81 FR 9233 - Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rule 341A(a)(4) To Provide for Web-Based Delivery of the Exchange's Continuing Education Program

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 36 (February 24, 2016)

[Federal Register Volume 81, Number 36 (Wednesday, February 24, 2016)]
[Notices]
[Pages 9233-9235]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-03793]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77174; File No. SR-NYSEMKT-2016-22]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Rule 
341A(a)(4) To Provide for Web-Based Delivery of the Exchange's 
Continuing Education Program

February 18, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on February 4, 2016, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 Rule 341A(a)(4) 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 341A(a)(4). 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 (``Commission'').\4\ The proposed rule change 
is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.
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    \4\ 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. 76880 
(January 12, 2016), 81 FR 2928 (January 19, 2016) (Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend 
Section (a)(4) of Rule 640, Continuing Education for Registered 
Persons) (SR-PHLX-2015-118).
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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 self-regulatory organization 
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 those 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 parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The CE requirements under Rule 341A consist of a Regulatory Element 
\5\ and a Firm Element.\6\ 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.\7\ 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

[[Page 9234]]

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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    \5\ See Rule 341A(a) (Regulatory Element).
    \6\ See Rule 341A(b) (Firm Element).
    \7\ Pursuant to Rule 341A, 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 341A(a)(1) provides that the following Regulatory Elements 
administered by FINRA shall be required: The S201 for registered 
principals and supervisors; the S106 for persons registered only as 
Investment Company Products/Variable Contracts Limited Representatives; 
and the S101 for 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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    \8\ Under current Rule 341A(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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    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,\9\ 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 \10\ and 
the use of rigorous security measures at test centers, which are 
appropriate for taking qualification examinations but onerous for a CE 
program.\11\ Also, according to FINRA, the test center is expensive to 
operate.\12\
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    \9\ FINRA is currently responsible for the operation of the test 
centers used for test center delivery method of the Regulatory 
Element.
    \10\ The current session time is three-and-a-half hours.
    \11\ 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).
    \12\ Id. at 34779.
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    Based on the recent amendments to FINRA Rule 1250,\13\ the Exchange 
proposes to amend Rule 341A(a)(4) to provide for a Web-based delivery 
method for completing the Regulatory Element. Specifically, the 
Exchange proposes to amend Rule 341A(a)(4) to provide that the 
continuing education Regulatory Element set forth in paragraph (a) of 
Rule 341A 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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    \13\ 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 for 
registered principals and supervisors. The second phase of the Web-
based delivery system was launched January 4, 2016 and includes the 
Regulatory Element of the S101 for all 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.\14\
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    \14\ 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 
341A(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.\15\
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    \15\ 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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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \16\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \17\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, 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) \18\ 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) \19\ 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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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ 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

[[Page 9235]]

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 registered 
persons for complying with the CE requirement 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 solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\ 
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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\23\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that waiving the 30-day operative delay 
is consistent with the protection of investors and the public interest 
as it will allow registered persons to immediately complete the 
Regulatory Element of the Exchange's continuing education requirement 
through the more flexible Web-based delivery method. Accordingly, the 
Commission designates the proposed rule change to be operative upon 
filing.\24\
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    \24\ 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 such 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 under 
Section 19(b)(2)(B) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \25\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEMKT-2016-22 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-NYSEMKT-2016-22. 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-NYSEMKT-2016-22 and should 
be submitted on or before March 16, 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. 2016-03793 Filed 2-23-16; 8:45 am]
BILLING CODE 8011-01-P