[Federal Register Volume 62, Number 170 (Wednesday, September 3, 1997)]
[Notices]
[Page 46535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23259]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38969; File No. SR-NASD-97-23]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by National Association of Securities Dealers, Inc. Relating to 
Registration Category, Study Outline and Specification for Series 72 
Examination, Government Securities Representative

August 25, 1997.
    On April 11, 1997, the NASD Regulation, Inc. (``NASD Regulation'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Act'') \1\ to create a new 
category of representative registration, the Government Securities 
Representative (Series 72), and to conform the registration 
requirements of the existing Registered Options Representative (Series 
42) category to take into consideration this new category.\2\ Notice of 
the proposed rule change, together with the substance of the proposal, 
was published in the Federal Register.\3\ No comment letters were 
received. This order approves the proposed rule change.
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    \1\ 15 U.S.C. Sec. 78s(b)(1) (1994).
    \2\ On July 1, the NASD submitted a technical amendment. 
Technical amendments do not need to be published in the Federal 
Register. Letter from Craig L. Landauer, Associate General Counsel, 
NASD, to Karl J. Varner, Esq., SEC, dated July 1, 1997.
    \3\ Securities Exchange Act Release No. 38566 (May 1, 1997), 62 
FR 25683 (May 9, 1997).
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I. Background

    The Government Securities Act of 1986 (``1986 Act''), an amendment 
to the Act, required sole government securities broker-dealers to 
register with the SEC for the first time. The 1986 Act also granted the 
NASD authority to require associated persons of such firms to register 
with the NASD. However, the 1986 Act did not allow the NASD to apply 
its qualification examination standards to associated persons of 
government securities broker-dealers. Since January 1989, such 
associated persons have been required to register as Government 
Securities Representatives or Government Securities Principals, but 
have not been required to pass a qualification examination. Under a 
1993 amendment to the Act, the NASD was given authority to apply its 
qualification standards to Government Securities Representatives and 
Government Securities Principals.
    The proposed rule change will establish an examination 
qualification requirement for government securities representatives. A 
person may qualify to sell government securities by passing the 
existing Series 7 examination or the new Series 72 examination. The 
proposed rule change replaces current Rule 1112, which was adopted in 
1989.
    NASD Regulation has determined to permit persons who have been 
registered with the NASD as a government securities representative for 
two years prior to the effective date of the rule will not have to take 
the examination unless they are subject to a statutory disqualification 
as defined in Section 3(a)(39) of the Act or in the last years have 
been subject to a suspension or fine of $5,000 or more imposed by a 
securities or commodities regulator.
    Currently, individuals who sell OTC options on government 
securities are not required to pass a qualification examination. The 
proposed rule change also will amend Rule 1032(d) for Registered 
Options Representatives to establish registration and qualification 
requirements for such individuals, and to add the Series 72 Examination 
to the list of the those examinations which prequalify an individual to 
take the Limited Representative--Options (Series 42) Examination. A 
person selling OTC options on government securities would be required 
to pass the new Series 72 examination and the existing Series 42 
examination.
    The Series 72 examination will consist of one hundred (100) 
questions. Candidates will have three hours to complete the 
examination. The passing score for the examination will be 70%. The 
NASD will not begin using the examination until September of 1997.

II. Discussion

    The Commission believes that the proposed rule change is consistent 
with the provisions of Sections 15A(b)(6) and 15A(g)(3) of the Act in 
that the NASD is required to prescribe standards of training, 
experience and competence for persons associated with NASD members. 
Pursuant to this statutory obligation, the NASD develops and 
administers examinations to establish that persons associated with NASD 
members have attained specified levels of competence and knowledge.
    Pursuant to this statutory obligation, NASD Regulation administers 
examinations developed by NASD Regulation and other self-regulatory 
organizations Section 15A(g)(3) of the Act to prescribe standards of 
training, experience and competence for persons associated with NASD 
members.
    The proposed rule change is consistent with the format of the other 
NASD limited registration categories. This proposed rule change will 
change the language of Rule 1032(d) Registered Option Representative so 
that it is similar to the language used in the other registration 
categories in Rule 1032.
    This provision is consistent with previous practice in permitting 
persons who have achieved a certain level of experience in a segment of 
the securities industry to be ``grandfathered'' if a new qualification 
examination is adopted for that particular industry segment.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change, SR-NASD-97-23, be, and hereby is, 
approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12)(1997).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-23259 Filed 9-2-97; 8:45 am]
BILLING CODE 8010-01-M