
organization and, at a minimum, must cover the following matters 
concerning securities products, services and strategies offered by the 
Trading Permit Holder or TPH organization: (a) General investment 
features and associated risk factors; (b) suitability and sales 
practice considerations; and (c) applicable regulatory requirements.
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    \12\ Under Rule 9.3A(c)(1) (Persons Subject to the Firm 
Element), a ``covered registered person'' means any registered 
person who has a Series 56 registration or direct contact with 
customers in the conduct of the TPH's or TPH organization's 
securities sales, trading or investment banking activities, and to 
the immediate supervisors of such persons.
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    Today, most registered persons complete the Regulatory Element in a 
test center rather than in-firm. Given the advances in Web-based 
technology, the Exchange believes that there is diminishing utility in 
the test center and in-firm delivery methods. Moreover, according to 
FINRA,\13\ TPHs and registered persons have raised concerns with the 
test center delivery method because of the travel involved, the limited 
time currently available to complete a Regulatory Element session \14\ 
and the use of rigorous security measures at test centers, which are 
appropriate for taking qualification examinations, but onerous for a CE 
program.\15\ Also, according to FINRA, the test center is expensive to 
operate.\16\
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    \13\ FINRA is currently responsible for the operation of the 
test centers used for test center delivery method of the Regulatory 
Element.
    \14\ The current session time is three-and-a-half hours.
    \15\ See Securities Exchange Act Release No. 75154 (June 11, 
2015), 80 FR 34777 (Notice of Filing of a Proposed Rule Change To 
Provide a Web-Based Delivery Method for Completing the Regulatory 
Element of the Continuing Education Requirements) (SR-FINRA-2015-
015).
    \16\ Id. at 34779.
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    In response to the issues noted above, FINRA engaged in extensive 
outreach with the industry and completed a pilot of a Web-based 
delivery system for administering the Regulatory Element.\17\ According 
to FINRA, the proposed Web-based system performed well during the pilot 
in terms of both performance and accessibility.\18\ FINRA also received 
positive feedback from firms and the individual pilot participants.\19\ 
FINRA noted that among other things, pilot participants appreciated the 
expanded time to focus on the provided learning materials without the 
pressure of a timed session and the ability to resume or complete their 
session from where they left off.\20\
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    \17\ Id.
    \18\ Id.
    \19\ Id.
    \20\ Id.
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Proposal
    Based on the recent amendments to FINRA Rule 1250,\21\ the Exchange 
proposes to amend Rule 9.3A to provide for a Web-based delivery method 
for completing the Regulatory Element. Specifically, the Exchange 
proposes to amend Rule 9.3A(b) to provide that the continuing education 
Regulatory Element set forth in paragraph (a) of Rule 9.3A will be 
administered through Web-based delivery or such other technological 
manner and format as specified by the Exchange. Should the Exchange 
determine to administer the Regulatory Element through a delivery 
mechanism other than Web-based delivery, however, the Exchange would 
notify the Commission and would need to file a further rule change with 
the Commission.
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    \21\ See FINRA Rule 1250 (Continuing Education Requirements). 
See also Securities Exchange Act Release No. 75581 (July 31, 2015) 
(Order Approving a Proposed Rule Change to Provide a Web-based 
Delivery Method for Completing the Regulatory Element of the 
Continuing Education Requirements) (SR-FINRA-2015-015).
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    In addition to proposing to amend Rule 9.3A to provide for a Web-
based delivery method for completing the Regulatory Element, the 
Exchange also proposes to remove the option for Series 56 registered 
persons to participate in the S501 Series 56 Proprietary Trader 
continuing education program in order to satisfy the Regulatory 
Element. The S501 Series 56 Proprietary Trader continuing education 
program is being phased out along with the Series 56 Proprietary Trader 
qualification examination and being replaced with the Series 57 
Securities Trader qualification examination.\22\ As a result, effective 
January 4, 2016, the S501 Series 56 Proprietary Trader continuing 
education program for Series 56 registered persons will cease to exist. 
In place of the S501 Series 56 Proprietary Trader continuing education 
program for Series 56 registered persons, the Exchange proposes that 
Series 57 registered persons be permitted to enroll in the S101 General 
Program for Series 7 and all other registered persons.
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    \22\ See Securities Exchange Act Release No. 75783 (August 28, 
2015) (Order Approving a Proposed Rule Change to Establish the 
Securities Trader and Securities Trader Principal Registration 
Categories) (SR-FINRA-2015-017).
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    The first phase of the Web-based delivery system would be launched 
October 1, 2015 and include the Regulatory Element of the S106 Program 
for Series 6 registered persons and the S201 Supervisor Program for 
registered principals and supervisors. The second phase of the Web-
based delivery system would be launched January 4, 2016 and include the 
Regulatory Element of the S101 General Program for Series 7 and all 
other registered persons, including, but not limited to Securities 
Traders.\23\
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    \23\ The Exchange has submitted a proposal to the Commission 
that would replace the Proprietary Trader registration category as 
referred to in Interpretation and Policy .08 to Rule 3.6A 
(Registration and Qualification of Trading Permit Holders and 
Associated Persons) with the Securities Trader registration category 
effective January 4, 2016.
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    The Exchange is proposing to phase out test-center delivery by no 
later than six months after January 4, 2016. Registered persons will 
continue to have the option of completing the Regulatory Element in a 
test center, but they will be required to use the Web-based system 
after that date.\24\
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    \24\ The Exchange anticipates filing fee filings to reduce the 
cost for Web-delivery of the Regulatory Element from $100 to $55 by 
October 1, 2015 for the S106 and S201 Regulatory Element Programs 
and by January 4, 2016 for Web-delivery of the S101 Regulatory 
Element Program. Fees for completing the Regulatory Element of the 
respective programs at a test center will remain $100.

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[[Page 62141]]

    Further, the Exchange is proposing to phase out the current option 
for in-firm delivery on a rolling basis as each Regulatory Element 
program becomes available for Web-based delivery. Firms will not be 
able to establish new in-firm delivery programs after October 1, 2015. 
Moreover, firms that have pre-existing in-firm delivery programs 
established prior to October 1, 2015 would not be able to use that 
delivery method for the S106 and S201 Regulatory Element programs after 
October 1, 2015, which is the anticipated launch date of Web-based 
delivery for these programs. However, such firms may continue to use 
their pre-existing in-firm delivery programs for the S501 Regulatory 
Element and S101 Regulatory Element program until January 4, 2016, 
which is the anticipated launch date of Web-based delivery for the S101 
program.\25\ The Exchange is also proposing to eliminate Rule 9.3A(b) 
relating to in-firm delivery of the Regulatory Element of these CE 
programs. The proposed Web-based delivery method will provide 
registered persons the flexibility to complete the Regulatory Element 
at a location of their choosing, including their private residence, at 
any time during their 120-day window for completion of the Regulatory 
Element.\26\
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    \25\ No firms currently provide the Regulatory Element of the 
S501 program in-house.
    \26\ Although the proposed rule change provides such 
flexibility, firms may choose to impose their own conditions based 
on their supervisory and compliance needs. For instance, a firm that 
wishes to have registered persons complete CE on the firm's premises 
can do so by having the registered person access Web-based CE from a 
firm device and location. Moreover, firms would have to update their 
written policies and procedures regarding the Regulatory Element to 
reflect the transition to Web-based CE and communicate the update to 
registered persons.
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    The Exchange notes that the Web-based format will include 
safeguards to authenticate the identity of the CE candidate. For 
instance, prior to commencing a Web-based session, the candidate will 
be asked to provide a portion of their SSN (either first five or last 
four digits) and their date of birth. This information will only be 
used for matching data in FINRA's Web-CRD system. The Web CE system 
will discard this information after the matching process. Further, 
before commencing a Web-based session, each candidate will be required 
to agree to the Rules of Conduct for Web-based delivery. Among other 
things, the Rules of Conduct will require each candidate to attest that 
he or she is in fact the person who is taking the Web-based session. 
The Rules of Conduct will also require that each candidate agree that 
the Regulatory Element content is intellectual property and that the 
content cannot be copied or redistributed by any means. If the Exchange 
discovers that a candidate has violated the Rules of Conduct, the 
candidate will forfeit the results of the Web-based session and may be 
subject to disciplinary action by the Exchange.\27\ Violation of the 
Rules of Conduct will be considered conduct inconsistent with high 
standards of commercial honor and just and equitable principles of 
trade, in violation of Rule 4.1 (Just and Equitable Principles of 
Trade). The Exchange is not proposing any changes to the Firm Element 
requirements under Rule 9.3A other than to change references from the 
Series 56 Proprietary Trader registration category to the Series 57 
Securities Trader registration category, consistent with recently 
proposed changes to Rule 3.6A (Qualification and Registration of 
Trading Permit Holders and Associated Persons) and NASD Rules 1022(a) 
(General Securities Principal) and 1032(f) (Limited Representative--
Securities Trader).\28\ The Exchange will announce the effective date 
for Web-delivery of the Regulatory Element of the S106 Program for 
Series 6 registered persons and the S201 Supervisor Program for 
registered principals and supervisors in a Regulatory Circular in 
October 2015 and the launch of Web-delivery of the Regulatory Element 
of the S101 General Program for Series 7 and all other registered 
persons, including, but not limited to Securities Traders in a 
Regulatory Circular at a date prior to January 4, 2016.
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    \27\ See generally Chapter XVII (Discipline).
    \28\ See Securities Exchange Act Release No. 75394 (July 8, 
2015), 80 FR 41119 (July 14, 2015) (Notice of Filing of a Proposed 
Rule Change to Establish the Securities Trader and Securities Trader 
Principal Registration Categories) (SR-FINRA-2015-017).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\29\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \30\ requirements that the rules 
of an exchange be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \31\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers and Section 6(c)(3) \32\ of the 
Act, which authorizes the Exchange to, among other things, prescribe 
standards of financial responsibility or operational capability and 
standards of training, experience and competence for its Trading Permit 
Holders and person associated with Trading Permit Holders.
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    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
    \31\ Id.
    \32\ 15 U.S.C. 78f(c)(3).
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    In particular, the Exchange believes that the proposed rule change 
will improve TPHs' compliance efforts and will allow registered persons 
to spend a greater amount of time on the review of CE materials and 
potentially achieve better learning outcomes, which will in turn 
enhance investor protection. Further, while the proposed rule change 
will provide more flexibility to TPHs and registered persons, it will 
maintain the integrity of the Regulatory Element of the CE program and 
the CE program in general.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange notes that the 
proposed rule change is specifically intended to reduce the burden on 
firms while preserving the integrity of the CE program. As described 
above, the Web-based delivery method will provide registered persons 
the flexibility to complete the Regulatory Element at any location that 
they choose. Further, Web-based delivery is efficient and offers 
significant cost savings over test-center and in-firm deliveries. With 
respect to the authentication process for Web-based delivery, the CE 
candidate's personal identifying information will be masked and will be 
submitted to FINRA through a secure, encrypted, network. The personal 
identifying information submitted via the Web-based system will be used 
for authentication purposes only--the information will not be stored in 
the Web-based system.

[[Page 62142]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \33\ and 
Rule 19b-4(f)(6) \34\ thereunder. 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 will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
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    \33\ 15 U.S.C. 78s(b)(3)(A).
    \34\ 17 CFR 240.19b-4(f)(6).
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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-CBOE-2015-084 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-CBOE-2015-084. 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 the filing also will be available 
for 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-CBOE-2015-084 and should be 
submitted on or before November 5, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26155 Filed 10-14-15; 8:45 am]
BILLING CODE 8011-01-P