81 FR 2935 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Section (a)(6) of Rule 1120, Continuing Education Requirements

SECURITIES AND EXCHANGE COMMISSION

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

Page Range		2935-2937
FR Document		2016-00787
Federal Register, Volume 81 Issue 11 (Tuesday, January 19, 2016)
[Federal Register Volume 81, Number 11 (Tuesday, January 19, 2016)]
[Notices]
[Pages 2935-2937]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-00787]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76874; File No. SR-NASDAQ-2015-167]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Section (a)(6) of Rule 1120, Continuing Education Requirements

January 12, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that, on December 30, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items 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)(6) of Rule 1120 
(Continuing Education Requirements) 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, and eliminate the current option 
for in-house delivery of the Regulatory Element of the CE program. The 
amendments will delete the current text of Rule 1120(a)(6) (In-Firm 
Delivery of the Regulatory Element). The Exchange's proposal is 
materially similar to a recent FINRA filing to amend FINRA Rule 1250, 
which was recently approved by the Securities and Exchange 
Commission.\3\ The proposed rule change will become operative January 
4, 2016.
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    \3\ See 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). See also Securities Exchange Act Release No. 76107 
(October 8, 2015), 80 FR 62139 (October 15, 2015) (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) (SR-CBOE-2015-084).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.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 1120 consist of a Regulatory Element 
\4\ and a Firm Element.\5\ The Regulatory Element applies to all 
registered persons \6\ 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.\7\ In addition, a registered person is required to retake 
the Regulatory Element in the event that such person (A) is subject to 
any statutory disqualification as defined in Section 3(a)(39) of the 
Act; (B) is 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 (C) is 
ordered as a sanction in a disciplinary action to retake the Regulatory 
Element by any securities governmental agency or self-regulatory 
organization. Rule 1120(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.\8\
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    \4\ See Rule 1120(a) (Regulatory Element).
    \5\ See Rule 1120(b) (Firm Element).
    \6\ For purposes of the Regulatory Element, a ``registered 
person'' means any person registered with Nasdaq as a 
representative, principal, or assistant representative pursuant to 
the Rule 1020, 1030, 1040, and 1110 Series. See Rule 1120(a)(5).
    \7\ Pursuant to Rule 1120(a)(1), 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 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 the Rule. The content of the Regulatory Element of 
the program shall be determined by Nasdaq and shall be appropriate 
to either the registered representative or principal status of the 
person subject to the Rule.
    \8\ Pursuant to Rule 1120(a)(6), Nasdaq Members that are also 
FINRA members are currently permitted to administer the continuing 
education Regulatory Element program to their registered persons by 
instituting an in-firm program to the extent such program has been 
deemed acceptable to FINRA in accordance with NASD Rule 1120(a)(6). 
(The Exchange notes that NASD Rule 1120 has previously been 
superseded by FINRA Rule 1250 which FINRA has amended, as discussed 
above, to delete the in-firm CE option on a phased basis.) Nasdaq 
and FINRA are parties to the Regulatory Contract pursuant to which 
FINRA has agreed to perform certain functions on behalf of Nasdaq. 
Therefore, Nasdaq members are complying with Nasdaq Rule 1120(a)(6) 
by complying with NASD Rule 1250. In addition, functions performed 
by FINRA, FINRA departments, and FINRA staff under Nasdaq Rule 
1120(a)(6) are being performed by FINRA on behalf of Nasdaq. Nasdaq 
Members that are not FINRA members are not permitted to institute 
in-firm delivery of the Regulatory Element program.
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    The Firm Element consists of annual, member-developed and 
administered training programs for covered registered persons,\9\ which 
must be appropriate for

[[Page 2936]]

the business of the member and, at a minimum, must cover the following 
matters concerning securities products, services and strategies offered 
by the member: (i) General investment features and associated risk 
factors; (ii) suitability and sales practice considerations; and (iii) 
applicable regulatory requirements.
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    \9\ Under Rule 1120(b)(1) (Persons Subject to the Firm Element), 
a ``covered registered person'' means any person registered with a 
member who has direct contact with customers in the conduct of the 
member's securities sales, trading and 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,\10\ 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 \11\ and 
the use of rigorous security measures at test centers, which are 
appropriate for taking qualification examinations but onerous for a CE 
program.\12\ Also, according to FINRA, the test center is expensive to 
operate.\13\
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    \10\ FINRA is currently responsible for the operation of the 
test centers used for test center delivery method of the Regulatory 
Element.
    \11\ The current session time is three-and-a-half hours.
    \12\ 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).
    \13\ 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.\14\ According 
to FINRA, the proposed Web-based system performed well during the pilot 
in terms of both performance and accessibility.\15\ FINRA also received 
positive feedback from firms and the individual pilot participants.\16\ 
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.\17\
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    \14\ Id.
    \15\ Id.
    \16\ Id.
    \17\ Id.
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Proposal
    Based on the recent amendments to FINRA Rule 1250,\18\ the Exchange 
proposes to amend Rule 1120(a)(6) to provide for a Web-based delivery 
method for completing the Regulatory Element. Specifically, the 
Exchange proposes to amend Rule 1120(a)(6) to provide that the 
continuing education Regulatory Element set forth in paragraph (a) of 
Rule 1120(a) 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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    \18\ 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.\19\
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    \19\ The Exchange intends to amend Rule 7003, Registration and 
Processing Fees, to reduce the cost for Web-delivery of the 
Regulatory Element from $100 to $55 if administered by Web-delivery. 
Fees for completing the CE 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 language in Rule 
1120(a)(6) relating to in-firm delivery of the CE Regulatory Element. 
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.\20\
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    \20\ 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 high 
standards of commercial honor and just and equitable principles of 
trade, in violation of Rule 2010A (Standards of Commercial Honor and 
Principles of Trade). The Exchange is not proposing any changes to the 
Firm Element requirements under Rule 1120(b).
 2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\21\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\22\ 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

[[Page 2937]]

proposed rule change is consistent with the Section 6(b)(5) \23\ 
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) \24\ 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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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 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 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.

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 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \25\ and Rule 19b-4(f)(6) 
thereunder.\26\
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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative on January 4, 2016. The 
Exchange states the Exchange believes that the proposed rule change 
will improve members' compliance efforts and will allow registered 
persons to spend more time on the review of CE materials and 
potentially achieve better learning outcomes, which will in turn 
enhance investor protection. In addition, waiving the operative delay 
will make NASDAQ's rules consistent with those of the other exchanges. 
For these reasons, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission designates the proposed rule 
change to be operative on January 4, 2016.\27\
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    \27\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-NASDAQ-2015-167 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-NASDAQ-2015-167. 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-NASDAQ-2015-167 and should 
be submitted on or before February 9, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00787 Filed 1-15-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 11 / Tuesday, January 19, 2016 / Notices 2935

Office of Information and Regulatory the Regulatory Element). The person is required to retake the
Affairs, Office of Management and Exchange’s proposal is materially Regulatory Element in the event that
Budget, Room 10102, New Executive similar to a recent FINRA filing to such person (A) is subject to any
Office Building, Washington, DC 20503, amend FINRA Rule 1250, which was statutory disqualification as defined in
or by sending an email to: Shagufta_ recently approved by the Securities and Section 3(a)(39) of the Act; (B) is subject
Ahmed@omb.eop.gov; and (ii) Pamela Exchange Commission.3 The proposed to suspension or to the imposition of a
Dyson, Director/Chief Information rule change will become operative fine of $5,000 or more for violation of
Officer, Securities and Exchange January 4, 2016. any provision of any securities law or
Commission, c/o Remi Pavlik-Simon, The text of the proposed rule change regulation, or any agreement with or
100 F Street NE., Washington, DC 20549 is available on the Exchange’s Web site rule or standard of conduct of any
or send an email to: PRA_Mailbox@ at http://nasdaq.cchwallstreet.com, at securities governmental agency,
sec.gov. Comments must be submitted to the principal office of the Exchange, and securities self-regulatory organization,
OMB within 30 days of this notice. at the Commission’s Public Reference or as imposed by any such regulatory or
Room. self-regulatory organization in
Dated: January 12, 2016.
II. Self-Regulatory Organization’s connection with a disciplinary
Robert W. Errett,
Statement of the Purpose of, and proceeding; or (C) is ordered as a
Deputy Secretary. sanction in a disciplinary action to
[FR Doc. 2016–00788 Filed 1–15–16; 8:45 am] Statutory Basis for, the Proposed Rule
Change retake the Regulatory Element by any
BILLING CODE 8011–01–P securities governmental agency or self-
In its filing with the Commission, the regulatory organization. Rule 1120(a)(1)
Exchange included statements provides that the following Regulatory
SECURITIES AND EXCHANGE concerning the purpose of and basis for Elements administered by FINRA shall
COMMISSION the proposed rule change and discussed be required: the S201 Supervisor
any comments it received on the Program for registered principals and
[Release No. 34–76874; File No. SR–
NASDAQ–2015–167]
proposed rule change. The text of these supervisors, the S501 Series 56
statements may be examined at the Proprietary Trader continuing education
Self-Regulatory Organizations; The places specified in Item IV below. The program for Series 56 registered
NASDAQ Stock Market LLC; Notice of Exchange has prepared summaries, set persons, and the S101 General Program
Filing and Immediate Effectiveness of forth in sections A, B, and C below, of for Series 7 and all other registered
Proposed Rule Change To Amend the most significant aspects of such persons. Currently, the Regulatory
Section (a)(6) of Rule 1120, Continuing statements. Element may be administered in a test
Education Requirements A. Self-Regulatory Organization’s center or in-firm subject to specified
Statement of the Purpose of, and procedures.8
January 12, 2016. The Firm Element consists of annual,
Statutory Basis for, the Proposed Rule
Pursuant to Section 19(b)(1) of the member-developed and administered
Change
Securities Exchange Act of 1934 training programs for covered registered
(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 1. Purpose persons,9 which must be appropriate for
notice is hereby given that, on December The CE requirements under Rule 1120
30, 2015, The NASDAQ Stock Market consist of a Regulatory Element 4 and a otherwise prescribed by the Exchange. On each
LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed Firm Element.5 The Regulatory Element occasion, the Regulatory Element must be
completed within 120 days after the person’s
with the Securities and Exchange applies to all registered persons 6 and registration anniversary date. A person’s initial
Commission (‘‘SEC’’ or ‘‘Commission’’) consists of periodic computer-based registration date, also known as the ‘‘base date,’’
the proposed rule change as described training on regulatory, compliance, shall establish the cycle of anniversary dates for
in Items I and II below, which Items purposes of the Rule. The content of the Regulatory
ethical, and supervisory subjects and Element of the program shall be determined by
have been prepared by the Exchange. sales practice standards, which must be Nasdaq and shall be appropriate to either the
The Commission is publishing this completed within prescribed registered representative or principal status of the
notice to solicit comments on the timeframes.7 In addition, a registered person subject to the Rule.
proposed rule change from interested 8 Pursuant to Rule 1120(a)(6), Nasdaq Members

that are also FINRA members are currently
persons. 3 See Securities Exchange Act Release No. 75581
permitted to administer the continuing education
(July 31, 2015), 80 FR 47018 (August 6, 2015) Regulatory Element program to their registered
I. Self-Regulatory Organization’s (Order Approving a Proposed Rule Change to persons by instituting an in-firm program to the
Statement of the Terms of Substance of Provide a Web-based Delivery Method for extent such program has been deemed acceptable to
the Proposed Rule Change Completing the Regulatory Element of the FINRA in accordance with NASD Rule 1120(a)(6).
Continuing Education Requirements) (SR–FINRA– (The Exchange notes that NASD Rule 1120 has
The Exchange proposes to amend 2015–015). See also Securities Exchange Act previously been superseded by FINRA Rule 1250
section (a)(6) of Rule 1120 (Continuing Release No. 76107 (October 8, 2015), 80 FR 62139 which FINRA has amended, as discussed above, to
(October 15, 2015) (Notice of Filing and Immediate
Education Requirements) to provide for Effectiveness of a Proposed Rule Change Relating to
delete the in-firm CE option on a phased basis.)
web-based delivery of the Exchange’s Nasdaq and FINRA are parties to the Regulatory
Delivery of the Regulatory Element of the Contract pursuant to which FINRA has agreed to
continuing education (‘‘CE’’) program. Exchange’s Continuing Education Program) (SR– perform certain functions on behalf of Nasdaq.
The proposed rule change would phase CBOE–2015–084). Therefore, Nasdaq members are complying with
4 See Rule 1120(a) (Regulatory Element).
out the current option of completing the Nasdaq Rule 1120(a)(6) by complying with NASD
5 See Rule 1120(b) (Firm Element).
Rule 1250. In addition, functions performed by
asabaliauskas on DSK5VPTVN1PROD with NOTICES

Regulatory Element in a test center, and 6 For purposes of the Regulatory Element, a FINRA, FINRA departments, and FINRA staff under
eliminate the current option for in- ‘‘registered person’’ means any person registered Nasdaq Rule 1120(a)(6) are being performed by
house delivery of the Regulatory with Nasdaq as a representative, principal, or FINRA on behalf of Nasdaq. Nasdaq Members that
Element of the CE program. The assistant representative pursuant to the Rule 1020, are not FINRA members are not permitted to
amendments will delete the current text 1030, 1040, and 1110 Series. See Rule 1120(a)(5). institute in-firm delivery of the Regulatory Element
7 Pursuant to Rule 1120(a)(1), each registered program.
of Rule 1120(a)(6) (In-Firm Delivery of person shall complete the Regulatory Element of the 9 Under Rule 1120(b)(1) (Persons Subject to the

continuing education program beginning with the Firm Element), a ‘‘covered registered person’’
1 15 U.S.C. 78s(b)(1). occurrence of their second registration anniversary means any person registered with a member who
2 17 CFR 240.19b–4. date and every three years thereafter, or as Continued

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2936 Federal Register / Vol. 81, No. 11 / Tuesday, January 19, 2016 / Notices

the business of the member and, at a Proposal day window for completion of the
minimum, must cover the following Regulatory Element.20
matters concerning securities products, Based on the recent amendments to The Exchange notes that the Web-
services and strategies offered by the FINRA Rule 1250,18 the Exchange based format will include safeguards to
proposes to amend Rule 1120(a)(6) to authenticate the identity of the CE
member: (i) General investment features
provide for a Web-based delivery candidate. For instance, prior to
and associated risk factors; (ii)
method for completing the Regulatory commencing a Web-based session, the
suitability and sales practice
Element. Specifically, the Exchange candidate will be asked to provide a
considerations; and (iii) applicable proposes to amend Rule 1120(a)(6) to portion of their [sic] SSN (either first
regulatory requirements. provide that the continuing education five or last four digits) and their [sic]
Today, most registered persons Regulatory Element set forth in date of birth. This information will only
complete the Regulatory Element in a paragraph (a) of Rule 1120(a) will be be used for matching data in FINRA’s
test center rather than in-firm. Given the administered through Web-based Web-CRD system. The Web CE system
advances in Web-based technology, the delivery or such other technological will discard this information after the
Exchange believes that there is manner and format as specified by the matching process. Further, before
diminishing utility in the test center and Exchange. Should the Exchange commencing a Web-based session, each
in-firm delivery methods. Moreover, determine to administer the Regulatory candidate will be required to agree to
according to FINRA,10 registered Element through a delivery mechanism the Rules of Conduct for Web-based
persons have raised concerns with the other than Web-based delivery, delivery. Among other things, the Rules
test center delivery method because of however, the Exchange would notify the of Conduct will require each candidate
the travel involved, the limited time Commission and would need to file a to attest that he or she is in fact the
currently available to complete a further rule change with the person who is taking the Web-based
Regulatory Element session 11 and the Commission. session. The Rules of Conduct will also
use of rigorous security measures at test The first phase of the Web-based require that each candidate agree that
centers, which are appropriate for taking delivery system was launched October the Regulatory Element content is
qualification examinations but onerous 1, 2015 and includes the Regulatory intellectual property and that the
for a CE program.12 Also, according to Element of the S201 Supervisor Program content cannot be copied or
for registered principals and redistributed by any means. If the
FINRA, the test center is expensive to
supervisors. The second phase of the Exchange discovers that a candidate has
operate.13
Web-based delivery system will be violated the Rules of Conduct, the
In response to the issues noted above, launched January 4, 2016 and include candidate will forfeit the results of the
FINRA engaged in extensive outreach the Regulatory Element of the S101 Web-based session and may be subject
with the industry and completed a pilot General Program for Series 7 and all to disciplinary action by the Exchange.
of a Web-based delivery system for other registered persons, including, but Violation of the Rules of Conduct will
administering the Regulatory Element.14 not limited to Securities Traders. be considered conduct inconsistent with
According to FINRA, the proposed Web- The Exchange is proposing to phase high standards of commercial honor and
based system performed well during the out test-center delivery by no later than just and equitable principles of trade, in
pilot in terms of both performance and six months after January 4, 2016. violation of Rule 2010A (Standards of
accessibility.15 FINRA also received Registered persons will continue to have Commercial Honor and Principles of
positive feedback from firms and the the option of completing the Regulatory Trade). The Exchange is not proposing
individual pilot participants.16 FINRA Element in a test center, but they will any changes to the Firm Element
noted that among other things, pilot be required to use the Web-based system requirements under Rule 1120(b).
participants appreciated the expanded after the test-center delivery is phased 2. Statutory Basis
time to focus on the provided learning out.19 The Exchange believes that its
materials without the pressure of a Further, the Exchange is proposing to proposal is consistent with Section 6(b)
timed session and the ability to resume eliminate the current option for in-firm of the Act,21 in general, and furthers the
or complete their session from where delivery and is deleting the current objectives of Section 6(b)(5) of the Act,22
they left off.17 language in Rule 1120(a)(6) relating to in particular, in that it is designed to
in-firm delivery of the CE Regulatory promote just and equitable principles of
has direct contact with customers in the conduct of Element. The proposed Web-based trade, to remove impediments to and
the member’s securities sales, trading and delivery method will provide registered perfect the mechanism of a free and
investment banking activities, and to the immediate persons the flexibility to complete the open market and a national market
supervisors of such persons. Regulatory Element at a location of their system, and, in general to protect
10 FINRA is currently responsible for the
choosing, including their private investors and the public interest.
operation of the test centers used for test center
residence, at any time during their 120- Additionally, the Exchange believes the
delivery method of the Regulatory Element.
11 The current session time is three-and-a-half
18 See FINRA Rule 1250 (Continuing Education 20 Although the proposed rule change provides
hours.
12 See Securities Exchange Act Release No. 75154 Requirements). See also Securities Exchange Act flexibility, firms may choose to impose their own
Release No. 75581 (July 31, 2015) 80 FR 47018 conditions based on their supervisory and
(June 11, 2015), 80 FR 34777 (June 17, 2015) (Notice (August 6, 2015) (Order Approving a Proposed Rule compliance needs. For instance, a firm that wishes
asabaliauskas on DSK5VPTVN1PROD with NOTICES

of Filing of a Proposed Rule Change To Provide a Change to Provide a Web-based Delivery Method for to have registered persons complete CE on the
Web-Based Delivery Method for Completing the Completing the Regulatory Element of the firm’s premises can do so by having the registered
Regulatory Element of the Continuing Education Continuing Education Requirements) (SR–FINRA– person access Web-based CE from a firm device and
Requirements) (SR–FINRA–2015–015). 2015–015). location. Moreover, firms would have to update
13 Id. at 34779. 19 The Exchange intends to amend Rule 7003, their written policies and procedures regarding the
14 Id. Registration and Processing Fees, to reduce the cost Regulatory Element to reflect the transition to Web-
for Web-delivery of the Regulatory Element from based CE and communicate the update to registered
15 Id.
$100 to $55 if administered by Web-delivery. Fees persons.
16 Id. 21 15 U.S.C. 78f(b).
for completing the CE Regulatory Element at a test
17 Id. center will remain $100. 22 15 U.S.C. 78f(b)(5).

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Federal Register / Vol. 81, No. 11 / Tuesday, January 19, 2016 / Notices 2937

proposed rule change is consistent with III. Date of Effectiveness of the change is consistent with the Act.
the Section 6(b)(5) 23 requirement that Proposed Rule Change and Timing for Comments may be submitted by any of
the rules of an exchange not be designed Commission Action the following methods:
to permit unfair discrimination between Because the proposed rule change Electronic Comments
customers, issuers, brokers, or dealers does not (i) significantly affect the
and Section 6(c)(3) 24 of the Act, which protection of investors or the public • Use the Commission’s Internet
authorizes the Exchange to, among other interest; (ii) impose any significant comment form (http://www.sec.gov/
things, prescribe standards of financial burden on competition; and (iii) become rules/sro.shtml); or
responsibility or operational capability operative for 30 days from the date on
• Send an email to rule-comments@
and standards of training, experience, which it was filed, or such shorter time
sec.gov. Please include File Number SR–
and competence for its members and as the Commission may designate, the
NASDAQ–2015–167 on the subject line.
persons associated with members. proposed rule change has become
effective pursuant to Section 19(b)(3)(A) Paper Comments
In particular, the Exchange believes
of the Act 25 and Rule 19b–4(f)(6)
that the proposed rule change will • Send paper comments in triplicate
thereunder.26
improve members’ compliance efforts The Exchange has asked the to Secretary, Securities and Exchange
and will allow registered persons to Commission to waive the 30-day Commission, 100 F Street NE.,
spend a greater amount of time on the operative delay so that the proposal may Washington, DC 20549–1090.
review of CE materials and potentially become operative on January 4, 2016.
achieve better learning outcomes, which All submissions should refer to File
The Exchange states the Exchange
will in turn enhance investor protection. believes that the proposed rule change Number SR–NASDAQ–2015–167. This
Further, while the proposed rule change will improve members’ compliance file number should be included on the
will provide more flexibility to members efforts and will allow registered persons subject line if email is used. To help the
and registered persons, it will maintain to spend more time on the review of CE Commission process and review your
the integrity of the Regulatory Element materials and potentially achieve better comments more efficiently, please use
of the CE program and the CE program learning outcomes, which will in turn only one method. The Commission will
in general. enhance investor protection. In post all comments on the Commission’s
addition, waiving the operative delay Internet Web site (http://www.sec.gov/
B. Self-Regulatory Organization’s will make NASDAQ’s rules consistent rules/sro.shtml). Copies of the
Statement on Burden on Competition with those of the other exchanges. For submission, all subsequent
these reasons, the Commission believes amendments, all written statements
The Exchange does not believe that
that waiver of the 30-day operative with respect to the proposed rule
the proposed rule change will impose
delay is consistent with the protection change that are filed with the
any burden on competition that is not
of investors and the public interest. Commission, and all written
necessary or appropriate in furtherance
Therefore, the Commission designates communications relating to the
of the purposes of the Act. The
the proposed rule change to be operative proposed rule change between the
Exchange notes that the proposed rule
on January 4, 2016.27 Commission and any person, other than
change is specifically intended to At any time within 60 days of the those that may be withheld from the
reduce the burden on firms while filing of the proposed rule change, the public in accordance with the
preserving the integrity of the CE Commission summarily may provisions of 5 U.S.C. 552, will be
program. As described above, the Web- temporarily suspend such rule change if available for Web site viewing and
based delivery method will provide it appears to the Commission that such printing in the Commission’s Public
registered persons the flexibility to action is necessary or appropriate in the Reference Room, 100 F Street NE.,
complete the Regulatory Element at any public interest, for the protection of Washington, DC 20549, on official
location that they choose. Further, Web- investors, or otherwise in furtherance of business days between the hours of
based delivery is efficient and offers the purposes of the Act. If the 10:00 a.m. and 3:00 p.m. Copies of the
significant cost savings over test-center Commission takes such action, the filing also will be available for
and in-firm deliveries. With respect to Commission shall institute proceedings inspection and copying at the principal
the authentication process for Web- to determine whether the proposed rule office of the Exchange. All comments
based delivery, the CE candidate’s should be approved or disapproved. received will be posted without change;
personal identifying information will be the Commission does not edit personal
masked and will be submitted to FINRA IV. Solicitation of Comments
identifying information from
through a secure, encrypted, network. Interested persons are invited to submissions. You should submit only
The personal identifying information submit written data, views and information that you wish to make
submitted via the Web-based system arguments concerning the foregoing, available publicly. All submissions
will be used for authentication purposes including whether the proposed rule should refer to File Number SR–
only—the information will not be stored NASDAQ–2015–167 and should be
25 15 U.S.C. 78s(b)(3)(A).
in the Web-based system. submitted on or before February 9, 2016.
26 17 CFR 240.19b–4(f)(6). As required under Rule
C. Self-Regulatory Organization’s 19b–4(f)(6)(iii), the Exchange provided the For the Commission, by the Division of
Commission with written notice of its intent to file
asabaliauskas on DSK5VPTVN1PROD with NOTICES

Statement on Comments on the Trading and Markets, pursuant to delegated
the proposed rule change, along with a brief
Proposed Rule Change Received From description and the text of the proposed rule authority.28
Members, Participants, or Others change, at least five business days prior to the date Robert W. Errett,
of filing of the proposed rule change, or such
No written comments were either shorter time as designated by the Commission. Deputy Secretary.
solicited or received. 27 For purposes only of waiving the 30-day [FR Doc. 2016–00787 Filed 1–15–16; 8:45 am]
operative delay, the Commission has also BILLING CODE 8011–01–P
considered the proposed rule’s impact on
23 15 U.S.C. 78f(b)(5). efficiency, competition, and capital formation. See
24 15 U.S.C. 78f(c)(3). 15 U.S.C. 78c(f). 28 17 CFR 200.30–3(a)(12).

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Document Created: 2016-01-16 01:10:41
Document Modified: 2016-01-16 01:10:41
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		81 FR 2935