83 FR 52287 - Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Amendments to Rules Regarding Qualification, Registration and Continuing Education Applicable to Member Organizations, Equity Trading Permit Holders, and American Trading Permit Holders
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 200 (October 16, 2018)
Federal Register Volume 83, Issue 200 (October 16, 2018)
| Page Range | 52287-52298 | |
| FR Document | 2018-22432 |
[Federal Register Volume 83, Number 200 (Tuesday, October 16, 2018)] [Notices] [Pages 52287-52298] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-22432] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84388; File No. SR-NYSEAMER-2018-46] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Amendments to Rules Regarding Qualification, Registration and Continuing Education Applicable to Member Organizations, Equity Trading Permit Holders, and American Trading Permit Holders October 10, 2018. 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 September 27, 2018, NYSE American LLC (the ``Exchange'' or ``NYSE American'') 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes amendments to the Exchange's rules regarding qualification, registration and continuing education requirements applicable to member organizations, Equity Trading Permit (``ETP'') Holders, and American Trading Permit (``ATP'') Holders. The Exchange's rule proposal is intended to harmonize its rules with Financial Regulatory Authority, Inc. (``FINRA'') rules and thus promote consistency within the securities industry, and therefore the Exchange is only adopting rules that are relevant to the Exchange's members and member organization and ETP Holders. The Exchange is not adopting registration categories that are not applicable to members and member organizations and ETP Holders because they do not engage in the type of business that would require such registration. As such, the Exchange is amending current Rules 341 and 341A of the Office Rules and Rules 2.4E and 2.21E of the Equities Rules regarding continuing education requirements to reflect the FINRA rule; adopting Commentary .06 to current Rule 341A regarding fingerprint information; adopting new Rule 2.1210 regarding registration requirements and related Commentary to new Rule 2.1210; adopting new Rule 2.1220 regarding registration categories \4\ and related Commentary to new Rule 2.1220; and adopting new Rule 2.1230 regarding associated persons exempt from registration and related Commentary to new Rule 2.1230. Each of these rule changes, which are [sic] described in more detail below, would become operative on October 1, 2018. The proposed rule change is available on the Exchange's website at www.nyse.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. --------------------------------------------------------------------------- \4\ The relevant principal registration categories the Exchange proposes to adopt are (1) Principal; (2) General Securities Principal; (3) Compliance Officer; (4) Financial and Operations Principal and Introducing Broker-Dealer Financial and Operations Principal; (5) Securities Trader Principal; (6) General Securities Sales Supervisor; and (7) Registered Options Principal. The relevant representative registration categories the Exchange proposes to adopt are (1) Representative; (2) General Securities Representative; and (3) Securities Trader. --------------------------------------------------------------------------- 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 Exchange proposes to amend its qualification, registration, and continuing education requirements applicable to members and member organizations and ETP Holders. The proposed amendments are intended to: (i) Provide transparency and clarity with respect to the Exchange's registration, qualification and examination [[Page 52288]] requirements; (ii) amend its rules relating to categories of registration and respective qualification examinations required for member organizations and ETP Holders that engage in trading activities on the Exchange; (iii) harmonize the Exchange's qualification, registration and examination rules with those of FINRA \5\ so as to promote uniform standards across the securities industry; and (iv) add new definitions of terms and make other conforming changes to enhance the comprehensiveness and clarity of the Exchange's rules.\6\ The proposed changes are discussed below. --------------------------------------------------------------------------- \5\ See Securities Exchange Act Release No. 81098 (July 7, 2017), 82 FR 32419 (July 13, 2017) (SR-FINRA-2017-007) (Approval Order) (the ``FINRA Filing''). The Exchange notes that in order to maintain consistency with the FINRA Filing, the Exchange proposes to incorporate certain terms from the relevant FINRA rule into the Exchange's rule that may not be applicable to all member organizations or ETP Holders. For example, while member organizations or ETP Holders may not be engaged in ``investment banking'' activity, the Exchange proposes to adopt that term within these registration rules to conform them to the FINRA rules. \6\ The conforming changes the Exchange proposes would substitute the term ``member organization,'' ``ETP Holder'' or ``ATP Holder'' as applicable for ``member'' and the term ``Exchange'' for ``FINRA.'' References to ``member organization'' as used in Exchange rules include ATP Holders, which are registered brokers or dealers approved to effect transactions on the Exchange's options marketplace. Under the Exchange's rules, an ATP Holder has the status as a ``member'' of the Exchange as that term is defined in Section 3 of the Act. See Rule 900.2NY(4) & (5). --------------------------------------------------------------------------- A. Amendments to Current Rule 341 of the Office Rules and Rule 2.4E of the Equities Rules \7\ --------------------------------------------------------------------------- \7\ The registration requirements set forth in the Office Rules are applicable to the NYSE Amex options market. The registration requirements for the NYSE equities market are set forth in the Equities Rules. --------------------------------------------------------------------------- Current Rule 341 of the Office Rules requires registration, qualification and approval by the Exchange of registered representatives, securities lending representatives, Securities Traders, and a direct supervisor. Commentary .01(c) of current Rule 341 provides the definition of a Securities Trader as any person engaged in the purchase or sale of securities or other similar instruments for the account of a member or member organization with which he is associated, as an employee or otherwise, and who does not transact any business with the public. The Exchange proposes to adopt FINRA's definition of Securities Trader (as described below) and, therefore, proposes to add a reference to Rule 2.1220(b)(3) as the appropriate rule in the Exchange's Rulebook where the definition of Securities Trader can be found. The Exchange also proposes to adopt rule text within the current rule that provides that a person registered as a Securities Trader would not be qualified to function in any other registration category unless he or she is also qualified and registered in such other registration category.\8\ --------------------------------------------------------------------------- \8\ The Exchange proposes the same changes to Commentary .03 of current Rule 2.21E, which provides the definition of a Securities Trader. --------------------------------------------------------------------------- Current Commentary .01(d) of Rule 341 provides that a supervisor of registered representatives may satisfy the registration requirements under Commentary .01 by registering and qualifying as a General Securities Principal by passing the Series 7 and Series 24 examinations. Consistent with the proposed restructuring of the representative-level examination proposed in the FINRA Filing, the Exchange proposes to amend current Commentary .01(d) to require such persons to also complete the Securities Industry Essentials (``SIE'') examination. Rule 2.4E of the Equities Rules currently requires traders of ETP Holders for which the Exchange is the Designated Examining Authority (``DEA'') to successfully complete the Series 7 Examination. The Exchange proposes to amend Rules 2.4E to require traders of ETP Holders for which the Exchange is the DEA to successfully complete the SIE examination in addition to the Series 7 Examination in order to satisfy the Exchange's registration requirement, consistent with the proposed restructuring of the representative-level examinations proposed in the FINRA Filing. B. Amendments to Rule 341A of the Office Rules and Rule 2.21E-- Continuing Education Requirements Rule 341A of the Office Rules and Rule 2.21E provide the continuing education requirements of registered persons \9\ of a member or member organization or ETP Holder, respectively, subsequent to their initial qualification and registration with the Exchange, and includes a Regulatory Element and a Firm Element. The Regulatory Element applies to registered persons and consists of periodic computer-based training on regulatory, compliance, ethical, supervisory subjects and sales practice standards. The Firm Element consists of at least an annual, member-developed and administered training programs designed to keep registered persons current regarding securities products, services and strategies offered by the member. --------------------------------------------------------------------------- \9\ For purposes of Rule 341A, the term ``registered person'' means any member, allied member, registered representative or other person registered or required to be registered under Exchange rules, but does not include any such person whose activities are limited solely to the transaction of business on the Floor with members or registered broker-dealers. See Rule 341A, Commentary .01. For purposes of Rule 2.21E, the term ``registered person'' means any ETP Holder, Allied Person thereof, registered representative or other person registered or required to be registered under the Rules of the Exchange. See Rule 2.21E, Commentary .01. --------------------------------------------------------------------------- 1. Regulatory Element The Exchange proposes to amend Rules 341A(a) and 2.21E(d)(1) to provide, consistent with proposed Rule 2.1210, Commentary .08, that a waiver-eligible person would be subject to a Regulatory Element program that correlates to his or her most recent registration category, and that the content of the Regulatory Element would be based on the same cycle had the individual remain [sic] registered.\10\ The proposed amendment to Rules 341A(a) and 2.21E(d)(1) also provides that if a waiver-eligible person fails to complete the Regulatory Element during the prescribed time frames, he or she would lose waiver eligibility.\11\ --------------------------------------------------------------------------- \10\ The proposed change is substantially similar to that contained in FINRA Rule 1240(a)(1). \11\ The proposed change is substantially similar to that contained in FINRA Rule 1240(a)(2). --------------------------------------------------------------------------- Further, the Exchange proposes to amend Rules 341A(a)(2) and 2.21E(d)(1)(B) to provide that any person whose registration has been deemed inactive under the rule may not accept or solicit business or receive any compensation for the purchase or sale of securities. The proposed amendment provides, however, that such person may receive trail or residual commissions resulting from transactions completed before the inactive status, unless the member organization or ETP Holder, respectively, with which the person is associated has a policy prohibiting such trail or residual commissions.\12\ --------------------------------------------------------------------------- \12\ The proposed change is substantially similar to that contained in FINRA Rule 1240(a)(2). --------------------------------------------------------------------------- Additionally, under Rules 341A(a)(3) and 2.21E(d)(1)(C), a registered person is required to retake the Regulatory Element in the event that such person (i) is subject to any statutory disqualification as defined in Section 3(a)(39) of the Exchange Act; (ii) 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 (iii) is [[Page 52289]] ordered as a sanction in a disciplinary action to retake the Regulatory Element by any securities governmental agency or self-regulatory organization. The Exchange proposes to amend Rules 341A(a)(3) and 2.21E(d)(1)(C) to provide an exception to a waiver-eligible person from retaking the Regulatory Element and satisfy [sic] all of its requirements.\13\ --------------------------------------------------------------------------- \13\ The proposed change is substantially similar to that contained in FINRA Rule 1240(a)(3). --------------------------------------------------------------------------- 2. Firm Element Current Rules 341A(b)(2)(ii) and 2.21E(d)(2)(B) provides that programs used to implement a training program must be appropriate for the business of the member or member organization or ETP Holder and, at a minimum must cover specific matters concerning securities products, services, and strategies offered by the member organization or ETP Holder. Current Rules 341A(b)(2)(ii) and 2.21E(d)(2)(B) also provides that programs used to implement a member organization's or ETP Holder's training program must be appropriate for the business of the member organization or ETP Holder and, at a minimum must cover specific matters concerning securities products, services, and strategies offered by the member organization or ETP Holder. The Exchange proposes to amend both Rules 341A(b)(2)(ii) and 2.21E(d)(2)(B) to expand the minimum standard for such training programs by requiring that, at a minimum, a firm's training program must also cover training in ethics and professional responsibility.\14\ --------------------------------------------------------------------------- \14\ The proposed change is substantially similar to that contained in FINRA Rule 1240(b)(2). --------------------------------------------------------------------------- C. Additional Amendments to Current Rule 2.21E Rule 2.21E(b)(iii) provides that employees of ETP Holders seeking limited registration as Securities Traders must pass the Series 57 examination. Given the formulation of the SIE examination which all potential representative-level registrants would be required to pass, the Exchange proposes to amend the current rule to require that a Securities Trader must register as such on Web CRD and must pass both the SIE examination and the Series 57 examination. The Exchange proposes the same change for Rule 2.4E, Commentary 03. Finally, Rule 2.2E(c) provides that the Exchange may exempt an individual from the examination requirements if such individual has successfully completed comparable examinations such as the Series 7 Examination. Consistent with the proposed restructuring of the representative-level examinations proposed in the FINRA Filing, the Exchange proposes to add ``and the Securities Industry Essentials Examination'' after the reference to the Series 7 Examination. D. Proposed New Commentary .05 to Rule 341A \15\ --------------------------------------------------------------------------- \15\ The proposed rule is substantially similar to FINRA Rule 1010(d). --------------------------------------------------------------------------- The Exchange proposes to adopt a new Commentary .05 to Rule 341A regarding the submission of fingerprint information by member organizations or ETP Holders, respectively.\16\ --------------------------------------------------------------------------- \16\ Given its placement in the General Rules, the proposed fingerprinting requirements would apply to both the Exchange's options and equities marketplace. As noted, the term member organization includes ATP Holders. --------------------------------------------------------------------------- As proposed, upon filing an electronic Form U4 on behalf of a person applying for registration, a member organization or ETP Holder, as applicable, would be required to promptly submit fingerprint information for that person. If the member organization or ETP Holder, as applicable, fails to submit the fingerprint information within 30 days after the Exchange receives the electronic Form U4, the person's registration shall be deemed inactive and the person would be required to immediately cease all activities requiring registration and would be prohibited from performing any duties and functioning in any capacity requiring registration. The proposed rule further provides allows [sic] the Exchange to administratively terminate a registration that is inactive for a period of two years. However, a person whose registration is administratively terminated may seek to reactivate his or her registration by reapplying for registration and meeting the qualification requirements under Exchange rules. E. Proposed New Rules 2.1210 Through 2.1230 As a general matter, FINRA administers qualification examinations that are designed to establish that persons associated with member organizations and ETP Holders have attained specified levels of competence and knowledge. Over time, the examination program has increased in complexity to address the introduction of new products and functions, and related regulatory concerns and requirements. As a result, today, there are a large number of examinations, considerable content overlap across the representative-level examinations and requirements for individuals in various segments of the industry to pass multiple examinations. To address these issues, FINRA formulated the SIE as a general knowledge examination that all potential representative-level registrants would take.\17\ --------------------------------------------------------------------------- \17\ The SIE would assess basic product knowledge; the structure and function of the securities industry markets, regulatory agencies and their functions; and regulated and prohibited practices. In particular, the SIE will cover four major areas. The first, ``Knowledge of Capital Markets,'' focuses on topics such as types of markets and offerings, broker-dealers and depositories, and economic cycles. The second, ``Understanding Products and Their Risks,'' covers securities products at a high level as well as associated investment risks. The third, ``Understanding Trading, Customer Accounts and Prohibited Activities,'' focuses on accounts, orders, settlement and prohibited activities. The final area, ``Overview of the Regulatory Framework,'' encompasses topics such as SROs, registration requirements and specified conduct rules. --------------------------------------------------------------------------- The Exchange proposes to create a new Section 4A titled ``Registration'' in its Office Rules to contain proposed Rules 2.1210 through 2.1230. Each proposed rule is discussed below. 1. Proposed Rule 2.1210--Registration Requirements \18\ --------------------------------------------------------------------------- \18\ The proposed rule is substantially similar to FINRA Rule 1210. --------------------------------------------------------------------------- Proposed Rule 2.1210 provides that each person engaged in the investment banking or securities business of a member organization or ETP Holder must register with the Exchange as a representative or principal in each category of registration appropriate to his or her functions and responsibilities as specified in proposed Rule 2.1220, unless exempt from registration pursuant to proposed Rule 2.1230. Proposed Rule 2.1210 also provides that such person is not qualified to function in any registered capacity other than that for which the person is registered, unless otherwise stated in the rules. 2. Proposed Rule 2.1210, Commentary .01--Permissive Registrations \19\ --------------------------------------------------------------------------- \19\ The proposed rule is substantially similar to FINRA Rule 1210.02. --------------------------------------------------------------------------- The Exchange currently does not have a specific rule that provides for permissive registrations. With this proposed rule change, and to conform its rules to the FINRA rules, the Exchange proposes to adopt a specific rule regarding permissive registrations. Proposed Rule 2.1210, Commentary .01, allows any associated person to obtain and maintain any registration permitted by a member organization or ETP Holder. For instance, an associated person of an ETP Holder working solely in a clerical or ministerial capacity, such as in an administrative capacity, would be able to obtain and maintain a General Securities Representative registration with the ETP Holder. As another example, an associated person [[Page 52290]] of an ETP Holder who is registered and functioning solely as a General Securities Representative would be able to obtain and maintain a General Securities Principal registration with the ETP Holder. Proposed Rule 2.1210, Commentary .01, would further allow an individual engaged in the securities business of a foreign securities affiliate or subsidiary of an ETP Holder to obtain and maintain any registration permitted by the ETP Holder. The Exchange is proposing to permit the registration of such individuals for several reasons. First, a member organization or ETP Holder may foresee a need to move a former representative or principal who has not been registered for two or more years back into a position that would require such person to be registered. Currently, such persons are required to requalify (or obtain a waiver of the applicable qualification examinations) and reapply for registration. Second, the proposed rule change would allow a member organization or ETP Holder to develop a depth of associated persons with registrations in the event of unanticipated personnel changes. Finally, allowing registration in additional categories encourages greater regulatory understanding. Individuals maintaining a permissive registration under the proposed rule change would be considered registered persons and subject to all Exchange rules, to the extent relevant to their activities. Additionally, consistent with the requirements of the Exchange's supervision rules, as proposed, a member organization or ETP Holder would be required to have adequate supervisory systems and procedures reasonably designed to ensure that individuals with permissive registrations do not act outside the scope of their assigned functions. With respect to an individual who solely maintains a permissive registration, such as an individual working exclusively in an administrative capacity, the individual's day-to-day supervisor may be a non-registered person. However, for purposes of compliance with the Exchange's supervision rules, a member organization or ETP Holder would be required to assign a registered supervisor who would be responsible for periodically contacting such individual's day-to-day supervisor to verify that the individual is not acting outside the scope of his or her assigned functions. If such individual is permissively registered as a representative, the registered supervisor must be registered as a representative or principal. If the individual is permissively registered as a principal, the registered supervisor must be registered as a principal.\20\ --------------------------------------------------------------------------- \20\ In either case, the registered supervisor of an individual who solely maintains a permissive registration would not be required to be registered in the same representative or principal registration category as the permissively-registered individual. --------------------------------------------------------------------------- 3. Proposed Rule 2.1210, Commentary .02--Qualification Examinations and Waivers of Examinations \21\ --------------------------------------------------------------------------- \21\ The proposed rule is substantially similar to FINRA Rule 1210.03. --------------------------------------------------------------------------- Proposed Rule 2.1210, Commentary .02, provides that before the registration of a person as a representative can become effective under proposed Rule 2.1210, such person must pass the SIE and an appropriate representative-level qualification examination as specified in proposed Rule 2.1220.\22\ Proposed Rule 2.1210, Commentary .02, also provides that before the registration of a person as a principal can become effective under proposed Rule 2.1210, such person must pass an appropriate principal-level qualification examination as specified in proposed Rule 2.1220. --------------------------------------------------------------------------- \22\ Proposed Rule 2.1220 sets forth each registration category and applicable qualification examination on the Exchange. --------------------------------------------------------------------------- Further, proposed Rule 2.1210, Commentary .02, provides that if a registered person's job functions change and he or she needs to become registered in another representative-level category, he or she would not need to pass the SIE again. Rather, the registered person would need to pass only the appropriate representative-level qualification examination. Moreover, proposed Rule 2.1210, Commentary .02, provides that all associated persons, such as associated persons whose functions are solely and exclusively clerical or ministerial, are eligible to take the SIE. Proposed Rule 2.1210, Commentary .02, also provides that individuals who are not associated persons of firms, such as members of the general public, are eligible to take the SIE. The Exchange believes that expanding the pool of individuals who are eligible to take the SIE would enable prospective securities industry professionals to demonstrate to prospective employers a basic level of knowledge prior to submitting a job application. Further, this approach would allow for more flexibility and career mobility within the securities industry. While all associated persons of firms as well as individuals who are not associated persons would be eligible to take the SIE pursuant to the proposed rule, passing the SIE alone would not qualify them for registration with the Exchange. Rather, to be eligible for registration with the Exchange, an individual must pass an applicable representative or principal qualification examination and complete the other requirements of the registration process. Proposed Rule 2.1210, Commentary .02, also provides that the Exchange may, in exceptional cases and where good cause is shown, pursuant to the Rule 9600 Series, waive the applicable qualification examination(s) and accept other standards as evidence of an applicant's qualifications for registration. The proposed rule further provides that the Exchange will only consider examination waiver requests submitted by a member organization or ETP Holder for individuals associated with the a member organization or ETP Holder who are seeking registration in a representative- or principal-level registration category. Moreover, the proposed rule states that the Exchange will consider waivers of the SIE alone or the SIE and the representative- and principal-level examination(s) for such individuals. The Exchange would not consider a waiver of the SIE for non-associated persons or for associated persons who are not registering as representatives or principals. 4. Persons Functioning as Principals for a Limited Period \23\ Proposed Rule 2.1210, Commentary .03--Requirements for Registered --------------------------------------------------------------------------- \23\ The proposed rule is substantially similar to FINRA Rule 1210.04. --------------------------------------------------------------------------- Proposed Rule 2.1210, Commentary .03, provides that a member organization or ETP Holder may designate any person currently registered, or who becomes registered, with the member organization or ETP Holder as a representative to function as a principal for a limited period, provided that such person has at least 18 months of experience functioning as a registered representative with [sic] the five-year period immediately preceding the designation. The proposed rule is intended to ensure that representatives designated to function as principals for the limited period under the proposal have an appropriate level of registered representative experience. The proposed rule clarifies that the requirements of the rule apply to designations to any principal category, including those categories that are not subject to a prerequisite representative-level registration requirement, such as the Financial and Operations Principal registration category.\24\ --------------------------------------------------------------------------- \24\ The Exchange notes that qualifying as a registered representative is a prerequisite to qualifying as a principal except with respect to the following principal-level registrations: (1) Compliance Official; (2) Financial and Operations Principal; and (3) Introducing Broker-Dealer Financial and Operations Principal. --------------------------------------------------------------------------- [[Page 52291]] The proposed rule also clarifies that the individual must fulfill all applicable prerequisite registration, fee and examination requirements before his or her designation as a principal. Further, the proposed rule provides that in no event may such person function as a principal beyond the initial 120 calendar days without having successfully passed an appropriate principal qualification examination. The proposed rule also provides an exception to the experience requirement for principals who are designated by a member organization or ETP Holder to function in other principal categories for a limited period. Specifically, the proposed rule states that a member organization or ETP Holder may designate any person currently registered, or who becomes registered, with the ETP Holder as a principal to function in another principal category for 120 calendar days before passing any applicable examinations. 5. Proposed Rule 2.1210, Commentary .04--Rules of Conduct for Taking Examinations and Confidentiality of Examinations \25\ --------------------------------------------------------------------------- \25\ The proposed rule is substantially similar to FINRA Rule 1210.05. --------------------------------------------------------------------------- Proposed Rule 2.1210, Commentary .04 states that associated persons taking the SIE would be subject to the SIE Rules of Conduct, and associated persons taking a representative or principal examination would be subject to the Rules of Conduct for representative and principal examinations. Pursuant to proposed Rule 2.1210, Commentary .04, a violation of the SIE Rules of Conduct or the Rules of Conduct for representative and principal examinations by an associated person would be deemed to be a violation of Rules 16 and 2010--Equities. Moreover, if an associated person is deemed to have violated the SIE Rules of Conduct or the Rules of Conduct for representative and principal examinations, the associated person may forfeit the results of the examination and may be subject to disciplinary action by the Exchange. Further, the proposed rule states that individuals taking the SIE who are not associated persons must agree to be subject to the SIE Rules of Conduct. Among other things, the SIE Rules of Conduct would require individuals to attest that they are not qualified to engage in the investment banking or securities business based on passing the SIE and would prohibit individuals from cheating on the examination or misrepresenting their qualifications to the public subsequent to passing the SIE. Moreover, non-associated persons may forfeit their SIE results and may be prohibited from retaking the SIE if the Exchange determines that they cheated on the SIE or that they misrepresented their qualifications to the public subsequent to passing the SIE. The proposed rule further notes that the Exchange considers all qualification examinations [sic] content to be highly confidential and that the removal of examination content from an examination center, reproduction, disclosure, receipt from or passing to any person, or use for study purposes of any portion of such qualification examination or any other use that would compromise the effectiveness of the examinations and the use in any manner and at any time of the questions or answers to the examinations is prohibited and would be deemed a violation of Rules 16 and 2010--Equities. 6. Proposed Rule 2.1210, Commentary .05--Waiting Periods for Retaking a Failed Examination \26\ --------------------------------------------------------------------------- \26\ The proposed rule is substantially similar to FINRA Rule 1210.06. --------------------------------------------------------------------------- Proposed Rule 2.1210, Commentary .05 provides that any person who fails a qualification examination may retake that examination after 30 calendar days from the date of the person's last attempt to pass that examination. The proposed rule further provides that if a person fails an examination three or more times in succession within a two-year period, he or she would be prohibited from retaking the examination either until a period of 180 calendar days from the date of the person's last attempt to pass it [sic]. These waiting periods would apply to the SIE and the representative- and principal-level examinations. Moreover, the proposed rule provides that non-associated persons taking the SIE must agree to be subject to the same waiting periods for retaking the SIE. 7. Proposed Rule 2.1210, Commentary .06--All Registered Persons Must Satisfy the Regulatory Element of Continuing Education \27\ --------------------------------------------------------------------------- \27\ The proposed rule is substantially similar to FINRA Rule 1210.07. --------------------------------------------------------------------------- Pursuant to Rule 341A of the Office Rules and Rule 2.21E, the CE requirements applicable to registered persons consist of a Regulatory Element \28\ and a Firm Element.\29\ The Regulatory Element applies to registered persons and must be completed within prescribed time frames.\30\ The Firm Element consists of annual, a member organization or ETP Holder-developed and administered training programs designed to keep covered registered persons current regarding securities products, services and strategies offered by the member organization or ETP Holder. For purposes of the Firm Element, the term covered registered persons means any registered Securities Trader and any registered person who has direct contact with customers in the conduct of the a member organization's or ETP Holder's securities sales, trading and investment banking activities and to the immediate supervisors of such persons. --------------------------------------------------------------------------- \28\ See Rules 341A(a) and 2.21E(d)(1). \29\ See Rules 341A(b) and 2.21E(d)(2). \30\ Pursuant to 341A(a) and 2.21E(d)(1), each specified registered person is required to complete the Regulatory Element initially within 120 days after the person's second registration anniversary date and, thereafter, within 120 days after every third registration anniversary date. A registered person who has not completed the Regulatory Element program within the prescribed time frames will have his or her registrations deemed inactive and designated as ``CE inactive'' on the CRD system until such time as the requirements of the program have been satisfied. A CE inactive person is prohibited from performing, or being compensated for, any activities requiring registration, including supervision. Moreover, if a registered person is CE inactive for a two-year period, the Exchange will administratively terminate the person's registration status. The two-year period would be calculated from the date the person becomes CE inactive. In either case, such person must requalify (or obtain a waiver of the applicable qualification examination(s)) to be re-eligible for registration. --------------------------------------------------------------------------- The Exchange believes that all registered persons, regardless of their activities, should be subject to the Regulatory Element of the CE requirements so that they can keep their knowledge of the securities industry current. Therefore, the Exchange proposes to adopt Rule 2.1210, Commentary .06, to clarify that all registered persons, including those who solely maintain a permissive registration, are required to satisfy the Regulatory Element, as specified in Rules 341A(a) and 2.21E(d)(1). The Exchange is making corresponding changes to Rule 341A and Rule 2.21E. The Exchange is not proposing any changes to the Firm Element requirement at this time. Individuals who have passed the SIE but not a representative- or principal-level examination and do not hold a registered position would not be subject to any CE requirements. Proposed Rule 2.1210, Commentary .06, also provides that a registered person of a member organization or ETP Holder who becomes CE inactive would not be permitted to be registered in another registration category with the a member organization or ETP Holder or be registered in any registration category [[Page 52292]] with another a member organization or ETP Holder, until the person has satisfied the Regulatory Element. 8. Proposed Rule 2.1210, Commentary .07--Lapse of Registration and Expiration of the SIE \31\ --------------------------------------------------------------------------- \31\ The proposed rule is substantially similar to FINRA Rule 1210.08. --------------------------------------------------------------------------- Proposed Rule 2.1210, Commentary .07, provides that any person who was last registered as a representative two or more years immediately preceding the date of receipt by the Exchange of a new application for registration as a representative is required to pass a qualification examination for representatives appropriate to the category of registration as specified in proposed Rule 2.1220(b). Proposed Rule 2.1210, Commentary .07, also sets forth that a passing result on the SIE would be valid for up to four years. Therefore, under the proposed rule change, an individual who passes the SIE and is an associated person of a member organization or ETP Holder at the time would have up to four years from the date he or she passes the SIE to pass a representative-level examination to register as a representative with that member organization or ETP Holder, or a subsequent member organization or ETP Holder, without having to retake the SIE. In addition, an individual who passes the SIE and is not an associated person at the time would have up to four years from the date he or she passes the SIE to become an associated person of a member organization or ETP Holder and pass a representative-level examination and register as a representative without having to retake the SIE. Moreover, an individual holding a representative-level registration who leaves the industry after the effective date of this proposed rule change would have up to four years to reassociate with a member organization or ETP Holder and register as a representative without having to retake the SIE. However, the four-year expiration period in the proposed rule change extends only to the SIE, and not the representative- and principal-level registrations. The representative- and principal-level registrations would continue to be subject to a two-year expiration period as is the case today. Finally, proposed Rule 2.1210, Commentary .07, clarifies that, for purposes of the proposed rule, an application would not be considered to have been received by the Exchange if that application does not result in a registration. 9. Proposed Rule 2.1210, Commentary .08--Waiver of Examinations for Individuals Working for a Financial Services Industry Affiliate of a Member Organization or ETP Holder \32\ --------------------------------------------------------------------------- \32\ The proposed rule is substantially similar to FINRA Rule 1210.09. --------------------------------------------------------------------------- Proposed Rule 2.1210, Commentary .08, provides the process for individuals working for a financial services industry affiliate of a member organization or ETP Holder \33\ to terminate their registrations with the member organization or ETP Holder and be granted a waiver of their requalification requirements upon re-registering with a member organization or ETP Holder, provided the firm that is requesting the waiver and the individual satisfy the criteria for a Financial Services Affiliate (``FSA'') waiver. --------------------------------------------------------------------------- \33\ Proposed Rule 2.1210, Commentary .07 [sic], defines a ``financial services industry affiliate of a member organization or ETP Holder'' as a legal entity that controls, is controlled by or is under common control with a member organization or ETP Holder and is regulated by the SEC, CFTC, state securities authorities, federal or state banking authorities, state insurance authorities, or substantially equivalent foreign regulatory authorities. --------------------------------------------------------------------------- Under the proposed waiver process, the first time a registered person is designated as eligible for a waiver based on the FSA criteria, the member organization or ETP Holder with which the individual is registered would notify the Exchange of the FSA designation. The member organization or ETP Holder would concurrently file a full Form U5 terminating the individual's registration with the firm, which would also terminate the individual's other SRO and state registrations. To be eligible for initial designation as an FSA- eligible person by a member organization or ETP Holder, an individual must have been registered for a total of five years within the most recent 10-year period prior to the designation, including for the most recent year with that member organization or ETP Holder. An individual would have to satisfy these preconditions only for purposes of his or her initial designation as an FSA-eligible person, and not for any subsequent FSA designation(s). Thereafter, the individual would be eligible for a waiver for up to seven years from the date of initial designation,\34\ provided that the other conditions of the waiver, as described below, have been satisfied. Consequently, a member organization or ETP Holder other than the member organization or ETP Holder that initially designated an individual as an FSA-eligible person may request a waiver for the individual and more than one member organization or ETP Holder may request a waiver for the individual during the seven-year period.\35\ --------------------------------------------------------------------------- \34\ Individuals would be eligible for a single, fixed seven- year period from the date of initial designation, and the period would not be tolled or renewed. \35\ The following examples illustrate this point: Example 1. Firm A designates an individual as an FSA-eligible person by notifying the Exchange and files a Form U5. The individual joins Firm A's financial services affiliate. Firm A does not submit a waiver request for the individual. After working for Firm A's financial services affiliate for three years, the individual directly joins Firm B's financial services affiliate for three years. Firm B then submits a waiver request to register the individual. Example 2. Same as Example 1, but the individual directly joins Firm B after working for Firm A's financial services affiliate, and Firm B submits a waiver request to register the individual at that point in time. Example 3. Firm A designates an individual as an FSA-eligible person by notifying the Exchange and files a Form U5. The individual joins Firm A's financial services affiliate for three years. Firm A then submits a waiver request to re-register the individual. After working for Firm A in a registered capacity for six months, Firm A re-designates the individual as an FSA-eligible person by notifying the Exchange and files a Form U5. The individual rejoins Firm A's financial services affiliate for two years, after which the individual directly joins Firm B's financial services affiliate for one year. Firm B then submits a waiver request to register the individual. Example 4. Same as Example 3, but the individual directly joins Firm B after the second period of working for Firm A's financial services affiliate, and Firm B submits a waiver request to register the individual at that point in time. --------------------------------------------------------------------------- An individual designated as an FSA-eligible person would be subject to the Regulatory Element of CE while working for a financial services industry affiliate of a member organization or ETP Holder. The individual would be subject to a Regulatory Element program that correlates to his or her most recent registration category, and CE would be based on the same cycle had the individual remained registered. If the individual fails to complete the prescribed Regulatory Element during the 120-day window for taking the session, he or she would lose FSA eligibility (i.e., the individual would have the standard two-year period after termination to re-register without having to retake an examination). The Exchange is making corresponding changes to Rules 341A and 2.21E. Upon registering an FSA-eligible person, a firm would file a Form U4 and request the appropriate registration(s) for the individual. The firm would also submit an examination waiver request to the Exchange,\36\ similar to the process used today for waiver requests, and it would represent that the individual is eligible for an FSA waiver based on the conditions set forth below. The Exchange would review the waiver [[Page 52293]] request and make a determination of whether to grant the request within 30 calendar days of receiving the request. The Exchange would summarily grant the request if the following conditions are met: --------------------------------------------------------------------------- \36\ The Exchange would consider a waiver of the representative- level qualification examination(s), the principal-level qualification examination(s) and the SIE, as applicable. --------------------------------------------------------------------------- (1) Prior to the individual's initial designation as an FSA- eligible person, the individual was registered for a total of five years within the most recent 10-year period, including for the most recent year with the member organization or ETP Holder that initially designated the individual as an FSA-eligible person; (2) The waiver request is made within seven years of the individual's initial designation as an FSA-eligible person by a member organization or ETP Holder; (3) The initial designation and any subsequent designation(s) were made concurrently with the filing of the individual's related Form U5; (4) The individual continuously worked for the financial services affiliate(s) of a member organization or ETP Holder since the last Form U5 filing; (5) The individual has complied with the Regulatory Element of CE; and (6) The individual does not have any pending or adverse regulatory matters, or terminations, that are reportable on the Form U4, and has not otherwise been subject to a statutory disqualification while the individual was designated as an FSA-eligible person with a member organization or ETP Holder. Following the Form U5 filing, an individual could move between the financial services affiliates of a member organization or ETP Holder so long as the individual is continuously working for an affiliate. Further, an ETP Holder could submit multiple waiver requests for the individual, provided that the waiver requests are made during the course of the seven-year period.\37\ An individual who has been designated as an FSA-eligible person by a member organization or ETP Holder would not be able to take additional examinations to gain additional registrations while working for a financial services affiliate of a member organization or ETP Holder. --------------------------------------------------------------------------- \37\ For example, if a member organization or ETP Holder submits a waiver request for an FSA-eligible person who has been working for a financial services affiliate of the member organization or ETP Holder for three years and re-registers the individual, the member organization or ETP Holder could subsequently file a Form U5 and re- designate the individual as an FSA-eligible person. Moreover, if the individual works with a financial services affiliate of the member organization or ETP Holder for another three years, the member organization or ETP Holder could submit a second waiver request and re-register the individual upon returning to the member organization or ETP Holder. --------------------------------------------------------------------------- 10. Proposed Rule 2.1210, Commentary .09--Status of Persons Serving in the Armed Forces of the United States \38\ --------------------------------------------------------------------------- \38\ The proposed rule is substantially similar to FINRA Rule 1210.10. --------------------------------------------------------------------------- Proposed Rule 2.1210, Commentary .09 provides specific relief to registered persons serving in the Armed Forces of the United States. Among other things, the proposed rule permits a registered person of a member organization or ETP Holder who volunteers for or is called into active duty in the Armed Forces of the United States to be registered in an inactive status and remain eligible to receive ongoing transaction-related compensation. The proposed rule also includes specific provisions regarding the deferment of the lapse of registration requirements for formerly registered persons serving in the Armed Forces of the United States. The proposed rule further requires that a member organization or ETP Holder with which such person is registered promptly notify the Exchange of such person's return to employment with a member organization or ETP Holder. The proposed rule would require a member organization or ETP Holder that is a sole proprietor to also similarly notify the Exchange of his or her return to participation in the investment banking or securities business. The proposed rule also provides that the Exchange would defer the lapse of the SIE for formerly registered persons serving in the Armed Forces of the United States. F. Proposed New Rule 2.1220--Registration Categories \39\ --------------------------------------------------------------------------- \39\ The Exchange is not adopting the following categories from the FINRA Filing because member organizations or ETP Holders do not engage in the type of business that would require registration with the Exchange: Investment Banking Principal, Research Principal, Government Securities Principal, Investment Company and Variable Contracts Products Principal, Direct Participation Programs Principal, Private Securities Offerings Principal, Supervisory Analyst, Operations Professional, Investment Banking Representative, Research Analyst, Investment Company and Variable Contracts Products Representative, Direct Participation Programs Representative, and Private Securities Offering Representative. The Exchange is also not adopting the following categories because the FINRA Filing eliminated them: Order Processing Assistant Representative, United Kingdom Securities Representative, Canadian Securities Representative, Options Representative, Corporate Securities Representative and Government Securities Representative. --------------------------------------------------------------------------- 1. Proposed Rule 2.1220(a)(1)--Principal As set forth in proposed Rule 2.1220(a)(1), for purposes of these registration rules, the term ``Principal'' means any Person Associated with a member organization or ETP Holder actively engaged in the management of the member organization's or ETP Holder's securities business, including supervision, solicitation, conduct of the member organization's or ETP Holder's business, or the training of Authorized Traders and Persons Associated with a member organization or ETP Holder for any of these functions. Such Persons include, among other, Sole Proprietors, Officers, Partners, and Directors of Corporations. For purposes of proposed Rule 1220(a)(1), the phrase ``actively engaged in the management of the member organization's or ETP Holder's securities business'' includes the management of, and the implementation of corporate policies related to, such business. The term also includes managerial decision-making authority with respect to a member organization's or ETP Holder's securities business and management-level responsibilities for supervising any aspect of such business, such as serving as a voting member of the a member organization's or ETP Holder's executive, management or operations committee. 2. Proposed Rule 2.1220(a)(2)--General Securities Principal \40\ --------------------------------------------------------------------------- \40\ The proposed rule is substantially similar to FINRA Rule 1220(a)(2). --------------------------------------------------------------------------- Proposed Rule 2.1220(a)(2)(A) states that each principal as defined in proposed Rule 2.1220(a)(1) is required to register with the Exchange as a General Securities Principal, subject to the following exceptions. The proposed rule provides that if a principal's activities include the functions of a Compliance Officer, a Financial and Operations Principal (or an Introducing Broker-Dealer Financial and Operations Principal, as applicable), a Principal Financial Officer, a Principal Operations Officer, a Securities Trader Principal, or a Registered Options Principal then the principal must appropriately register in one or more of these categories. Proposed Rule 2.1220(a)(2)(A) further provides that if a principal's activities are limited solely to the functions of a General Securities Sales Supervisor, then the principal may appropriately register in that category in lieu of registering as a General Securities Principal. Proposed Rule 2.1220(a)(2)(B) requires that an individual registering as a General Securities Principal satisfy the General Securities Representative prerequisite registration and pass the General Securities Principal qualification examination. Proposed Rule 2.1220(a)(2)(B) also clarifies that an [[Page 52294]] individual may register as a General Securities Sales Supervisor and pass the General Securities Sales Supervisor qualification examination in lieu of passing the General Securities Principal examination. As a general matter, the Exchange currently recognizes the Corporate Securities Representative but would no longer recognize this registration category given its elimination by FINRA. Proposed Rule 2.1220(a)(2)(B), however, provides that, subject to the lapse of registration provisions in proposed Rule 2.1210, Commentary .07, each person registered with the Exchange as a Corporate Securities Representative and a General Securities Principal on October 1, 2018 and each person who was registered with the Exchange as a Corporate Securities Representative and a General Securities Principal within two years prior to October 1, 2018 would be qualified to register as a General Securities Principal without having to take any additional qualification examinations, provided that such person's supervisory responsibilities in the investment banking and securities business of a member organization or ETP Holder are limited to corporate securities activities of a member organization or ETP Holder. The proposed rule further provides that all other individuals registering as General Securities Principals after October 1, 2018 shall, prior to or concurrent with such registration, become registered as a General Securities Representative and either (1) pass the General Securities Principal qualification examination; or (2) register as a General Securities Sales Supervisor and pass the General Securities Sales Supervisor qualification examination. 3. Proposed Rule 2.1220(a)(3)--Compliance Officer \41\ --------------------------------------------------------------------------- \41\ The proposed rule is substantially similar to FINRA Rule 1220(a)(3). --------------------------------------------------------------------------- Proposed Rule 2.1220(a)(3) establishes a Compliance Officer registration category and requires all persons designated as CCOs on Schedule A of Form BD to register as Compliance Officers, subject to an exception for member organizations or ETP Holders engaged in limited investment banking or securities business. The proposed rule only addresses the registration requirements for CCOs. However, consistent with proposed Rule 2.1210, Commentary .01 relating to permissive registrations, a firm may allow other associated persons to register as Compliance Officers. Chief Compliance Officers at ATP Holders, who are currently not subject to a registration requirement, would be excluded from the requirements of the proposed rule. In addition, the Exchange is proposing to provide CCOs of firms that engage in limited investment banking or securities business with greater flexibility to satisfy the qualification requirements for CCOs. Specifically, proposed Rule 2.1220(a)(3) set forth the following qualification requirements for Compliance Officer registration:Subject to the lapse of registration provisions in proposed Rule 2.1210, Commentary .07, each person registered with the Exchange as a General Securities Representative and a General Securities Principal on October 1, 2018 and each person who was registered with the Exchange as a General Securities Representative and a General Securities Principal within two years prior to October 1, 2018 would be qualified to register as Compliance Officers without having to take any additional examinations. In addition, subject to the lapse of registration provisions in proposed Rule 2.1210, Commentary .07, individuals registered as Compliance Officials in the CRD system on October 1, 2018 and individuals who were registered as such within two years prior to October 1, 2018 would also be qualified to register as Compliance Officers without having to take any additional examinations; [sic] All other individuals registering as Compliance Officers after October 1, 2018 would have to: (1) Satisfy the General Securities Representative prerequisite registration and pass the General Securities Principal qualification examination; or (2) pass the Compliance Official qualification examination. An individual designated as a CCO on Schedule A of Form BD of a member organization or ETP Holder that is engaged in limited investment banking or securities business may be registered in a principal category under proposed Rule 2.1220(a) that corresponds to the limited scope of the A member organization's or ETP Holder's business. 4. Proposed Rule 2.1220(a)(4)--Financial and Operation Principal and Introducing Broker-Dealer Financial and Operations Principal \42\ --------------------------------------------------------------------------- \42\ The proposed rule is substantially similar to FINRA Rule 1220(a)(4). --------------------------------------------------------------------------- Proposed Rule 2.1220(a)(4) provides that each principal who is responsible for the financial and operational management of a member organization or ETP Holder that has a minimum net capital requirement of $250,000 under SEA Rules 15c3-1(a)(1)(ii) and 15c3-1(a)(2)(i), or a member organization or ETP Holder that has a minimum net capital requirement of $150,000 under SEA Rule 15c-3-1(a)(8) must be designated as a Financial and Operations Principal. In addition, proposed Rule 2.1220(a)(4) provides that a principal who is responsible for the financial and operational management of a member organization or ETP Holder that is subject to the net capital requirements of SEA Rule 15c3-1, other than a member organization or ETP Holder that is subject to the net capital requirements of SEA Rules 15c3-1(a)(1)(ii), (a)(2)(i) or (a)(8), must be designated and registered as either a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal. Financial and Operations Principals and Introducing Broker-Dealer Financial and Operation Principals are not subject to a prerequisite representative registration, but they must pass the Financial and Operations Principal or Introducing Broker- Dealer Financial and Operations Principal examination, as applicable. Additionally, proposed Rule 2.1220(a)(4)(B) requires a member organization or ETP Holder to designate a Principal Financial Officer with primary responsibility for the day-to-day operations of the business, including overseeing the receipt and delivery of securities and funds, safeguarding customer and firm assets, calculation and collection of margin from customers and processing dividend receivable and payables and reorganization redemptions and those books and records related to such activities. Further, the proposed rule requires that a firm's Principal Financial Officer and Principal Operations Officer qualify and register as Financial and Operations Principals or Introducing Broker-Dealer Financial and Operations Principals, as applicable. Because the financial and operational activities of member organizations or ETP Holders that neither self-clear nor provide clearing services are more limited, such member organizations or ETP Holders may designate the same person as the Principal Financial Officer, Principal Operations Officer and Financial and Operations Principal or Introducing Broker-Dealer Financial and Operations Principal (that is, such member organizations or ETP Holders are not required to designate different persons to function in these capacities). Given the level of financial and operational responsibility at clearing and self-clearing members, the Exchange believes that it is necessary for such member organizations or ETP [[Page 52295]] Holders to designate separate persons to function as Principal Financial Officer and Principal Operations Officer. Such persons may also carry out the other responsibilities of a Financial and Operations Principal, such as supervision of individuals engaged in financial and operational activities. In addition, the proposed rule provides that a clearing or self-clearing member organization or ETP Holder that is limited in size and resources may request a waiver of the requirement to designate separate persons to function as Principal Financial Officer and Principal Operations Officer. 5. Proposed Rule 2.1220(a)(5)--Securities Trader Principal \43\ --------------------------------------------------------------------------- \43\ The proposed rule is substantially similar to FINRA Rule 1220(a)(7). --------------------------------------------------------------------------- Proposed Rule 2.1220(a)(5) requires that a principal responsible for supervising the securities trading activities specified in proposed Rule 2.1220(b)(3) register as a Securities Trader Principal. The proposed rule requires that individuals registering as Securities Trader Principals must be registered as Securities Traders and pass the General Securities Principal qualification examination. 6. Proposed Rule 2.1220(a)(6)--General Securities Sales Supervisor \44\ --------------------------------------------------------------------------- \44\ The proposed rule is substantially similar to FINRA Rule 1220(a)(10). --------------------------------------------------------------------------- Proposed Rule 2.1220(a)(6) provides that a principal may register with the Exchange as a General Securities Sales Supervisor if his or her supervisory responsibilities in the investment banking or securities business of a member organization or ETP Holder are limited to the securities sales activities of a member organization or ETP Holder, including the approval of customer accounts, training of sales and sales supervisory personnel and the maintenance of records of original entry or ledger accounts of a member organization or ETP Holder required to be maintained in branch offices by Exchange Act record-keeping rules. A person registering as a General Securities Sales Supervisor must satisfy the General Securities Representative prerequisite registration and pass the General Securities Sales Supervisor examinations.\45\ Moreover, a General Securities Sales Supervisor is precluded from performing any of the following activities: (1) Supervision of the origination and structuring of underwritings; (2) supervision of market-making commitments; (3) supervision of the custody of firm or customer funds or securities for purposes of SEA Rule 15c3-3; or (4) supervision of overall compliance with financial responsibility rules. --------------------------------------------------------------------------- \45\ An individual may also register as a General Securities Sales Supervisor by passing a combination of other principal-level examinations. --------------------------------------------------------------------------- 7. Proposed Rule 2.1220(a)(7)--Registered Options Principal \46\ --------------------------------------------------------------------------- \46\ The proposed rule is substantially similar to FINRA Rule 1220(a)(8). --------------------------------------------------------------------------- Proposed Rule 2.1220(a)(7) provides that each ATP Holder engaged in options transactions with the public have at least one Registered Options Principal. The proposed rule further requires that a principal responsible for supervising an ATP Holder's options sales practices with the public, including a person designated pursuant to Rule 11.18(b)(2) register with the Exchange as a Registered Options Principal, unless such principal's options activities are limited solely to those activities that may be supervised by a General Securities Sales Supervisor, in which case, such person may register as a General Securities Sales Supervisor in lieu of registering as a Registered Options Principal. Proposed Rule 2.1220(a)(7)(B) further provides that, subject to the lapse of registration provisions in proposed Rule 2.1210, Commentary .07, each person registered with the Exchange as a Registered Options Principal on October 1, 2018 and each person who was registered with the Exchange as a Registered Options Principal within two years prior to October 1, 2018 would be qualified to register as a Registered Options Principal without having to pass any additional qualification examinations. The proposed rule further provides that all other individuals registering as Registered Options Principals after October 1, 2018 shall, prior to or concurrent with such registration, become registered as a General Securities Representative and pass the Registered Options Principal qualification examination. 8. Proposed Rule 2.1220(b)(1)--Representative \47\ --------------------------------------------------------------------------- \47\ The proposed rule is substantially similar to FINRA Rule 1220(b)(1). --------------------------------------------------------------------------- Proposed Rule 2.1220(b)(1) defines a representative as any person associated with a member organization or ETP Holder, including assistant officers other than principals, who is engaged in the a member organization's or ETP Holder's investment banking or securities business, such as supervision, solicitation, conduct of business in securities or the training of persons associated with a member organization or ETP Holder for any of these functions. 9. Proposed Rule 2.1220(b)(2)--General Securities Representative \48\ --------------------------------------------------------------------------- \48\ The proposed rule is substantially similar to FINRA Rule 1220(b)(2). --------------------------------------------------------------------------- Proposed Rule 2.1220(b)(2)(A) states that each representative as defined in proposed Rule 2.1220(b)(1) is required to register with the Exchange as a General Securities Representative, subject to the following exceptions. The proposed rule provides that if a representative's activities include the function of a Securities Trader, then the representative must appropriately register in that category. The proposed rule further provides that, subject to the lapse of registration provisions in proposed Rule 2.1210, Commentary .07, each person registered with the Exchange as a General Securities Representative on October 1, 2018 and each person who was registered with the Exchange as a General Securities Representative within two years prior to October 1, 2018 would be qualified to register as a General Securities Representative without having to take any additional qualification examinations. Additionally, the proposed rule would require that individuals registering as General Securities Representatives after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the General Securities Representative examination. 10. Proposed Rule 2.1220(b)(3)--Securities Trader \49\ --------------------------------------------------------------------------- \49\ The proposed rule is substantially similar to FINRA Rule 1220(b)(4). --------------------------------------------------------------------------- Proposed Rule 2.1220(b)(3) provides that each representative as defined in proposed Rule 2.1220(b)(1) is required to register as a Securities Trader if, with respect to transactions in equity (including equity options), preferred or convertible debt securities, such person is engaged in proprietary trading, the execution of transactions on an agency basis, or the direct supervision of such activities. The proposed rule provides an exception from the registration requirement for any associated person of a member organization or ETP Holder whose trading activities are conducted primarily on behalf of an investment company that is registered with the SEC pursuant to the Investment Company Act and that controls, is controlled by, or is under common control with a member organization or ETP Holder. The Exchange proposes to adopt FINRA's definition of Securities Trader in proposed Rule 2.1220(b)(3) in order [[Page 52296]] to align the text of the rule to that adopted by FINRA and other exchanges.\50\ --------------------------------------------------------------------------- \50\ See e.g., MIAX International Stock Exchange, LLC Rule 203(d). --------------------------------------------------------------------------- The proposed rule also requires that associated persons primarily responsible for the design, development or significant modification of algorithmic trading strategies (or responsible for the day-to-day supervision or direction of such activities) register as Securities Traders. Individuals registering as Securities Traders must pass the SIE and the Securities Trader examination. Finally, the proposed rule provides that, subject to the lapse of registration provisions in proposed Rule 2.1210, Commentary .07, each person registered with the Exchange as a Securities Trader on October 1, 2018 and each person who was registered with the Exchange as a Securities Trader within two years prior to October 1, 2018 would be qualified to register as a Securities Trader without having to take any additional qualification examinations. Additionally, the proposed rule would require that individuals registering as Securities Traders after October 1, 2018 shall, prior to or concurrent with such registration, pass the SIE and the Securities Trader qualification examination. 11. Proposed Rule 2.1220, Commentary .01--Foreign Registrations \51\ --------------------------------------------------------------------------- \51\ The proposed rule is substantially similar to FINRA Rule 1220.01 and 1220.06. --------------------------------------------------------------------------- Proposed Rule 2.1220, Commentary .01, states that individuals who are in good standing as representatives with the Financial Conduct Authority in the United Kingdom or with a Canadian stock exchange or securities regulator would be exempt from the requirement to pass the SIE, and thus would be required only to pass a specialized knowledge examination to register with the Exchange as a representative. The proposed approach would provide individuals with a United Kingdom or Canadian qualification more flexibility to obtain a representative- level registration. Additionally, proposed Rule 2.1220, Commentary .01, provides that, subject to the lapse of registration provisions in Rule 2.1210, Commentary .07, each person who is registered with the Exchange as a United Kingdom Securities Representative or a Canada Securities Representative on October 1, 2018 and each person who was registered with the Exchange in such categories within two years prior to October 1, 2018 would be eligible to maintain such registrations with the Exchange. However, if persons registered in such categories subsequently terminate such registration(s) with the Exchange and the registration remains terminated for two or more years, they would not be eligible to re-register in such categories. 12. Proposed Rule 2.1220, Commentary .02--Additional Qualification Requirements for Persons Engaged in Security Futures \52\ --------------------------------------------------------------------------- \52\ The proposed rule is substantially similar to FINRA Rule 1220.02. --------------------------------------------------------------------------- Proposed Rule 2.1220, Commentary .02, states that each person who is registered with the Exchange as a General Securities Representative, United Kingdom Securities Representative, Canada Securities Representative, Options Representative, Registered Options Principal or General Securities Sales Supervisor shall be eligible to engage in security futures activities as a representative or principal, as applicable, provided that such individual completes a Firm Element program as set forth in Rule 341A(b) for member organizations and Rule 2.21E(d)(2) for ETP Holders that addresses security futures products before such person engages in security futures activities. 13. Proposed Rule 2.1220, Commentary .03--Scope of General Securities Sales Supervisor Registration Category \53\ --------------------------------------------------------------------------- \53\ The proposed rule is substantially similar to FINRA Rule 1220.04. --------------------------------------------------------------------------- Proposed Rule 2.1220, Commentary .03, explains the purpose of the General Securities Sales Supervisor registration category. The General Securities Sales Supervisor category is an alternate category of registration designed to lessen the qualification burdens on principals of general securities firms who supervise sales. Without this category of limited registration, such principals would be required to separately qualify pursuant to the rules of FINRA, the MSRB, the NYSE and the options exchanges. While persons may continue to separately qualify with all relevant self-regulatory organizations, the General Securities Sales Supervisor examination permits qualification as a supervisor of sales of all securities through one registration category. Persons registered as General Securities Sales Supervisors may also qualify in any other category of principal registration. Persons who are already qualified in one or more categories of principal registration may supervise sales activities of all securities by also qualifying as General Securities Sales Supervisors. The proposed rule further provides that any person required to be registered as a principal who supervises sales activities in corporate, municipal and option securities, investment company products, variable contracts, and security futures (subject to the requirements of Rule 2.1220, Commentary .02) may be registered solely as a General Securities Sales Supervisor. In addition to branch office managers, other persons such as regional and national sales managers may also be registered solely as General Securities Sales Supervisors as long as they supervise only sales activities. 14. Proposed Rule 2.1220, Commentary .04--ATP Holders With One Registered Options Principal \54\ --------------------------------------------------------------------------- \54\ The proposed rule is substantially similar to FINRA Rule 1220.03. --------------------------------------------------------------------------- Proposed Rule 2.1220, Commentary .03, requires that an ATP Holder that has one Registered Options Principal promptly notify the Exchange and agree to specified conditions if such person is terminated, resigns, becomes incapacitated or is otherwise unable to perform his or her duties. G. Proposed New Rule 2.1230--Associated Persons Exempt From Registration \55\ --------------------------------------------------------------------------- \55\ The proposed rule is substantially similar to FINRA Rule 1230. --------------------------------------------------------------------------- Proposed Rule 2.1230 provides an exemption from registration with the Exchange for certain associated persons. Specifically, the proposed rule provides that persons associated with a member organization or ETP Holder whose functions are solely and exclusively clerical or ministerial would be exempt from registration.\56\ --------------------------------------------------------------------------- \56\ FINRA Rule 1230 also provides an exemption from registration with FINRA to persons associated with a FINRA member whose functions are solely and exclusively clerical or ministerial and persons associated with a FINRA member whose functions are related solely and exclusively to (i) effecting transactions on the floor of a national securities exchange and who are appropriately registered with such exchange; (ii) effecting transactions in municipal securities; (iii) effecting transactions in commodities; or (iv) effecting transactions in security futures, provided that any such person is registered with a registered futures association. Member organizations or ETP Holders do not solely and exclusively engage in any of the foregoing transactions and therefore the Exchange is not adopting that portion of FINRA Rule 1230. --------------------------------------------------------------------------- 1. Proposed Rule 2.1230, Commentary .01--Registration Requirements for Associated Persons Who Accept Customer Orders \57\ --------------------------------------------------------------------------- \57\ The proposed rule is substantially similar to FINRA Rule 1230.01. --------------------------------------------------------------------------- Proposed Rule 2.1230, Commentary .01, clarifies that the function of accepting customer orders is not [[Page 52297]] considered clerical or ministerial and that associated persons who accept customer orders under any circumstances are required to be appropriately registered. However, the proposed rule provides that an associated person is not accepting a customer order where occasionally, when an appropriately registered person is unavailable, the associated person transcribes the order details and the registered person contacts the customer to confirm the order details before entering the order. F. Proposed Amendments to Rules 920, 921NY, 921.1NY, 930NY and 931NY of the Options Rules Finally, consistent with the proposed restructuring of the representative-level examinations proposed in the FINRA Filing, the Exchange proposes to add ``and the Securities Industry Essentials Examination'' following the reference to the Series 7 Examination in Commentary .06 to Rules 920 and in 930NY(b)(1)(A) of the Options Rules and following the reference to the Series 57 Examination in Rules 921NY(a), 921.1NY(b)(2) and 931NY(a) of the Options Rules. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\58\ in general, and furthers the objectives of Section 6(b)(5),\59\ in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \58\ 15 U.S.C. 78f(b). \59\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change will streamline, and bring consistency and uniformity to, the registration rules, which will, in turn, assist member organizations or ETP Holders and their associated persons in complying with these rules and improve regulatory efficiency. The proposed rule change will also improve the efficiency of the examination program, without compromising the qualification standards. In addition, the proposed rule change will expand the scope of permissive registrations, which, among other things, will allow member organizations or ETP Holders to develop a depth of associated persons with registrations to respond to unanticipated personnel changes and will encourage greater regulatory understanding. Further, the proposed rule change will provide a more streamlined and effective waiver process for individuals working for a financial services industry affiliate of a member organization or ETP Holder, and it will require such individuals to maintain specified levels of competence and knowledge while working in areas ancillary to the investment banking and securities business. Finally, the Exchange believes that, with the introduction of the SIE and expansion of the pool of individuals who are eligible to take the SIE, the proposed rule change has the potential of enhancing the pool of prospective securities industry professionals by introducing them to securities laws, rules and regulations and appropriate conduct before they join the industry in a registered capacity. 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 proposed amendments are intended to promote transparency in the Exchange's rules, and consistency with the rules of other SROs with respect to the examination, qualification, and continuing education requirements applicable to member organizations or ETP Holders and their registered personnel. The Exchange believes that in that regard that any burden on competition would be clearly outweighed by the important regulatory goal of ensuring clear and consistent requirements applicable across SROs, avoiding duplication, and mitigating any risk of SROs implementing different standards in these important areas. Further, the Exchange does not believe that the proposed amendments will affect competition among securities markets since all SROs are expected to adopt similar rules with uniform standards for qualification, registration and continuing education requirements. 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 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) of the Act \60\ and Rule 19b- 4(f)(6) thereunder. --------------------------------------------------------------------------- \60\ 15 U.S.C. 78s(b)(3)(A). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days from the date of filing. However, Rule 19b-4(f)(6)(iii) \61\ permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative on October 1, 2018 to coincide with the effective date of FINRA's proposed rule change on which the proposal is based.\62\ The waiver of the operative delay would make the Exchange's qualification requirements consistent with those of FINRA, as of October 1, 2018. Therefore, the Commission believes that the waiver of the 30-day operative delay is consistent with the protection of investors and the public interest and hereby waives the 30-day operative delay and designates the proposal operative on October 1, 2018.\63\ --------------------------------------------------------------------------- \61\ 17 CFR 240.19b-4(f)(6)(iii). \62\ See supra note 5. \63\ 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). --------------------------------------------------------------------------- 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. 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: [[Page 52298]] 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-NYSEAMER-2018-46 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-NYSEAMER-2018-46. 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEAMER-2018-46 and should be submitted on or before November 6, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\64\ --------------------------------------------------------------------------- \64\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-22432 Filed 10-15-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices 52287
IV. Solicitation of Comments For the Commission, by the Division of require such registration. As such, the
Trading and Markets, pursuant to delegated Exchange is amending current Rules 341
Interested persons are invited to authority.10 and 341A of the Office Rules and Rules
submit written data, views, and Eduardo A. Aleman, 2.4E and 2.21E of the Equities Rules
arguments concerning the foregoing, Assistant Secretary. regarding continuing education
including whether the proposed rule [FR Doc. 2018–22425 Filed 10–15–18; 8:45 am] requirements to reflect the FINRA rule;
change is consistent with the Act. BILLING CODE 8011–01–P adopting Commentary .06 to current
Comments may be submitted by any of Rule 341A regarding fingerprint
the following methods: information; adopting new Rule 2.1210
SECURITIES AND EXCHANGE regarding registration requirements and
Electronic Comments
COMMISSION related Commentary to new Rule
• Use the Commission’s internet [Release No. 34–84388; File No. SR– 2.1210; adopting new Rule 2.1220
comment form (http://www.sec.gov/ NYSEAMER–2018–46] regarding registration categories 4 and
rules/sro.shtml); or related Commentary to new Rule
Self-Regulatory Organizations; NYSE 2.1220; and adopting new Rule 2.1230
• Send an email to rule-comments@
American LLC; Notice of Filing and regarding associated persons exempt
sec.gov. Please include File Number SR–
Immediate Effectiveness of from registration and related
CBOE–2018–065 on the subject line.
Amendments to Rules Regarding Commentary to new Rule 2.1230. Each
Paper Comments Qualification, Registration and of these rule changes, which are [sic]
Continuing Education Applicable to described in more detail below, would
• Send paper comments in triplicate Member Organizations, Equity Trading become operative on October 1, 2018.
to Secretary, Securities and Exchange Permit Holders, and American Trading The proposed rule change is available
Commission, 100 F Street NE, Permit Holders on the Exchange’s website at
Washington, DC 20549–1090. www.nyse.com, at the principal office of
October 10, 2018. the Exchange, and at the Commission’s
All submissions should refer to File Pursuant to Section 19(b)(1) 1 of the
Number SR–CBOE–2018–065. This file Public Reference Room.
Securities Exchange Act of 1934 (the
number should be included on the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 II. Self-Regulatory Organization’s
subject line if email is used. To help the notice is hereby given that on Statement of the Purpose of, and
Commission process and review your September 27, 2018, NYSE American Statutory Basis for, the Proposed Rule
comments more efficiently, please use LLC (the ‘‘Exchange’’ or ‘‘NYSE Change
only one method. The Commission will American’’) filed with the Securities In its filing with the Commission, the
post all comments on the Commission’s and Exchange Commission (the self-regulatory organization included
internet website (http://www.sec.gov/ ‘‘Commission’’) the proposed rule statements concerning the purpose of,
rules/sro.shtml). Copies of the change as described in Items I and II and basis for, the proposed rule change
submission, all subsequent below, which Items have been prepared and discussed any comments it received
amendments, all written statements by the self-regulatory organization. The on the proposed rule change. The text
with respect to the proposed rule Commission is publishing this notice to of those statements may be examined at
change that are filed with the solicit comments on the proposed rule the places specified in Item IV below.
Commission, and all written change from interested persons. The Exchange has prepared summaries,
communications relating to the I. Self-Regulatory Organization’s set forth in sections A, B, and C below,
proposed rule change between the Statement of the Terms of Substance of of the most significant parts of such
Commission and any person, other than the Proposed Rule Change statements.
those that may be withheld from the
public in accordance with the The Exchange proposes amendments A. Self-Regulatory Organization’s
provisions of 5 U.S.C. 552, will be to the Exchange’s rules regarding Statement of the Purpose of, and the
available for website viewing and qualification, registration and Statutory Basis for, the Proposed Rule
continuing education requirements Change
printing in the Commission’s Public
Reference Room, 100 F Street NE, applicable to member organizations, 1. Purpose
Washington, DC 20549 on official Equity Trading Permit (‘‘ETP’’) Holders,
and American Trading Permit (‘‘ATP’’) The Exchange proposes to amend its
business days between the hours of qualification, registration, and
Holders. The Exchange’s rule proposal
10:00 a.m. and 3:00 p.m. Copies of the continuing education requirements
is intended to harmonize its rules with
filing also will be available for applicable to members and member
Financial Regulatory Authority, Inc.
inspection and copying at the principal organizations and ETP Holders. The
(‘‘FINRA’’) rules and thus promote
office of the Exchange. All comments proposed amendments are intended to:
consistency within the securities
received will be posted without change. (i) Provide transparency and clarity with
industry, and therefore the Exchange is
Persons submitting comments are only adopting rules that are relevant to respect to the Exchange’s registration,
cautioned that we do not redact or edit the Exchange’s members and member qualification and examination
personal identifying information from organization and ETP Holders. The
comment submissions. You should Exchange is not adopting registration 4 The relevant principal registration categories the
submit only information that you wish categories that are not applicable to
Exchange proposes to adopt are (1) Principal; (2)
amozie on DSK3GDR082PROD with NOTICES1
to make available publicly. All General Securities Principal; (3) Compliance
members and member organizations and Officer; (4) Financial and Operations Principal and
submissions should refer to File ETP Holders because they do not engage Introducing Broker-Dealer Financial and Operations
Number SR–CBOE–2018–065 and in the type of business that would Principal; (5) Securities Trader Principal; (6)
should be submitted on or before General Securities Sales Supervisor; and (7)
November 6, 2018. Registered Options Principal. The relevant
1 15 U.S.C. 78s(b)(1). representative registration categories the Exchange
2 15 U.S.C. 78a. proposes to adopt are (1) Representative; (2) General
10 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4. Securities Representative; and (3) Securities Trader.
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/1.svg)
![52288 Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
requirements; (ii) amend its rules adopt rule text within the current rule compliance, ethical, supervisory
relating to categories of registration and that provides that a person registered as subjects and sales practice standards.
respective qualification examinations a Securities Trader would not be The Firm Element consists of at least an
required for member organizations and qualified to function in any other annual, member-developed and
ETP Holders that engage in trading registration category unless he or she is administered training programs
activities on the Exchange; (iii) also qualified and registered in such designed to keep registered persons
harmonize the Exchange’s qualification, other registration category.8 current regarding securities products,
registration and examination rules with Current Commentary .01(d) of Rule services and strategies offered by the
those of FINRA 5 so as to promote 341 provides that a supervisor of member.
uniform standards across the securities registered representatives may satisfy
the registration requirements under 1. Regulatory Element
industry; and (iv) add new definitions of
terms and make other conforming Commentary .01 by registering and The Exchange proposes to amend
changes to enhance the qualifying as a General Securities Rules 341A(a) and 2.21E(d)(1) to
comprehensiveness and clarity of the Principal by passing the Series 7 and provide, consistent with proposed Rule
Exchange’s rules.6 The proposed Series 24 examinations. Consistent with 2.1210, Commentary .08, that a waiver-
changes are discussed below. the proposed restructuring of the eligible person would be subject to a
representative-level examination Regulatory Element program that
A. Amendments to Current Rule 341 of proposed in the FINRA Filing, the correlates to his or her most recent
the Office Rules and Rule 2.4E of the Exchange proposes to amend current registration category, and that the
Equities Rules 7 Commentary .01(d) to require such content of the Regulatory Element
Current Rule 341 of the Office Rules persons to also complete the Securities would be based on the same cycle had
requires registration, qualification and Industry Essentials (‘‘SIE’’) examination. the individual remain [sic] registered.10
approval by the Exchange of registered Rule 2.4E of the Equities Rules The proposed amendment to Rules
representatives, securities lending currently requires traders of ETP 341A(a) and 2.21E(d)(1) also provides
representatives, Securities Traders, and Holders for which the Exchange is the that if a waiver-eligible person fails to
a direct supervisor. Commentary .01(c) Designated Examining Authority complete the Regulatory Element during
of current Rule 341 provides the (‘‘DEA’’) to successfully complete the the prescribed time frames, he or she
definition of a Securities Trader as any Series 7 Examination. The Exchange would lose waiver eligibility.11
person engaged in the purchase or sale proposes to amend Rules 2.4E to require Further, the Exchange proposes to
of securities or other similar traders of ETP Holders for which the amend Rules 341A(a)(2) and
instruments for the account of a member Exchange is the DEA to successfully 2.21E(d)(1)(B) to provide that any
or member organization with which he complete the SIE examination in person whose registration has been
is associated, as an employee or addition to the Series 7 Examination in deemed inactive under the rule may not
otherwise, and who does not transact order to satisfy the Exchange’s accept or solicit business or receive any
any business with the public. registration requirement, consistent compensation for the purchase or sale of
The Exchange proposes to adopt with the proposed restructuring of the securities. The proposed amendment
FINRA’s definition of Securities Trader representative-level examinations provides, however, that such person
(as described below) and, therefore, proposed in the FINRA Filing. may receive trail or residual
proposes to add a reference to Rule commissions resulting from transactions
2.1220(b)(3) as the appropriate rule in B. Amendments to Rule 341A of the completed before the inactive status,
the Exchange’s Rulebook where the Office Rules and Rule 2.21E— unless the member organization or ETP
definition of Securities Trader can be Continuing Education Requirements Holder, respectively, with which the
found. The Exchange also proposes to Rule 341A of the Office Rules and person is associated has a policy
Rule 2.21E provide the continuing prohibiting such trail or residual
5 See Securities Exchange Act Release No. 81098
education requirements of registered commissions.12
(July 7, 2017), 82 FR 32419 (July 13, 2017) (SR– persons 9 of a member or member Additionally, under Rules 341A(a)(3)
FINRA–2017–007) (Approval Order) (the ‘‘FINRA
Filing’’). The Exchange notes that in order to organization or ETP Holder, and 2.21E(d)(1)(C), a registered person is
maintain consistency with the FINRA Filing, the respectively, subsequent to their initial required to retake the Regulatory
Exchange proposes to incorporate certain terms qualification and registration with the Element in the event that such person
from the relevant FINRA rule into the Exchange’s Exchange, and includes a Regulatory (i) is subject to any statutory
rule that may not be applicable to all member
organizations or ETP Holders. For example, while Element and a Firm Element. The disqualification as defined in Section
member organizations or ETP Holders may not be Regulatory Element applies to registered 3(a)(39) of the Exchange Act; (ii) is
engaged in ‘‘investment banking’’ activity, the persons and consists of periodic subject to suspension or to the
Exchange proposes to adopt that term within these imposition of a fine of $5,000 or more
registration rules to conform them to the FINRA
computer-based training on regulatory,
rules.
for violation of any provision of any
6 The conforming changes the Exchange proposes 8 The Exchange proposes the same changes to securities law or regulation, or any
would substitute the term ‘‘member organization,’’ Commentary .03 of current Rule 2.21E, which agreement with or rule or standard of
‘‘ETP Holder’’ or ‘‘ATP Holder’’ as applicable for provides the definition of a Securities Trader. conduct of any securities governmental
‘‘member’’ and the term ‘‘Exchange’’ for ‘‘FINRA.’’ 9 For purposes of Rule 341A, the term ‘‘registered
agency, securities self-regulatory
References to ‘‘member organization’’ as used in person’’ means any member, allied member,
Exchange rules include ATP Holders, which are registered representative or other person registered organization, or as imposed by any such
registered brokers or dealers approved to effect or required to be registered under Exchange rules, regulatory or self-regulatory
transactions on the Exchange’s options marketplace. but does not include any such person whose organization in connection with a
amozie on DSK3GDR082PROD with NOTICES1
Under the Exchange’s rules, an ATP Holder has the activities are limited solely to the transaction of disciplinary proceeding; or (iii) is
status as a ‘‘member’’ of the Exchange as that term business on the Floor with members or registered
is defined in Section 3 of the Act. See Rule broker-dealers. See Rule 341A, Commentary .01.
10 The proposed change is substantially similar to
900.2NY(4) & (5). For purposes of Rule 2.21E, the term ‘‘registered
7 The registration requirements set forth in the person’’ means any ETP Holder, Allied Person that contained in FINRA Rule 1240(a)(1).
11 The proposed change is substantially similar to
Office Rules are applicable to the NYSE Amex thereof, registered representative or other person
options market. The registration requirements for registered or required to be registered under the that contained in FINRA Rule 1240(a)(2).
the NYSE equities market are set forth in the Rules of the Exchange. See Rule 2.21E, Commentary 12 The proposed change is substantially similar to
Equities Rules. .01. that contained in FINRA Rule 1240(a)(2).
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/2.svg)
![Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices 52289
ordered as a sanction in a disciplinary proposed in the FINRA Filing, the issues, FINRA formulated the SIE as a
action to retake the Regulatory Element Exchange proposes to add ‘‘and the general knowledge examination that all
by any securities governmental agency Securities Industry Essentials potential representative-level registrants
or self-regulatory organization. The Examination’’ after the reference to the would take.17
Exchange proposes to amend Rules Series 7 Examination. The Exchange proposes to create a
341A(a)(3) and 2.21E(d)(1)(C) to provide new Section 4A titled ‘‘Registration’’ in
D. Proposed New Commentary .05 to its Office Rules to contain proposed
an exception to a waiver-eligible person Rule 341A 15
from retaking the Regulatory Element Rules 2.1210 through 2.1230. Each
and satisfy [sic] all of its requirements.13 The Exchange proposes to adopt a proposed rule is discussed below.
new Commentary .05 to Rule 341A
2. Firm Element regarding the submission of fingerprint 1. Proposed Rule 2.1210—Registration
information by member organizations or Requirements 18
Current Rules 341A(b)(2)(ii) and
2.21E(d)(2)(B) provides that programs ETP Holders, respectively.16 Proposed Rule 2.1210 provides that
used to implement a training program As proposed, upon filing an electronic each person engaged in the investment
must be appropriate for the business of Form U4 on behalf of a person applying banking or securities business of a
the member or member organization or for registration, a member organization member organization or ETP Holder
ETP Holder and, at a minimum must or ETP Holder, as applicable, would be must register with the Exchange as a
cover specific matters concerning required to promptly submit fingerprint representative or principal in each
securities products, services, and information for that person. If the category of registration appropriate to
strategies offered by the member member organization or ETP Holder, as his or her functions and responsibilities
organization or ETP Holder. Current applicable, fails to submit the as specified in proposed Rule 2.1220,
Rules 341A(b)(2)(ii) and 2.21E(d)(2)(B) fingerprint information within 30 days unless exempt from registration
also provides that programs used to after the Exchange receives the pursuant to proposed Rule 2.1230.
implement a member organization’s or electronic Form U4, the person’s Proposed Rule 2.1210 also provides that
ETP Holder’s training program must be registration shall be deemed inactive such person is not qualified to function
appropriate for the business of the and the person would be required to in any registered capacity other than
member organization or ETP Holder immediately cease all activities that for which the person is registered,
and, at a minimum must cover specific requiring registration and would be unless otherwise stated in the rules.
matters concerning securities products, prohibited from performing any duties 2. Proposed Rule 2.1210, Commentary
services, and strategies offered by the and functioning in any capacity .01—Permissive Registrations 19
member organization or ETP Holder. requiring registration. The proposed
rule further provides allows [sic] the The Exchange currently does not have
The Exchange proposes to amend both a specific rule that provides for
Rules 341A(b)(2)(ii) and 2.21E(d)(2)(B) Exchange to administratively terminate
a registration that is inactive for a period permissive registrations. With this
to expand the minimum standard for proposed rule change, and to conform
such training programs by requiring of two years. However, a person whose
registration is administratively its rules to the FINRA rules, the
that, at a minimum, a firm’s training Exchange proposes to adopt a specific
program must also cover training in terminated may seek to reactivate his or
her registration by reapplying for rule regarding permissive registrations.
ethics and professional responsibility.14 Proposed Rule 2.1210, Commentary .01,
registration and meeting the
C. Additional Amendments to Current qualification requirements under allows any associated person to obtain
Rule 2.21E Exchange rules. and maintain any registration permitted
by a member organization or ETP
Rule 2.21E(b)(iii) provides that E. Proposed New Rules 2.1210 Through Holder. For instance, an associated
employees of ETP Holders seeking 2.1230 person of an ETP Holder working solely
limited registration as Securities Traders in a clerical or ministerial capacity,
As a general matter, FINRA
must pass the Series 57 examination. such as in an administrative capacity,
administers qualification examinations
Given the formulation of the SIE would be able to obtain and maintain a
that are designed to establish that
examination which all potential General Securities Representative
persons associated with member
representative-level registrants would be registration with the ETP Holder. As
organizations and ETP Holders have
required to pass, the Exchange proposes another example, an associated person
attained specified levels of competence
to amend the current rule to require that
and knowledge. Over time, the
a Securities Trader must register as such 17 The SIE would assess basic product knowledge;
examination program has increased in
on Web CRD and must pass both the SIE the structure and function of the securities industry
complexity to address the introduction
examination and the Series 57 markets, regulatory agencies and their functions;
of new products and functions, and and regulated and prohibited practices. In
examination. The Exchange proposes
related regulatory concerns and particular, the SIE will cover four major areas. The
the same change for Rule 2.4E, first, ‘‘Knowledge of Capital Markets,’’ focuses on
requirements. As a result, today, there
Commentary 03. Finally, Rule 2.2E(c) topics such as types of markets and offerings,
are a large number of examinations,
provides that the Exchange may exempt broker-dealers and depositories, and economic
considerable content overlap across the cycles. The second, ‘‘Understanding Products and
an individual from the examination
representative-level examinations and Their Risks,’’ covers securities products at a high
requirements if such individual has level as well as associated investment risks. The
requirements for individuals in various
successfully completed comparable third, ‘‘Understanding Trading, Customer Accounts
segments of the industry to pass
examinations such as the Series 7 and Prohibited Activities,’’ focuses on accounts,
multiple examinations. To address these
amozie on DSK3GDR082PROD with NOTICES1
Examination. Consistent with the orders, settlement and prohibited activities. The
final area, ‘‘Overview of the Regulatory
proposed restructuring of the 15 The proposed rule is substantially similar to Framework,’’ encompasses topics such as SROs,
representative-level examinations FINRA Rule 1010(d). registration requirements and specified conduct
16 Given its placement in the General Rules, the rules.
13 The proposed change is substantially similar to 18 The proposed rule is substantially similar to
proposed fingerprinting requirements would apply
that contained in FINRA Rule 1240(a)(3). to both the Exchange’s options and equities FINRA Rule 1210.
14 The proposed change is substantially similar to marketplace. As noted, the term member 19 The proposed rule is substantially similar to
that contained in FINRA Rule 1240(b)(2). organization includes ATP Holders. FINRA Rule 1210.02.
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/3.svg)
![52290 Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
of an ETP Holder who is registered and permissively registered as a principal, Exchange. Rather, to be eligible for
functioning solely as a General the registered supervisor must be registration with the Exchange, an
Securities Representative would be able registered as a principal.20 individual must pass an applicable
to obtain and maintain a General representative or principal qualification
3. Proposed Rule 2.1210, Commentary
Securities Principal registration with the examination and complete the other
ETP Holder. Proposed Rule 2.1210, .02—Qualification Examinations and requirements of the registration process.
Commentary .01, would further allow Waivers of Examinations 21 Proposed Rule 2.1210, Commentary
an individual engaged in the securities Proposed Rule 2.1210, Commentary .02, also provides that the Exchange
business of a foreign securities affiliate .02, provides that before the registration may, in exceptional cases and where
or subsidiary of an ETP Holder to obtain of a person as a representative can good cause is shown, pursuant to the
and maintain any registration permitted become effective under proposed Rule Rule 9600 Series, waive the applicable
by the ETP Holder. 2.1210, such person must pass the SIE qualification examination(s) and accept
The Exchange is proposing to permit and an appropriate representative-level other standards as evidence of an
the registration of such individuals for qualification examination as specified applicant’s qualifications for
several reasons. First, a member in proposed Rule 2.1220.22 Proposed registration. The proposed rule further
organization or ETP Holder may foresee Rule 2.1210, Commentary .02, also provides that the Exchange will only
a need to move a former representative provides that before the registration of a consider examination waiver requests
or principal who has not been registered person as a principal can become submitted by a member organization or
for two or more years back into a effective under proposed Rule 2.1210, ETP Holder for individuals associated
position that would require such person such person must pass an appropriate with the a member organization or ETP
to be registered. Currently, such persons principal-level qualification Holder who are seeking registration in a
are required to requalify (or obtain a examination as specified in proposed representative- or principal-level
waiver of the applicable qualification Rule 2.1220. registration category. Moreover, the
examinations) and reapply for Further, proposed Rule 2.1210, proposed rule states that the Exchange
registration. Second, the proposed rule Commentary .02, provides that if a will consider waivers of the SIE alone
change would allow a member registered person’s job functions change or the SIE and the representative- and
organization or ETP Holder to develop and he or she needs to become principal-level examination(s) for such
a depth of associated persons with registered in another representative- individuals. The Exchange would not
registrations in the event of level category, he or she would not need consider a waiver of the SIE for non-
unanticipated personnel changes. to pass the SIE again. Rather, the associated persons or for associated
Finally, allowing registration in registered person would need to pass persons who are not registering as
additional categories encourages greater only the appropriate representative- representatives or principals.
regulatory understanding. level qualification examination.
Individuals maintaining a permissive 4. Persons Functioning as Principals for
Moreover, proposed Rule 2.1210, a Limited Period 23 Proposed Rule
registration under the proposed rule Commentary .02, provides that all
change would be considered registered 2.1210, Commentary .03—Requirements
associated persons, such as associated for Registered
persons and subject to all Exchange persons whose functions are solely and
rules, to the extent relevant to their Proposed Rule 2.1210, Commentary
exclusively clerical or ministerial, are
activities. Additionally, consistent with .03, provides that a member
eligible to take the SIE. Proposed Rule
the requirements of the Exchange’s organization or ETP Holder may
2.1210, Commentary .02, also provides
supervision rules, as proposed, a designate any person currently
that individuals who are not associated
member organization or ETP Holder registered, or who becomes registered,
persons of firms, such as members of the with the member organization or ETP
would be required to have adequate
general public, are eligible to take the Holder as a representative to function as
supervisory systems and procedures
SIE. The Exchange believes that a principal for a limited period,
reasonably designed to ensure that
expanding the pool of individuals who provided that such person has at least
individuals with permissive
are eligible to take the SIE would enable 18 months of experience functioning as
registrations do not act outside the
prospective securities industry a registered representative with [sic] the
scope of their assigned functions. With
professionals to demonstrate to five-year period immediately preceding
respect to an individual who solely
prospective employers a basic level of the designation. The proposed rule is
maintains a permissive registration,
knowledge prior to submitting a job intended to ensure that representatives
such as an individual working
application. Further, this approach designated to function as principals for
exclusively in an administrative
capacity, the individual’s day-to-day would allow for more flexibility and the limited period under the proposal
supervisor may be a non-registered career mobility within the securities have an appropriate level of registered
person. However, for purposes of industry. While all associated persons of representative experience. The proposed
compliance with the Exchange’s firms as well as individuals who are not rule clarifies that the requirements of
supervision rules, a member associated persons would be eligible to the rule apply to designations to any
organization or ETP Holder would be take the SIE pursuant to the proposed principal category, including those
required to assign a registered rule, passing the SIE alone would not categories that are not subject to a
supervisor who would be responsible qualify them for registration with the prerequisite representative-level
for periodically contacting such 20 In either case, the registered supervisor of an
registration requirement, such as the
individual’s day-to-day supervisor to Financial and Operations Principal
amozie on DSK3GDR082PROD with NOTICES1
individual who solely maintains a permissive
verify that the individual is not acting registration would not be required to be registered registration category.24
outside the scope of his or her assigned in the same representative or principal registration
functions. If such individual is category as the permissively-registered individual. 23 The proposed rule is substantially similar to
21 The proposed rule is substantially similar to FINRA Rule 1210.04.
permissively registered as a
FINRA Rule 1210.03. 24 The Exchange notes that qualifying as a
representative, the registered supervisor 22 Proposed Rule 2.1220 sets forth each registered representative is a prerequisite to
must be registered as a representative or registration category and applicable qualification qualifying as a principal except with respect to the
principal. If the individual is examination on the Exchange. following principal-level registrations: (1)
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/4.svg)
![Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices 52291
The proposed rule also clarifies that misrepresenting their qualifications to prescribed time frames.30 The Firm
the individual must fulfill all applicable the public subsequent to passing the Element consists of annual, a member
prerequisite registration, fee and SIE. Moreover, non-associated persons organization or ETP Holder-developed
examination requirements before his or may forfeit their SIE results and may be and administered training programs
her designation as a principal. Further, prohibited from retaking the SIE if the designed to keep covered registered
the proposed rule provides that in no Exchange determines that they cheated persons current regarding securities
event may such person function as a on the SIE or that they misrepresented products, services and strategies offered
principal beyond the initial 120 their qualifications to the public by the member organization or ETP
calendar days without having subsequent to passing the SIE. Holder. For purposes of the Firm
successfully passed an appropriate The proposed rule further notes that Element, the term covered registered
principal qualification examination. The the Exchange considers all qualification persons means any registered Securities
proposed rule also provides an examinations [sic] content to be highly Trader and any registered person who
exception to the experience requirement confidential and that the removal of has direct contact with customers in the
for principals who are designated by a examination content from an conduct of the a member organization’s
member organization or ETP Holder to examination center, reproduction, or ETP Holder’s securities sales, trading
function in other principal categories for disclosure, receipt from or passing to and investment banking activities and to
a limited period. Specifically, the any person, or use for study purposes of the immediate supervisors of such
proposed rule states that a member any portion of such qualification persons.
organization or ETP Holder may examination or any other use that would The Exchange believes that all
designate any person currently compromise the effectiveness of the registered persons, regardless of their
registered, or who becomes registered, examinations and the use in any manner activities, should be subject to the
with the ETP Holder as a principal to and at any time of the questions or Regulatory Element of the CE
function in another principal category answers to the examinations is requirements so that they can keep their
for 120 calendar days before passing any prohibited and would be deemed a knowledge of the securities industry
applicable examinations. violation of Rules 16 and 2010— current. Therefore, the Exchange
Equities. proposes to adopt Rule 2.1210,
5. Proposed Rule 2.1210, Commentary Commentary .06, to clarify that all
.04—Rules of Conduct for Taking 6. Proposed Rule 2.1210, Commentary
registered persons, including those who
Examinations and Confidentiality of .05—Waiting Periods for Retaking a
solely maintain a permissive
Examinations 25 Failed Examination 26
registration, are required to satisfy the
Proposed Rule 2.1210, Commentary Proposed Rule 2.1210, Commentary Regulatory Element, as specified in
.04 states that associated persons taking .05 provides that any person who fails Rules 341A(a) and 2.21E(d)(1). The
the SIE would be subject to the SIE a qualification examination may retake Exchange is making corresponding
Rules of Conduct, and associated that examination after 30 calendar days changes to Rule 341A and Rule 2.21E.
persons taking a representative or from the date of the person’s last The Exchange is not proposing any
principal examination would be subject attempt to pass that examination. The changes to the Firm Element
to the Rules of Conduct for proposed rule further provides that if a requirement at this time. Individuals
representative and principal person fails an examination three or who have passed the SIE but not a
examinations. Pursuant to proposed more times in succession within a two- representative- or principal-level
Rule 2.1210, Commentary .04, a year period, he or she would be examination and do not hold a
violation of the SIE Rules of Conduct or prohibited from retaking the registered position would not be subject
the Rules of Conduct for representative examination either until a period of 180 to any CE requirements.
and principal examinations by an calendar days from the date of the Proposed Rule 2.1210, Commentary
associated person would be deemed to person’s last attempt to pass it [sic]. .06, also provides that a registered
be a violation of Rules 16 and 2010— These waiting periods would apply to person of a member organization or ETP
Equities. Moreover, if an associated the SIE and the representative- and Holder who becomes CE inactive would
person is deemed to have violated the principal-level examinations. Moreover, not be permitted to be registered in
SIE Rules of Conduct or the Rules of the proposed rule provides that non- another registration category with the a
Conduct for representative and associated persons taking the SIE must member organization or ETP Holder or
principal examinations, the associated agree to be subject to the same waiting be registered in any registration category
person may forfeit the results of the periods for retaking the SIE.
examination and may be subject to 7. Proposed Rule 2.1210, Commentary
30 Pursuant to 341A(a) and 2.21E(d)(1), each
disciplinary action by the Exchange. .06—All Registered Persons Must
specified registered person is required to complete
Further, the proposed rule states that the Regulatory Element initially within 120 days
Satisfy the Regulatory Element of after the person’s second registration anniversary
individuals taking the SIE who are not
Continuing Education 27 date and, thereafter, within 120 days after every
associated persons must agree to be third registration anniversary date. A registered
subject to the SIE Rules of Conduct. Pursuant to Rule 341A of the Office person who has not completed the Regulatory
Among other things, the SIE Rules of Rules and Rule 2.21E, the CE Element program within the prescribed time frames
requirements applicable to registered will have his or her registrations deemed inactive
Conduct would require individuals to and designated as ‘‘CE inactive’’ on the CRD system
attest that they are not qualified to persons consist of a Regulatory until such time as the requirements of the program
engage in the investment banking or Element 28 and a Firm Element.29 The have been satisfied. A CE inactive person is
securities business based on passing the Regulatory Element applies to registered prohibited from performing, or being compensated
amozie on DSK3GDR082PROD with NOTICES1
SIE and would prohibit individuals persons and must be completed within for, any activities requiring registration, including
supervision. Moreover, if a registered person is CE
from cheating on the examination or inactive for a two-year period, the Exchange will
26 The proposed rule is substantially similar to
administratively terminate the person’s registration
Compliance Official; (2) Financial and Operations FINRA Rule 1210.06. status. The two-year period would be calculated
27 The proposed rule is substantially similar to
Principal; and (3) Introducing Broker-Dealer from the date the person becomes CE inactive. In
Financial and Operations Principal. FINRA Rule 1210.07. either case, such person must requalify (or obtain
28 See Rules 341A(a) and 2.21E(d)(1).
25 The proposed rule is substantially similar to a waiver of the applicable qualification
FINRA Rule 1210.05. 29 See Rules 341A(b) and 2.21E(d)(2). examination(s)) to be re-eligible for registration.
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/5.svg)
![52292 Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
with another a member organization or 9. Proposed Rule 2.1210, Commentary designated an individual as an FSA-
ETP Holder, until the person has .08—Waiver of Examinations for eligible person may request a waiver for
satisfied the Regulatory Element. Individuals Working for a Financial the individual and more than one
Services Industry Affiliate of a Member member organization or ETP Holder
8. Proposed Rule 2.1210, Commentary
Organization or ETP Holder 32 may request a waiver for the individual
.07—Lapse of Registration and during the seven-year period.35
Expiration of the SIE 31 Proposed Rule 2.1210, Commentary
.08, provides the process for individuals An individual designated as an FSA-
Proposed Rule 2.1210, Commentary working for a financial services industry eligible person would be subject to the
.07, provides that any person who was affiliate of a member organization or Regulatory Element of CE while working
last registered as a representative two or ETP Holder 33 to terminate their for a financial services industry affiliate
more years immediately preceding the registrations with the member of a member organization or ETP
date of receipt by the Exchange of a new organization or ETP Holder and be Holder. The individual would be subject
application for registration as a granted a waiver of their requalification to a Regulatory Element program that
representative is required to pass a requirements upon re-registering with a correlates to his or her most recent
qualification examination for member organization or ETP Holder, registration category, and CE would be
representatives appropriate to the provided the firm that is requesting the based on the same cycle had the
category of registration as specified in waiver and the individual satisfy the individual remained registered. If the
proposed Rule 2.1220(b). Proposed Rule criteria for a Financial Services Affiliate individual fails to complete the
2.1210, Commentary .07, also sets forth (‘‘FSA’’) waiver. prescribed Regulatory Element during
that a passing result on the SIE would Under the proposed waiver process, the 120-day window for taking the
be valid for up to four years. Therefore, the first time a registered person is session, he or she would lose FSA
under the proposed rule change, an designated as eligible for a waiver based eligibility (i.e., the individual would
individual who passes the SIE and is an on the FSA criteria, the member have the standard two-year period after
associated person of a member organization or ETP Holder with which termination to re-register without
organization or ETP Holder at the time the individual is registered would notify having to retake an examination). The
would have up to four years from the the Exchange of the FSA designation. Exchange is making corresponding
date he or she passes the SIE to pass a The member organization or ETP Holder changes to Rules 341A and 2.21E.
representative-level examination to Upon registering an FSA-eligible
would concurrently file a full Form U5
person, a firm would file a Form U4 and
register as a representative with that terminating the individual’s registration
request the appropriate registration(s)
member organization or ETP Holder, or with the firm, which would also
for the individual. The firm would also
a subsequent member organization or terminate the individual’s other SRO
submit an examination waiver request
ETP Holder, without having to retake and state registrations. To be eligible for
to the Exchange,36 similar to the process
the SIE. In addition, an individual who initial designation as an FSA-eligible
used today for waiver requests, and it
passes the SIE and is not an associated person by a member organization or ETP
would represent that the individual is
person at the time would have up to Holder, an individual must have been
eligible for an FSA waiver based on the
four years from the date he or she passes registered for a total of five years within
conditions set forth below. The
the SIE to become an associated person the most recent 10-year period prior to Exchange would review the waiver
of a member organization or ETP Holder the designation, including for the most
and pass a representative-level recent year with that member 35 The following examples illustrate this point:
examination and register as a organization or ETP Holder. An Example 1. Firm A designates an individual as an
representative without having to retake individual would have to satisfy these FSA-eligible person by notifying the Exchange and
the SIE. preconditions only for purposes of his files a Form U5. The individual joins Firm A’s
financial services affiliate. Firm A does not submit
Moreover, an individual holding a or her initial designation as an FSA- a waiver request for the individual. After working
representative-level registration who eligible person, and not for any for Firm A’s financial services affiliate for three
leaves the industry after the effective subsequent FSA designation(s). years, the individual directly joins Firm B’s
Thereafter, the individual would be financial services affiliate for three years. Firm B
date of this proposed rule change would then submits a waiver request to register the
have up to four years to reassociate with eligible for a waiver for up to seven individual. Example 2. Same as Example 1, but the
a member organization or ETP Holder years from the date of initial individual directly joins Firm B after working for
and register as a representative without designation,34 provided that the other Firm A’s financial services affiliate, and Firm B
conditions of the waiver, as described submits a waiver request to register the individual
having to retake the SIE. However, the at that point in time. Example 3. Firm A designates
four-year expiration period in the below, have been satisfied. an individual as an FSA-eligible person by
proposed rule change extends only to Consequently, a member organization or notifying the Exchange and files a Form U5. The
the SIE, and not the representative- and ETP Holder other than the member individual joins Firm A’s financial services affiliate
for three years. Firm A then submits a waiver
principal-level registrations. The organization or ETP Holder that initially request to re-register the individual. After working
representative- and principal-level for Firm A in a registered capacity for six months,
32 The proposed rule is substantially similar to
registrations would continue to be Firm A re-designates the individual as an FSA-
FINRA Rule 1210.09. eligible person by notifying the Exchange and files
subject to a two-year expiration period 33 Proposed Rule 2.1210, Commentary .07 [sic], a Form U5. The individual rejoins Firm A’s
as is the case today. defines a ‘‘financial services industry affiliate of a financial services affiliate for two years, after which
Finally, proposed Rule 2.1210, member organization or ETP Holder’’ as a legal the individual directly joins Firm B’s financial
Commentary .07, clarifies that, for entity that controls, is controlled by or is under services affiliate for one year. Firm B then submits
common control with a member organization or a waiver request to register the individual. Example
purposes of the proposed rule, an
amozie on DSK3GDR082PROD with NOTICES1
ETP Holder and is regulated by the SEC, CFTC, 4. Same as Example 3, but the individual directly
application would not be considered to state securities authorities, federal or state banking joins Firm B after the second period of working for
have been received by the Exchange if authorities, state insurance authorities, or Firm A’s financial services affiliate, and Firm B
that application does not result in a substantially equivalent foreign regulatory submits a waiver request to register the individual
authorities. at that point in time.
registration. 34 Individuals would be eligible for a single, fixed 36 The Exchange would consider a waiver of the
seven-year period from the date of initial representative-level qualification examination(s),
31 The proposed rule is substantially similar to designation, and the period would not be tolled or the principal-level qualification examination(s) and
FINRA Rule 1210.08. renewed. the SIE, as applicable.
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/6.svg)
![52294 Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
individual may register as a General currently not subject to a registration SEA Rules 15c3–1(a)(1)(ii) and 15c3–
Securities Sales Supervisor and pass the requirement, would be excluded from 1(a)(2)(i), or a member organization or
General Securities Sales Supervisor the requirements of the proposed rule. ETP Holder that has a minimum net
qualification examination in lieu of In addition, the Exchange is capital requirement of $150,000 under
passing the General Securities Principal proposing to provide CCOs of firms that SEA Rule 15c–3–1(a)(8) must be
examination. engage in limited investment banking or designated as a Financial and
As a general matter, the Exchange securities business with greater Operations Principal. In addition,
currently recognizes the Corporate flexibility to satisfy the qualification proposed Rule 2.1220(a)(4) provides
Securities Representative but would no requirements for CCOs. Specifically, that a principal who is responsible for
longer recognize this registration proposed Rule 2.1220(a)(3) set forth the the financial and operational
category given its elimination by following qualification requirements for management of a member organization
FINRA. Proposed Rule 2.1220(a)(2)(B), Compliance Officer registration: or ETP Holder that is subject to the net
however, provides that, subject to the • Subject to the lapse of registration capital requirements of SEA Rule 15c3–
lapse of registration provisions in provisions in proposed Rule 2.1210, 1, other than a member organization or
proposed Rule 2.1210, Commentary .07, Commentary .07, each person registered ETP Holder that is subject to the net
each person registered with the with the Exchange as a General capital requirements of SEA Rules
Exchange as a Corporate Securities Securities Representative and a General 15c3–1(a)(1)(ii), (a)(2)(i) or (a)(8), must
Representative and a General Securities Securities Principal on October 1, 2018 be designated and registered as either a
Principal on October 1, 2018 and each and each person who was registered Financial and Operations Principal or
person who was registered with the with the Exchange as a General an Introducing Broker-Dealer Financial
Exchange as a Corporate Securities Securities Representative and a General and Operations Principal. Financial and
Representative and a General Securities Securities Principal within two years Operations Principals and Introducing
Principal within two years prior to prior to October 1, 2018 would be Broker-Dealer Financial and Operation
October 1, 2018 would be qualified to qualified to register as Compliance Principals are not subject to a
register as a General Securities Principal Officers without having to take any prerequisite representative registration,
without having to take any additional additional examinations. In addition, but they must pass the Financial and
qualification examinations, provided subject to the lapse of registration Operations Principal or Introducing
that such person’s supervisory provisions in proposed Rule 2.1210, Broker-Dealer Financial and Operations
responsibilities in the investment Commentary .07, individuals registered Principal examination, as applicable.
banking and securities business of a as Compliance Officials in the CRD Additionally, proposed Rule
member organization or ETP Holder are system on October 1, 2018 and 2.1220(a)(4)(B) requires a member
limited to corporate securities activities individuals who were registered as such organization or ETP Holder to designate
of a member organization or ETP within two years prior to October 1, a Principal Financial Officer with
Holder. The proposed rule further 2018 would also be qualified to register primary responsibility for the day-to-
provides that all other individuals as Compliance Officers without having day operations of the business,
registering as General Securities to take any additional examinations; including overseeing the receipt and
Principals after October 1, 2018 shall, [sic] delivery of securities and funds,
prior to or concurrent with such • All other individuals registering as safeguarding customer and firm assets,
registration, become registered as a Compliance Officers after October 1, calculation and collection of margin
General Securities Representative and 2018 would have to: (1) Satisfy the from customers and processing
either (1) pass the General Securities General Securities Representative dividend receivable and payables and
Principal qualification examination; or prerequisite registration and pass the reorganization redemptions and those
(2) register as a General Securities Sales General Securities Principal books and records related to such
Supervisor and pass the General qualification examination; or (2) pass activities. Further, the proposed rule
Securities Sales Supervisor qualification the Compliance Official qualification requires that a firm’s Principal Financial
examination. examination. Officer and Principal Operations Officer
• An individual designated as a CCO qualify and register as Financial and
3. Proposed Rule 2.1220(a)(3)— Operations Principals or Introducing
on Schedule A of Form BD of a member
Compliance Officer 41 Broker-Dealer Financial and Operations
organization or ETP Holder that is
Proposed Rule 2.1220(a)(3) establishes engaged in limited investment banking Principals, as applicable.
a Compliance Officer registration or securities business may be registered Because the financial and operational
category and requires all persons in a principal category under proposed activities of member organizations or
designated as CCOs on Schedule A of Rule 2.1220(a) that corresponds to the ETP Holders that neither self-clear nor
Form BD to register as Compliance limited scope of the A member provide clearing services are more
Officers, subject to an exception for organization’s or ETP Holder’s business. limited, such member organizations or
member organizations or ETP Holders ETP Holders may designate the same
engaged in limited investment banking 4. Proposed Rule 2.1220(a)(4)— person as the Principal Financial
or securities business. The proposed Financial and Operation Principal and Officer, Principal Operations Officer
rule only addresses the registration Introducing Broker-Dealer Financial and and Financial and Operations Principal
requirements for CCOs. However, Operations Principal 42 or Introducing Broker-Dealer Financial
consistent with proposed Rule 2.1210, Proposed Rule 2.1220(a)(4) provides and Operations Principal (that is, such
Commentary .01 relating to permissive that each principal who is responsible member organizations or ETP Holders
amozie on DSK3GDR082PROD with NOTICES1
registrations, a firm may allow other for the financial and operational are not required to designate different
associated persons to register as management of a member organization persons to function in these capacities).
Compliance Officers. Chief Compliance or ETP Holder that has a minimum net Given the level of financial and
Officers at ATP Holders, who are capital requirement of $250,000 under operational responsibility at clearing
and self-clearing members, the
41 The proposed rule is substantially similar to 42 The proposed rule is substantially similar to Exchange believes that it is necessary
FINRA Rule 1220(a)(3). FINRA Rule 1220(a)(4). for such member organizations or ETP
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/8.svg)
![52298 Federal Register / Vol. 83, No. 200 / Tuesday, October 16, 2018 / Notices
Electronic Comments SOCIAL SECURITY ADMINISTRATION The full text of the Agreement and its
accompanying Administrative
• Use the Commission’s internet [Docket No. SSA–2018–0045]
Arrangement is available at https://
comment form (http://www.sec.gov/ www.ssa.gov/international/Agreement_
Agreement on Social Security Between
rules/sro.shtml); or Texts/brazil.html.
the United States and the Federative
• Send an email to rule-comments@ Republic of Brazil; Entry Into Force Nancy A. Berryhill,
sec.gov. Please include File Number SR–
AGENCY: Social Security Administration Acting Commissioner of Social Security.
NYSEAMER–2018–46 on the subject
line. (SSA). [FR Doc. 2018–22509 Filed 10–15–18; 8:45 am]
ACTION: Notice. BILLING CODE 4191–02–P
Paper Comments
SUMMARY: We are giving notice of an
• Send paper comments in triplicate agreement coordinating the United DEPARTMENT OF STATE
to Brent J. Fields, Secretary, Securities States (U.S.) and Brazilian social
and Exchange Commission, 100 F Street security programs effective on October [Public Notice: 10547]
NE, Washington, DC 20549–1090. 1, 2018. The Agreement with Brazil,
which was signed on June 30, 2015, is 60-Day Notice of Proposed Information
All submissions should refer to File similar to U.S. social security Collection: Brokering Prior Approval
Number SR–NYSEAMER–2018–46. This agreements already in force with 26 (License)
file number should be included on the other countries—Australia, Austria,
subject line if email is used. To help the Notice of request for public
ACTION:
Belgium, Canada, Chile, the Czech comment.
Commission process and review your Republic, Denmark, Finland, France,
comments more efficiently, please use Germany, Greece, Hungary, Ireland, SUMMARY: The Department of State is
only one method. The Commission will Italy, Japan, Korea (South), Luxembourg, seeking Office of Management and
post all comments on the Commission’s the Netherlands, Norway, Poland, Budget (OMB) approval for the
internet website (http://www.sec.gov/ Portugal, the Slovak Republic, Spain, information collection described below.
rules/sro.shtml). Copies of the Sweden, Switzerland and the United In accordance with the Paperwork
submission, all subsequent Kingdom. Section 233 of the Social Reduction Act of 1995, we are
amendments, all written statements Security Act authorizes agreements of requesting comments on this collection
with respect to the proposed rule this type. from all interested individuals and
change that are filed with the Like the other agreements, the U.S.- organizations. The purpose of this
Commission, and all written Brazilian Agreement eliminates dual notice is to allow 60 days for public
communications relating to the social security coverage. This situation comment preceding submission of the
proposed rule change between the exists when a worker from one country collection to OMB.
Commission and any person, other than works in the other country and has DATES: The Department will accept
those that may be withheld from the coverage under the social security comments from the public up to
public in accordance with the systems of both countries for the same December 17, 2018.
provisions of 5 U.S.C. 552, will be work. Without such agreements in force,
ADDRESSES: You may submit comments
available for website viewing and when dual coverage occurs, the worker,
the worker’s employer, or both may be by any of the following methods:
printing in the Commission’s Public
required to pay social security • Web: Persons with access to the
Reference Room, 100 F Street NE, internet may comment on this notice by
Washington, DC 20549 on official contributions to the two countries
simultaneously. Under the U.S.- going to www.Regulations.gov. You can
business days between the hours of search for the document by entering
Brazilian Agreement, a worker who is
10:00 a.m. and 3:00 p.m. Copies of the ‘‘Docket Number: DOS–2018–0043’’ in
sent by an employer in one country to
filing also will be available for the Search field. Then click the
work in the other country for 5 or fewer
inspection and copying at the principal ‘‘Comment Now’’ button and complete
years remains covered only by the
office of the Exchange. All comments the comment form.
sending country. The Agreement
received will be posted without change.
includes additional rules that eliminate • Email: DDTCPublicComments@
Persons submitting comments are dual U.S. and Brazilian coverage in state.gov.
cautioned that we do not redact or edit • Regular Mail: Send written
other work situations.
personal identifying information from The Agreement also helps eliminate comments to: Directorate of Defense
comment submissions. You should situations where workers suffer a loss of Trade Controls, Attn: Andrea Battista,
submit only information that you wish benefit rights because they have divided 2401 E St. NW, Suite H–1205,
to make available publicly. All their careers between the two countries. Washington, DC 20522–0112.
submissions should refer to File Under the Agreement, workers may You must include the subject (PRA 60
Number SR–NYSEAMER–2018–46 and qualify for partial U.S. benefits or partial Day Comment), information collection
should be submitted on or before Brazilian benefits based on combined title Brokering Prior Approval (License),
November 6, 2018. (totalized) work credits from both and OMB control number (1405–0142)
countries. in any correspondence.
For the Commission, by the Division of
Persons who wish to obtain copies of FOR FURTHER INFORMATION CONTACT:
Trading and Markets, pursuant to delegated
authority.64 the Agreement or want more Direct requests for additional
amozie on DSK3GDR082PROD with NOTICES1
information about its provisions may information regarding this collection to
Eduardo A. Aleman,
write to the Social Security Andrea Battista, who may be reached at
Assistant Secretary. Administration, Office of International BattistaAL@state.gov or 202–663–3136.
[FR Doc. 2018–22432 Filed 10–15–18; 8:45 am] Programs, Post Office Box 17741, SUPPLEMENTARY INFORMATION:
BILLING CODE 8011–01–P Baltimore, MD 21235–7741 or visit the • Title of Information Collection:
Social Security website at Brokering Prior Approval.
64 17 CFR 200.30–3(a)(12). www.socialsecurity.gov/international. • OMB Control Number: 1405–0142.
VerDate Sep<11>2014 18:44 Oct 15, 2018 Jkt 247001 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 E:\FR\FM\16OCN1.SGM 16OCN1](https://thefederalregister.org/doc/83_FR_52487/page/12.svg)
Document Created: 2018-10-15 23:42:17
Document Modified: 2018-10-15 23:42:17
| 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 | 83 FR 52287 |
2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR