81_FR_2939 81 FR 2928 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section (a)(4) of Rule 640, Continuing Education for Registered Persons

81 FR 2928 - Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section (a)(4) of Rule 640, Continuing Education for Registered Persons

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 11 (January 19, 2016)

Page Range2928-2930
FR Document2016-00785

Federal Register, Volume 81 Issue 11 (Tuesday, January 19, 2016)
[Federal Register Volume 81, Number 11 (Tuesday, January 19, 2016)]
[Notices]
[Pages 2928-2930]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-00785]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76880; File No. SR-Phlx-2015-118]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Section (a)(4) of Rule 640, Continuing Education for Registered Persons

January 12, 2016.
    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 December 30, 2015, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I, II, 
and III, below, of which Items I and II have been prepared by the 
Exchange. 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.
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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 Section (a)(4) of Rule 640, 
Continuing Education for Registered Persons, to provide for web-based 
delivery of the Exchange's continuing education (``CE'') program. The 
proposed rule change would phase out the current option of completing 
the Regulatory Element in a test center, delete the current option for 
in-house delivery of the Regulatory Element of the CE program and also 
delete the existing text of Rule 640(a)(4), In-Firm Delivery of the 
Regulatory Element. The Exchange's proposal, which is being filed for 
immediate effectiveness and will be operative January 4, 2016, is 
materially similar to a recent FINRA filing to amend FINRA Rule 1250, 
which was recently approved by the Securities and Exchange Commission 
(``Commission'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/, at the principal 
office of the Exchange, 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 640 consist of a Regulatory Element 
\3\ and a Firm Element.\4\ The Regulatory Element applies to all 
registered persons 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.\5\ In addition, unless otherwise determined by the 
Exchange, a registered person is required to re-take the Regulatory 
Element of the program and satisfy the program's requirements in their 
entirety in the event such person: (i) Becomes subject to any statutory 
disqualification as defined in Section 3(a)(39) of the Securities 
Exchange Act of 1934; (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 ordered as a sanction in a disciplinary action 
to re-take the Regulatory Element by any securities governmental agency 
or securities self-regulatory organization.
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    \3\ See Rule 640(a) (Regulatory Element).
    \4\ See Rule 640(b) (Firm Element).
    \5\ Pursuant to Rule 640, each registered person shall complete 
the Regulatory Element of the continuing education program on the 
occurrence of their second registration anniversary date(s), and 
every three years thereafter or as otherwise prescribed by the 
Exchange. On each occasion, the Regulatory Element must be completed 
within 120 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 this 
Rule.
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    Rule 640(a)(1) provides that the following Regulatory Elements 
administered by FINRA shall be required: The S201 Supervisor Program 
for registered principals and supervisors, 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. Currently, the Regulatory Element may be 
administered in a test center or in-firm subject to specified 
procedures.\6\
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    \6\ Under current Rule 640(a)(4), In-Firm Delivery of the 
Regulatory Element, members and member organizations are permitted 
to administer the continuing education Regulatory Element program to 
their registered persons by instituting an in-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 firm must designate a principal/officer-
in-charge to be responsible for the in-firm delivery of the 
Regulatory Element; (2) the location of the delivery site must be 
under the control of the firm; (3) the communication links and firm 
delivery computer hardware must comply with standards defined by the 
Exchange or its designated vendor; (4) the firm's written 
supervisory procedures must contain the procedures implemented to 
comply with requirements of in-firm delivery of the Regulatory 
Element continuing education; (5) all sessions must be proctored by 
an authorized person during the entire Regulatory Element continuing 
education session and proctors must be present in the session room 
or must be able to view the person(s) sitting for Regulatory Element 
continuing education through a window or by video monitor; (6) all 
appointments must be scheduled in advance using the procedures and 
software specified by the Exchange to communicate with the 
Exchange's system and designated vendor; and (7) a Letter of 
Attestation for In-Firm Delivery of Regulatory Element CE must be 
delivered.

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[[Page 2929]]

    The Firm Element consists of annual, member-developed and 
administered training programs for covered registered persons,\7\ which 
must be appropriate for the business of the member organization and, at 
a minimum, must cover the following matters concerning securities 
products, services and strategies offered by the member organization: 
(a) General investment features and associated risk factors; (b) 
suitability and sales practice considerations; and (c) applicable 
regulatory requirements.
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    \7\ Under Rule 640(b) (Persons Subject to the Firm Element), a 
``covered registered person'' means any registered person who has 
direct contact with customers in the conduct of the member 
organization's securities sales, trading or investment banking 
activities, and to the immediate supervisors of such persons.
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    Currently, 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,\8\ 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 \9\ and 
the use of rigorous security measures at test centers, which are 
appropriate for taking qualification examinations but onerous for a CE 
program.\10\ Also, according to FINRA, the test center is expensive to 
operate.\11\
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    \8\ FINRA is currently responsible for the operation of the test 
centers used for test center delivery method of the Regulatory 
Element.
    \9\ The current session time is three-and-a-half hours.
    \10\ See Securities Exchange Act Release No. 75154 (June 11, 
2015), 80 FR 34777 (June 17, 2015) (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).
    \11\ 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.\12\ According 
to FINRA, the proposed Web-based system performed well during the pilot 
in terms of both performance and accessibility.\13\ FINRA also received 
positive feedback from firms and the individual pilot participants.\14\ 
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.\15\
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    \12\ Id.
    \13\ Id.
    \14\ Id.
    \15\ Id.
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Proposal
    Based on the recent amendments to FINRA Rule 1250,\16\ the Exchange 
proposes to amend Rule 640(a)(4) to provide for a Web-based delivery 
method for completing the Regulatory Element. Specifically, the 
Exchange proposes to amend Rule 640(a)(4) to provide that the 
continuing education Regulatory Element set forth in paragraph (a) of 
Rule 640 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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    \16\ See FINRA Rule 1250 (Continuing Education Requirements). 
See also Securities Exchange Act Release No. 75581 (July 31, 2015) 
80 FR 47018 (August 6, 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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    The first phase of the Web-based delivery system was launched 
October 1, 2015 and includes the Regulatory Element of the S201 
Supervisor Program for registered principals and supervisors. The 
second phase of the Web-based delivery system will 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. 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 the test-center delivery is phased out.\17\
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    \17\ The Exchange intends to amend its fee schedule to reduce 
the cost for Regulatory Element CE from $100 to $55 if administered 
by Web-delivery. Fees for completing the Regulatory Element at a 
test center will remain $100.
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    Further, the Exchange is proposing to eliminate the current option 
for in-firm delivery and is deleting the current text of Rule 640(a)(4) 
relating to in-firm delivery of the Regulatory Element of the 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.\18\
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    \18\ Although the proposed rule change provides 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 [sic] SSN (either first five or 
last four digits) and their [sic] 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. Violation of the 
Rules of Conduct will be considered conduct inconsistent with just and 
equitable principles of trade, in violation of Rule 707, Conduct 
Inconsistent with Just and Equitable Principles of Trade. The Exchange 
is not proposing any changes to the Firm Element requirements under 
Rule 640(b).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \19\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \20\

[[Page 2930]]

in particular, in that it is designed to promote just and equitable 
principles of trade, 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) \21\ 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) \22\ 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 members and persons 
associated with members.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78f(b)(5).
    \22\ 15 U.S.C. 78f(c)(3).
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    In particular, the Exchange believes that the proposed rule change 
will improve members' 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 members 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 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.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
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)(iii) of the Act \23\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \24\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    The Exchange has requested that the Commission waive the thirty-day 
operative delay so that the proposal may become operative as of January 
4, 2016. The Commission believes that waiving the thirty day delay is 
consistent with the protection of investors and the public interest, as 
it will enable the Exchange to have the new requirements in effect at 
the same time as the other SROs. Therefore, the Commission hereby 
waives the thirty-day operative delay and designates the proposal 
operative as of January 4, 2016.\25\
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    \25\ For purposes of waiving the 30-day operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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.

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-Phlx-2015-118 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-Phlx-2015-118. 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-Phlx-2015-118 and 
should be submitted on or before February 9, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00785 Filed 1-15-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                    2928                           Federal Register / Vol. 81, No. 11 / Tuesday, January 19, 2016 / Notices

                                                    only one method. The Commission will                    have been prepared by the Exchange.                     ethical, and supervisory subjects and
                                                    post all comments on the Commission’s                   The Commission is publishing this                       sales practice standards, which must be
                                                    Internet Web site (http://www.sec.gov/                  notice to solicit comments on the                       completed within prescribed
                                                    rules/sro.shtml). Copies of the                         proposed rule change from interested                    timeframes.5 In addition, unless
                                                    submission, all subsequent                              persons.                                                otherwise determined by the Exchange,
                                                    amendments, all written statements                                                                              a registered person is required to re-take
                                                                                                            I. Self-Regulatory Organization’s
                                                    with respect to the proposed rule                                                                               the Regulatory Element of the program
                                                                                                            Statement of the Terms of Substance of
                                                    change that are filed with the                                                                                  and satisfy the program’s requirements
                                                                                                            the Proposed Rule Change
                                                    Commission, and all written                                                                                     in their entirety in the event such
                                                    communications relating to the                             The Exchange proposes to amend                       person: (i) Becomes subject to any
                                                    proposed rule change between the                        Section (a)(4) of Rule 640, Continuing                  statutory disqualification as defined in
                                                    Commission and any person, other than                   Education for Registered Persons, to                    Section 3(a)(39) of the Securities
                                                    those that may be withheld from the                     provide for web-based delivery of the                   Exchange Act of 1934; (ii) becomes
                                                    public in accordance with the                           Exchange’s continuing education (‘‘CE’’)                subject to suspension or to the
                                                    provisions of 5 U.S.C. 552, will be                     program. The proposed rule change                       imposition of a fine of $5,000 or more
                                                    available for Web site viewing and                      would phase out the current option of                   for violation of any provision of any
                                                    printing in the Commission’s Public                     completing the Regulatory Element in a                  securities law or regulation, or any
                                                    Reference Room, 100 F Street NE.,                       test center, delete the current option for              agreement with or rule or standard of
                                                    Washington, DC 20549, on official                       in-house delivery of the Regulatory                     conduct of any securities governmental
                                                    business days between the hours of                      Element of the CE program and also                      agency, securities self-regulatory
                                                    10:00 a.m. and 3:00 p.m. Copies of the                  delete the existing text of Rule 640(a)(4),             organization, or as imposed by any such
                                                    filing also will be available for                       In-Firm Delivery of the Regulatory                      regulatory or self-regulatory
                                                    inspection and copying at the principal                 Element. The Exchange’s proposal,                       organization in connection with a
                                                    office of the Exchange. All comments                    which is being filed for immediate                      disciplinary proceeding; or (iii) is
                                                    received will be posted without change;                 effectiveness and will be operative                     ordered as a sanction in a disciplinary
                                                    the Commission does not edit personal                   January 4, 2016, is materially similar to               action to re-take the Regulatory Element
                                                    identifying information from                            a recent FINRA filing to amend FINRA                    by any securities governmental agency
                                                    submissions. You should submit only                     Rule 1250, which was recently                           or securities self-regulatory
                                                    information that you wish to make                       approved by the Securities and                          organization.
                                                    available publicly. All submissions                     Exchange Commission (‘‘Commission’’).
                                                                                                                                                                       Rule 640(a)(1) provides that the
                                                    should refer to File Number SR–BX–                         The text of the proposed rule change
                                                                                                                                                                    following Regulatory Elements
                                                    2016–002 and should be submitted on                     is available on the Exchange’s Web site
                                                                                                            at http://                                              administered by FINRA shall be
                                                    or before February 9, 2016.                                                                                     required: The S201 Supervisor Program
                                                                                                            nasdaqomxphlx.cchwallstreet.com/, at
                                                      For the Commission, by the Division of
                                                                                                            the principal office of the Exchange, and               for registered principals and
                                                    Trading and Markets, pursuant to delegated                                                                      supervisors, the S501 Series 56
                                                    authority.28                                            at the Commission’s Public Reference
                                                                                                            Room.                                                   Proprietary Trader continuing education
                                                    Robert W. Errett,                                                                                               program for Series 56 registered
                                                    Deputy Secretary.                                       II. Self-Regulatory Organization’s                      persons, and the S101 General Program
                                                    [FR Doc. 2016–00786 Filed 1–15–16; 8:45 am]             Statement of the Purpose of, and                        for Series 7 and all other registered
                                                    BILLING CODE 8011–01–P                                  Statutory Basis for, the Proposed Rule                  persons. Currently, the Regulatory
                                                                                                            Change                                                  Element may be administered in a test
                                                                                                               In its filing with the Commission, the               center or in-firm subject to specified
                                                    SECURITIES AND EXCHANGE                                 Exchange included statements                            procedures.6
                                                    COMMISSION                                              concerning the purpose of and basis for
                                                                                                                                                                       5 Pursuant to Rule 640, each registered person
                                                    [Release No. 34–76880; File No. SR–Phlx–                the proposed rule change and discussed
                                                                                                                                                                    shall complete the Regulatory Element of the
                                                    2015–118]                                               any comments it received on the                         continuing education program on the occurrence of
                                                                                                            proposed rule change. The text of these                 their second registration anniversary date(s), and
                                                    Self-Regulatory Organizations;                          statements may be examined at the                       every three years thereafter or as otherwise
                                                    NASDAQ OMX PHLX LLC; Notice of                          places specified in Item IV below. The                  prescribed by the Exchange. On each occasion, the
                                                    Filing and Immediate Effectiveness of                                                                           Regulatory Element must be completed within 120
                                                                                                            Exchange has prepared summaries, set                    days after the person’s registration anniversary date.
                                                    Proposed Rule Change To Amend                           forth in sections A, B, and C below, of                 A person’s initial registration date, also known as
                                                    Section (a)(4) of Rule 640, Continuing                  the most significant aspects of such                    the ‘‘base date,’’ shall establish the cycle of
                                                    Education for Registered Persons                        statements.                                             anniversary dates for purposes of this Rule.
                                                                                                                                                                       6 Under current Rule 640(a)(4), In-Firm Delivery
                                                    January 12, 2016.                                       A. Self-Regulatory Organization’s                       of the Regulatory Element, members and member
                                                       Pursuant to Section 19(b)(1) of the                  Statement of the Purpose of, and                        organizations are permitted to administer the
                                                    Securities Exchange Act of 1934                                                                                 continuing education Regulatory Element program
                                                                                                            Statutory Basis for, the Proposed Rule                  to their registered persons by instituting an in-firm
                                                    (‘‘Act’’),1 and Rule 19b–4 thereunder,2                 Change                                                  program acceptable to the Exchange. Among others,
                                                    notice is hereby given that on December                                                                         the following procedures are required in order to
                                                    30, 2015, NASDAQ OMX PHLX LLC                           1. Purpose                                              administer the Regulatory Element of the CE
asabaliauskas on DSK5VPTVN1PROD with NOTICES




                                                    (‘‘Phlx’’ or ‘‘Exchange’’) filed with the                  The CE requirements under Rule 640                   program in-house: (1) The firm must designate a
                                                                                                                                                                    principal/officer-in-charge to be responsible for the
                                                    Securities and Exchange Commission                      consist of a Regulatory Element 3 and a                 in-firm delivery of the Regulatory Element; (2) the
                                                    (‘‘SEC’’ or ‘‘Commission’’) the proposed                Firm Element.4 The Regulatory Element                   location of the delivery site must be under the
                                                    rule change as described in Items I, II,                applies to all registered persons and                   control of the firm; (3) the communication links and
                                                    and III, below, of which Items I and II                 consists of periodic computer-based                     firm delivery computer hardware must comply with
                                                                                                                                                                    standards defined by the Exchange or its designated
                                                                                                            training on regulatory, compliance,                     vendor; (4) the firm’s written supervisory
                                                      28 17 CFR 200.30–3(a)(12).                                                                                    procedures must contain the procedures
                                                      1 15 U.S.C. 78s(b)(1).                                  3 See   Rule 640(a) (Regulatory Element).             implemented to comply with requirements of in-
                                                      2 17 CFR 240.19b–4.                                     4 See   Rule 640(b) (Firm Element).                   firm delivery of the Regulatory Element continuing



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                                                                                  Federal Register / Vol. 81, No. 11 / Tuesday, January 19, 2016 / Notices                                                     2929

                                                       The Firm Element consists of annual,                 positive feedback from firms and the                   of Rule 640(a)(4) relating to in-firm
                                                    member-developed and administered                       individual pilot participants.14 FINRA                 delivery of the Regulatory Element of
                                                    training programs for covered registered                noted that among other things, pilot                   the CE programs. The proposed Web-
                                                    persons,7 which must be appropriate for                 participants appreciated the expanded                  based delivery method will provide
                                                    the business of the member organization                 time to focus on the provided learning                 registered persons the flexibility to
                                                    and, at a minimum, must cover the                       materials without the pressure of a                    complete the Regulatory Element at a
                                                    following matters concerning securities                 timed session and the ability to resume                location of their choosing, including
                                                    products, services and strategies offered               or complete their session from where                   their private residence, at any time
                                                    by the member organization: (a) General                 they left off.15                                       during their 120-day window for
                                                    investment features and associated risk                                                                        completion of the Regulatory Element.18
                                                    factors; (b) suitability and sales practice             Proposal                                                  The Exchange notes that the Web-
                                                    considerations; and (c) applicable                         Based on the recent amendments to                   based format will include safeguards to
                                                    regulatory requirements.                                FINRA Rule 1250,16 the Exchange                        authenticate the identity of the CE
                                                       Currently, most registered persons                   proposes to amend Rule 640(a)(4) to                    candidate. For instance, prior to
                                                    complete the Regulatory Element in a                    provide for a Web-based delivery                       commencing a Web-based session, the
                                                    test center rather than in-firm. Given the              method for completing the Regulatory                   candidate will be asked to provide a
                                                    advances in Web-based technology, the                   Element. Specifically, the Exchange                    portion of their [sic] SSN (either first
                                                    Exchange believes that there is                         proposes to amend Rule 640(a)(4) to                    five or last four digits) and their [sic]
                                                    diminishing utility in the test center and              provide that the continuing education                  date of birth. This information will only
                                                    in-firm delivery methods. Moreover,                     Regulatory Element set forth in                        be used for matching data in FINRA’s
                                                    according to FINRA,8 registered persons                 paragraph (a) of Rule 640 will be                      Web-CRD system. The Web CE system
                                                    have raised concerns with the test                      administered through Web-based                         will discard this information after the
                                                    center delivery method because of the                   delivery or such other technological                   matching process. Further, before
                                                    travel involved, the limited time                       manner and format as specified by the                  commencing a Web-based session, each
                                                    currently available to complete a                       Exchange. Should the Exchange                          candidate will be required to agree to
                                                    Regulatory Element session 9 and the                    determine to administer the Regulatory                 the Rules of Conduct for Web-based
                                                    use of rigorous security measures at test               Element through a delivery mechanism                   delivery. Among other things, the Rules
                                                    centers, which are appropriate for taking               other than Web-based delivery,                         of Conduct will require each candidate
                                                    qualification examinations but onerous                  however, the Exchange would notify the                 to attest that he or she is in fact the
                                                    for a CE program.10 Also, according to                  Commission and would need to file a                    person who is taking the Web-based
                                                    FINRA, the test center is expensive to                  further rule change with the                           session. The Rules of Conduct will also
                                                    operate.11                                              Commission.                                            require that each candidate agree that
                                                       In response to the issues noted above,                  The first phase of the Web-based                    the Regulatory Element content is
                                                    FINRA engaged in extensive outreach                     delivery system was launched October                   intellectual property and that the
                                                    with the industry and completed a pilot                 1, 2015 and includes the Regulatory                    content cannot be copied or
                                                    of a Web-based delivery system for                      Element of the S201 Supervisor Program                 redistributed by any means. If the
                                                    administering the Regulatory Element.12                 for registered principals and                          Exchange discovers that a candidate has
                                                    According to FINRA, the proposed Web-                   supervisors. The second phase of the                   violated the Rules of Conduct, the
                                                    based system performed well during the                  Web-based delivery system will be                      candidate will forfeit the results of the
                                                    pilot in terms of both performance and                  launched January 4, 2016 and include                   Web-based session and may be subject
                                                    accessibility.13 FINRA also received                    the Regulatory Element of the S101                     to disciplinary action by the Exchange.
                                                                                                            General Program for Series 7 and all                   Violation of the Rules of Conduct will
                                                    education; (5) all sessions must be proctored by an
                                                    authorized person during the entire Regulatory
                                                                                                            other registered persons, including, but               be considered conduct inconsistent with
                                                    Element continuing education session and proctors       not limited to Securities Traders. The                 just and equitable principles of trade, in
                                                    must be present in the session room or must be able     Exchange is proposing to phase out test-               violation of Rule 707, Conduct
                                                    to view the person(s) sitting for Regulatory Element    center delivery by no later than six                   Inconsistent with Just and Equitable
                                                    continuing education through a window or by video
                                                    monitor; (6) all appointments must be scheduled in      months after January 4, 2016. Registered               Principles of Trade. The Exchange is not
                                                    advance using the procedures and software               persons will continue to have the option               proposing any changes to the Firm
                                                    specified by the Exchange to communicate with the       of completing the Regulatory Element in                Element requirements under Rule
                                                    Exchange’s system and designated vendor; and (7)
                                                    a Letter of Attestation for In-Firm Delivery of
                                                                                                            a test center, but they will be required               640(b).
                                                    Regulatory Element CE must be delivered.                to use the Web-based system after the
                                                                                                                                                                   2. Statutory Basis
                                                       7 Under Rule 640(b) (Persons Subject to the Firm     test-center delivery is phased out.17
                                                    Element), a ‘‘covered registered person’’ means any        Further, the Exchange is proposing to                  The Exchange believes that its
                                                    registered person who has direct contact with           eliminate the current option for in-firm               proposal is consistent with Section 6(b)
                                                    customers in the conduct of the member
                                                    organization’s securities sales, trading or             delivery and is deleting the current text              of the Act 19 in general, and furthers the
                                                    investment banking activities, and to the immediate                                                            objectives of Section 6(b)(5) of the Act 20
                                                    supervisors of such persons.                              14 Id.
                                                       8 FINRA is currently responsible for the operation     15 Id.                                                  18 Although the proposed rule change provides
                                                    of the test centers used for test center delivery         16 SeeFINRA Rule 1250 (Continuing Education          flexibility, firms may choose to impose their own
                                                    method of the Regulatory Element.                       Requirements). See also Securities Exchange Act        conditions based on their supervisory and
                                                       9 The current session time is three-and-a-half
                                                                                                            Release No. 75581 (July 31, 2015) 80 FR 47018          compliance needs. For instance, a firm that wishes
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                                                    hours.                                                  (August 6, 2015) (Order Approving a Proposed Rule      to have registered persons complete CE on the
                                                       10 See Securities Exchange Act Release No. 75154                                                            firm’s premises can do so by having the registered
                                                                                                            Change to Provide a Web-based Delivery Method for
                                                    (June 11, 2015), 80 FR 34777 (June 17, 2015) (Notice    Completing the Regulatory Element of the               person access Web-based CE from a firm device and
                                                    of Filing of a Proposed Rule Change To Provide a        Continuing Education Requirements) (SR–FINRA–          location. Moreover, firms would have to update
                                                    Web-Based Delivery Method for Completing the            2015–015).                                             their written policies and procedures regarding the
                                                    Regulatory Element of the Continuing Education            17 The Exchange intends to amend its fee             Regulatory Element to reflect the transition to Web-
                                                    Requirements) (SR–FINRA–2015–015).                      schedule to reduce the cost for Regulatory Element     based CE and communicate the update to registered
                                                       11 Id. at 34779.
                                                                                                            CE from $100 to $55 if administered by Web-            persons.
                                                       12 Id.                                                                                                         19 15 U.S.C. 78f(b).
                                                                                                            delivery. Fees for completing the Regulatory
                                                       13 Id.                                               Element at a test center will remain $100.                20 15 U.S.C. 78f(b)(5).




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                                                    2930                           Federal Register / Vol. 81, No. 11 / Tuesday, January 19, 2016 / Notices

                                                    in particular, in that it is designed to                 C. Self-Regulatory Organization’s                         Comments may be submitted by any of
                                                    promote just and equitable principles of                 Statement on Comments on the                              the following methods:
                                                    trade, to remove impediments to and                      Proposed Rule Change Received From
                                                    perfect the mechanism of a free and                      Members, Participants, or Others                          Electronic Comments
                                                    open market and a national market                          No written comments were either                           • Use the Commission’s Internet
                                                    system, and, in general to protect                       solicited or received.                                    comment form (http://www.sec.gov/
                                                    investors and the public interest.                                                                                 rules/sro.shtml); or
                                                    Additionally, the Exchange believes the                  III. Date of Effectiveness of the
                                                    proposed rule change is consistent with                  Proposed Rule Change and Timing for                         • Send an email to rule-comments@
                                                    the Section 6(b)(5) 21 requirement that                  Commission Action                                         sec.gov. Please include File Number SR–
                                                    the rules of an exchange not be designed                                                                           Phlx–2015–118 on the subject line.
                                                                                                                Because the foregoing proposed rule
                                                    to permit unfair discrimination between                  change does not: (i) Significantly affect                 Paper Comments
                                                    customers, issuers, brokers, or dealers                  the protection of investors or the public
                                                    and Section 6(c)(3) 22 of the Act, which                 interest; (ii) impose any significant                       • Send paper comments in triplicate
                                                    authorizes the Exchange to, among other                  burden on competition; and (iii) become                   to Brent J. Fields, Secretary, Securities
                                                    things, prescribe standards of financial                 operative for 30 days from the date on                    and Exchange Commission, 100 F Street
                                                    responsibility or operational capability                 which it was filed, or such shorter time                  NE., Washington, DC 20549–1090.
                                                    and standards of training, experience                    as the Commission may designate, it has                   All submissions should refer to File
                                                    and competence for its members and                       become effective pursuant to Section                      Number SR–Phlx–2015–118. This file
                                                    persons associated with members.                         19(b)(3)(A)(iii) of the Act 23 and                        number should be included on the
                                                       In particular, the Exchange believes                  subparagraph (f)(6) of Rule 19b–4                         subject line if email is used. To help the
                                                    that the proposed rule change will                       thereunder.24                                             Commission process and review your
                                                    improve members’ compliance efforts                         The Exchange has requested that the                    comments more efficiently, please use
                                                    and will allow registered persons to                     Commission waive the thirty-day                           only one method. The Commission will
                                                    spend a greater amount of time on the                    operative delay so that the proposal may                  post all comments on the Commission’s
                                                    review of CE materials and potentially                   become operative as of January 4, 2016.                   Internet Web site (http://www.sec.gov/
                                                    achieve better learning outcomes, which                  The Commission believes that waiving                      rules/sro.shtml).
                                                    will in turn enhance investor protection.                the thirty day delay is consistent with                      Copies of the submission, all
                                                    Further, while the proposed rule change                  the protection of investors and the                       subsequent amendments, all written
                                                    will provide more flexibility to members                 public interest, as it will enable the                    statements with respect to the proposed
                                                    and registered persons, it will maintain                 Exchange to have the new requirements                     rule change that are filed with the
                                                    the integrity of the Regulatory Element                  in effect at the same time as the other                   Commission, and all written
                                                    of the CE program and the CE program                     SROs. Therefore, the Commission                           communications relating to the
                                                    in general.                                              hereby waives the thirty-day operative                    proposed rule change between the
                                                                                                             delay and designates the proposal                         Commission and any person, other than
                                                    B. Self-Regulatory Organization’s                        operative as of January 4, 2016.25
                                                    Statement on Burden on Competition                                                                                 those that may be withheld from the
                                                                                                                At any time within 60 days of the                      public in accordance with the
                                                                                                             filing of the proposed rule change, the                   provisions of 5 U.S.C. 552, will be
                                                      The Exchange does not believe that                     Commission summarily may
                                                    the proposed rule change will impose                                                                               available for Web site viewing and
                                                                                                             temporarily suspend such rule change if                   printing in the Commission’s Public
                                                    any burden on competition not                            it appears to the Commission that such
                                                    necessary or appropriate in furtherance                                                                            Reference Room, 100 F Street NE.,
                                                                                                             action is: (i) Necessary or appropriate in                Washington, DC 20549, on official
                                                    of the purposes of the Act. The                          the public interest; (ii) for the protection
                                                    Exchange notes that the proposed rule                                                                              business days between the hours of
                                                                                                             of investors; or (iii) otherwise in                       10:00 a.m. and 3:00 p.m. Copies of the
                                                    change is specifically intended to                       furtherance of the purposes of the Act.
                                                    reduce the burden on firms while                                                                                   filing also will be available for
                                                                                                             If the Commission takes such action, the                  inspection and copying at the principal
                                                    preserving the integrity of the CE                       Commission shall institute proceedings
                                                    program. As described above, the Web-                                                                              office of the Exchange. All comments
                                                                                                             to determine whether the proposed rule                    received will be posted without change;
                                                    based delivery method will provide                       should be approved or disapproved.
                                                    registered persons the flexibility to                                                                              the Commission does not edit personal
                                                    complete the Regulatory Element at any                   IV. Solicitation of Comments                              identifying information from
                                                    location that they choose. Further, Web-                                                                           submissions. You should submit only
                                                                                                               Interested persons are invited to
                                                    based delivery is efficient and offers                                                                             information that you wish to make
                                                                                                             submit written data, views, and
                                                    significant cost savings over test-center                                                                          available publicly.
                                                                                                             arguments concerning the foregoing,
                                                    and in-firm deliveries. With respect to                  including whether the proposed rule                          All submissions should refer to File
                                                    the authentication process for Web-                      change is consistent with the Act.                        Number SR–Phlx–2015–118 and should
                                                    based delivery, the CE candidate’s                                                                                 be submitted on or before February 9,
                                                    personal identifying information will be                   23 15  U.S.C. 78s(b)(3)(a)(iii).                        2016.
                                                    masked and will be submitted to FINRA                      24 17  CFR 240.19b–4(f)(6). In addition, Rule 19b–        For the Commission, by the Division of
                                                    through a secure, encrypted, network.                    4(f)(6) requires a self-regulatory organization to give
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                                                                                                                                                                       Trading and Markets, pursuant to delegated
                                                    The personal identifying information                     the Commission written notice of its intent to file
                                                                                                             the proposed rule change at least five business days      authority.26
                                                    submitted via the Web-based system                       prior to the date of filing of the proposed rule          Robert W. Errett,
                                                    will be used for authentication purposes                 change, or such shorter time as designated by the
                                                    only—the information will not be stored                  Commission. The Exchange has satisfied this               Deputy Secretary.
                                                    in the Web-based system.                                 requirement.                                              [FR Doc. 2016–00785 Filed 1–15–16; 8:45 am]
                                                                                                               25 For purposes of waiving the 30-day operative
                                                                                                                                                                       BILLING CODE 8011–01–P
                                                                                                             delay, the Commission has considered the proposed
                                                      21 15 U.S.C. 78f(b)(5).                                rule’s impact on efficiency, competition, and capital
                                                      22 15 U.S.C. 78f(c)(3).                                formation. See 15 U.S.C. 78c(f).                            26 17   CFR 200.30–3(a)(12).



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Document Created: 2016-01-16 01:10:34
Document Modified: 2016-01-16 01:10:34
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation81 FR 2928 

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