[Federal Register Volume 87, Number 52 (Thursday, March 17, 2022)]
[Notices]
[Pages 15286-15292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05597]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94400; File No. SR-NASDAQ-2022-021]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Exchange Registration Rules in General 4

March 11, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 7, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been substantially prepared by 
the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend General 4, Rule 1240 (Continuing 
Education Requirements). While these amendments are effective upon 
filing, the Exchange has designated the proposed amendments to be 
operative on March 15, 2022.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.listingcenter.nasdaq.com/rulebook/nasdaq/rules, 
at the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 15287]]

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

1. Purpose
    The Exchange proposes to amend its continuing education 
requirements in General 4, Rule 1240. This proposed rule change is 
based on a filing recently submitted by the Financial Industry 
Regulatory Authority, Inc. (``FINRA''), and is intended to harmonize 
the Exchange's continuing education rules with those of FINRA so as to 
promote uniform standards across the securities industry.\3\ The 
Exchange also proposes to amend its manual signature requirements in 
General 4, Rule 1250 (Form U4 Filing Requirements) to align with 
changes FINRA has made to similar rules.\4\ Each change is discussed in 
detail below.
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    \3\ See Securities Exchange Act Release No. 93097 (September 21, 
2021), 86 FR 53358 (September 27, 2021) (SR-FINRA-2021-015) (``FINRA 
Rule Change'').
    \4\ See Securities Exchange Release No. 91262 (March 5, 2021), 
86 FR 13935 (March 11, 2021) (SR-FINRA-2021-003).
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    The proposed changes are based on the changes approved by the 
Commission in the approval order for SR-FINRA-2021-015 and as noticed 
in SR-FINRA-2021-003.\5\ The Exchange is proposing to adopt such 
changes substantially in the same form as proposed by FINRA, with only 
minor changes necessary to conform to the Exchange's existing rules 
such as to remove cross-references and rules that are applicable to 
FINRA members but not to Exchange members.
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    \5\ See supra notes 3 and 4.
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Continuing Education Rules
(i) Background
    The continuing education program for registered persons of broker-
dealers (``CE Program'') currently requires registered persons to 
complete continuing education consisting of a Regulatory Element and a 
Firm Element. The Regulatory Element, which is administered by FINRA, 
focuses on regulatory requirements and industry standards, while the 
Firm Element is provided by each firm and focuses on securities 
products, services and strategies the firm offers, firm policies and 
industry trends. The CE Program is codified under the rules of the 
self-regulatory organizations (``SROs''). The CE Program for registered 
persons of Exchange members is codified under General 4, Rule 1240.\6\
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    \6\ See also General 4, Rule 1210.07 (All Registered Persons 
Must Satisfy the Regulatory Element of Continuing Education).
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a. Regulatory Element
    General 4, Rule 1240(a) (Regulatory Element) currently requires a 
registered person to complete the applicable 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.\7\ The Exchange may extend these time 
frames for good cause shown.\8\ Registered persons who have not 
completed the Regulatory Element within the prescribed time frames will 
have their Exchange registrations deemed inactive and will be 
designated as ``CE inactive'' in the CRD system until the requirements 
of the Regulatory Element have been satisfied.\9\ A CE inactive person 
is prohibited from performing, or being compensated for, any activities 
requiring FINRA registration, including supervision. Moreover, if 
registered persons remain CE inactive for two consecutive years, they 
must requalify by retaking required examinations (or obtain a waiver of 
the applicable qualification examinations).\10\
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    \7\ See General 4, Rules 1240(a)(1) (Requirements) and (a)(4) 
(Reassociation in a Registered Capacity). An individual's 
registration anniversary date is generally the date they initially 
registered with the Exchange in the Central Registration Depository 
(``CRD[supreg]'') system. However, an individual's registration 
anniversary date would be reset if the individual has been out of 
the industry for two or more years and is required to requalify by 
examination, or obtain an examination waiver, in order to 
reregister. An individual's registration anniversary date would also 
be reset if the individual obtains a conditional examination waiver 
that requires them to complete the Regulatory Element by a specified 
date. Non-registered individuals who are participating in the waiver 
program under General 4, Rule 1210.09 (Waiver of Examinations for 
Individuals Working for a Financial Services Industry Affiliate of a 
Member) (``FSAWP participants'') are also subject to the Regulatory 
Element. See also General 4, Rule 1240(a)(5) (Definition of Covered 
Person). The Regulatory Element for FSAWP participants correlates to 
their most recent registration(s), and it must be completed based on 
the same cycle had they remained registered. FSAWP participants are 
eligible for a single, fixed seven-year waiver period from the date 
of their initial designation, subject to specified conditions. 
Registered persons who become subject to a significant disciplinary 
action, as specified in General 4, Rule 1240(a)(3) (Disciplinary 
Actions), may be required to retake the Regulatory Element within 
120 days of the effective date of the disciplinary action, if they 
remain registered. Further, their cycle for participation in the 
Regulatory Element may be adjusted to reflect the effective date of 
the disciplinary action rather than their registration anniversary 
date.
    \8\ See General 4, Rule 1240(a)(2) (Failure to Complete).
    \9\ See supra note 8. Individuals must complete the entire 
Regulatory Element session to be considered to have ``completed'' 
the Regulatory Element; partial completion is the same as non-
completion.
    \10\ This CE inactive two-year period is calculated from the 
date such persons become CE inactive, and it continues to run 
regardless of whether they terminate their registrations before the 
end of the two-year period. Therefore, if registered persons 
terminate their registrations while in a CE inactive status, they 
must satisfy all outstanding Regulatory Element prior to the end of 
the CE inactive two-year period in order to reregister with a member 
without having to requalify by examination or having to obtain an 
examination waiver.
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    The Regulatory Element consists of a subprogram for registered 
persons generally, and a subprogram for principals and supervisors.\11\ 
While some of the current Regulatory Element content is unique to 
particular registration categories, most of the content has broad 
application to both representatives and principals.\12\
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    \11\ The S101 (General Program for Registered Persons) and the 
S201 (Registered Principals and Supervisors).
    \12\ The current content is presented in a single format leading 
individuals through a case that provides a story depicting 
situations that they may encounter in the course of their work.
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    The Regulatory Element was originally designed at a time when most 
individuals had to complete the Regulatory Element at a test center, 
and its design was shaped by the limitations of the test center-based 
delivery model. In 2015, FINRA transitioned the delivery of the 
Regulatory Element to an online platform (``CE Online''), which allows 
individuals to complete the content online at a location of their 
choosing, including their private residence. This online delivery 
provides the Exchange with much greater flexibility in updating content 
in a timelier fashion, developing content tailored to each registration 
category and presenting the material in an optimal learning format.
b. Firm Element
    General 4, Rule 1240(b) (Firm Element) currently requires each firm 
to develop and administer an annual Firm Element training program for 
covered registered persons.\13\ The rule requires firms to conduct an 
annual needs analysis to determine the appropriate training.\14\ 
Currently, at a minimum, the Firm Element must cover training in ethics 
and professional responsibility as well as the following items 
concerning securities products, services and strategies offered by the 
member: (1) General investment features and associated risk factors; 
(2) suitability and sales practice considerations; and

[[Page 15288]]

(3) applicable regulatory requirements.\15\
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    \13\ The rule defines ``covered registered persons'' as any 
registered person who has direct contact with customers in the 
conduct of a member's securities sales and trading activities, and 
the immediate supervisors of any such persons. See General 4, Rule 
1240(b)(1) (Persons Subject to the Firm Element).
    \14\ See General 4, Rule 1240(b)(2) (Standards for the Firm 
Element).
    \15\ See supra note 14.
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    A firm, consistent with its needs analysis, may determine to apply 
toward the Firm Element other required training. The current rule does 
not expressly recognize other required training, such as training 
relating to the anti-money laundering (``AML'') compliance program and 
training relating to the annual compliance meeting,\16\ for purposes of 
satisfying Firm Element training.
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    \16\ See General 9, Sections 20 and 37.
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c. Termination of a Registration
    Currently, individuals whose registrations as representatives or 
principals have been terminated for two or more years may reregister as 
representatives or principals only if they requalify by retaking and 
passing the applicable representative- or principal-level examination 
or if they obtain a waiver of such examination(s) (the ``two-year 
qualification period'').\17\ The two-year qualification period was 
adopted prior to the creation of the CE Program and was intended to 
ensure that individuals who reregister are relatively current on their 
regulatory and securities knowledge.
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    \17\ See General 4, Rule 1210.08 (Lapse of Registration and 
Expiration of SIE). The two-year qualification period is calculated 
from the date individuals terminate their registration and the date 
the Exchange receives a new application for registration. The two-
year qualification period does not apply to individuals who 
terminate a limited registration category that is a subset of a 
broader registration category for which they remain qualified. For 
instance, it would not apply to an individual who maintains his 
registration as a General Securities Representative but who 
terminates his registration as an Investment Company and Variable 
Contracts Products Representative. Such individuals have the option 
of reregistering in the more limited registration category without 
having to requalify by examination or obtain an examination waiver 
so long as they continue to remain qualified for the broader 
registration category. Further, the two-year qualification period 
only applies to the representative- and principal-level 
examinations; it does not extend to the Securities Industry 
Essentials (``SIE'') examination. The SIE examination is valid for 
four years, but having a valid SIE examination alone does not 
qualify an individual for registration as a representative or 
principal. Individuals whose registrations as representatives or 
principals have been revoked pursuant to General 5, Rule 8310 
(Sanctions for Violation of the Rules) may only requalify by 
retaking the applicable representative- or principal-level 
examination in order to reregister as representatives or principals, 
in addition to satisfying the eligibility conditions for association 
with a firm. Waivers are granted either on a case-by-case basis 
under General 4, Rule 1210.03 (Qualification Examinations and 
Waivers of Examinations) or as part of the waiver program under 
General 4, Rule 1210.09.
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(ii) Proposed Rule Change
    After extensive work with the Securities Industry/Regulatory 
Council on Continuing Education (``CE Council'') and discussions with 
stakeholders, including industry participants and the North American 
Securities Administrators Association (``NASAA''), FINRA adopted the 
following changes to the CE Program under its rules.\18\ In order to 
promote uniform standards across the securities industry, the Exchange 
now proposes to adopt the same changes to its continuing education 
rules.
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    \18\ See supra note 3. FINRA's changes are based on the CE 
Council's September 2019 recommendations to enhance the CE Program. 
See Recommended Enhancements for the Securities Industry Continuing 
Education Program, available at http://cecouncil.org/media/266634/council-recommendations-final-.pdf. The CE Council is composed of 
securities industry representatives and representatives of SROs. The 
CE Council was formed in 1995 upon a recommendation from the 
Securities Industry Task Force on Continuing Education and was 
tasked with facilitating the development of uniform continuing 
education requirements for registered persons of broker-dealers.
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a. Transition to Annual Regulatory Element for Each Registration 
Category
    As noted above, currently, the Regulatory Element generally must be 
completed every three years, and the content is broad in nature. Based 
on changes in technology and learning theory, the Regulatory Element 
content can be updated and delivered in a timelier fashion and tailored 
to each registration category, which would further the goals of the 
Regulatory Element.\19\ Therefore, to provide registered persons with 
more timely and relevant training on significant regulatory 
developments, the Exchange proposes amending General 4, Rule 1240(a) to 
require registered persons to complete the Regulatory Element annually 
by December 31.\20\ The proposed amendment would also require 
registered persons to complete Regulatory Element content for each 
representative or principal registration category that they hold, which 
would also further the goals of the Regulatory Element.\21\
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    \19\ When the CE Program was originally adopted in 1995, 
registered persons were required to complete the Regulatory Element 
on their second, fifth and 10th registration anniversary dates. See 
Securities Exchange Act Release No. 35341 (February 8, 1995), 60 FR 
8426 (February 14, 1995) (Order Approving File Nos. SR-AMEX-94-59; 
SR-CBOE-94-49; SR-CHX-94-27; SR-MSRB-94-17; SR-NASD-94-72; SR-NYSE-
94-43; SR-PSE-94-35; and SR-PHLX-94-52). The change to the current 
three-year cycle was made in 1998 to provide registered persons more 
timely and effective training, consistent with the overall purpose 
of the Regulatory Element. See Securities Exchange Act Release No. 
39712 (March 3, 1998), 63 FR 11939 (March 11, 1998) (Order Approving 
File Nos. SR-CBOE-97-68; SR-MSRB-98-02; SR-NASD-98-03; and SR-NYSE-
97-33).
    \20\ See proposed General 4, Rules 1240(a)(1) and (a)(4).
    \21\ See proposed General 4, Rules 1210.07 and 1240(a)(1).
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    Under the proposed rule change, firms would have the flexibility to 
require their registered persons to complete the Regulatory Element 
sooner than December 31, which would allow firms to coordinate the 
timing of the Regulatory Element with other training requirements, 
including the Firm Element.\22\ For example, a firm could require its 
registered persons to complete both their Regulatory Element and Firm 
Element by October 1 of each year.
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    \22\ See proposed General 4, Rules 1240(a)(1) and (a)(4).
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    Individuals who would be registering as a representative or 
principal for the first time on or after the implementation date of the 
proposed rule change would be required to complete their initial 
Regulatory Element for that registration category in the next calendar 
year following their registration.\23\ In addition, subject to 
specified conditions, individuals who would be reregistering as a 
representative or principal on or after the implementation date of the 
proposed rule change would also be required to complete their initial 
Regulatory Element for that registration category in the next calendar 
year following their reregistration.\24\
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    \23\ See proposed General 4, Rule 1240(a)(1).
    \24\ See proposed General 4, Rule 1240(a)(4).
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    Consistent with current requirements, individuals who fail to 
complete their Regulatory Element within the prescribed period would be 
automatically designated as CE inactive.\25\ However, the proposed rule 
change preserves the Exchange's ability to extend the time by which a 
registered person must complete the Regulatory Element for good cause 
shown.\26\
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    \25\ See proposed General 4, Rule 1240(a)(2).
    \26\ See supra note 25. The proposed rule change clarifies that 
the request for an extension of time must be in writing and include 
supporting documentation, which is consistent with current practice.
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    The Exchange also proposes amending General 4, Rule 1240(a) to 
clarify that: (1) Individuals who are designated as CE inactive would 
be required to complete all of their pending and upcoming annual 
Regulatory Element, including any annual Regulatory Element that 
becomes due during their CE inactive period, to return to active 
status; \27\ (2) the two-year CE inactive period is calculated from the 
date individuals become CE inactive, and it continues to run regardless 
of whether individuals

[[Page 15289]]

terminate their registrations; \28\ (3) individuals who become subject 
to a significant disciplinary action may be required to complete 
assigned continuing education content as prescribed by the Exchange; 
\29\ (4) individuals who have not completed any Regulatory Element 
content for a registration category in the calendar year(s) prior to 
reregistering would not be approved for registration for that category 
until they complete that Regulatory Element content, pass an 
examination for that registration category or obtain an unconditional 
examination waiver for that registration category, whichever is 
applicable; \30\ and (5) the Regulatory Element requirements apply to 
individuals who are registered, or in the process of registering, as a 
representative or principal.\31\ In addition, the Exchange proposes 
making conforming amendments to General 4, Rule 1210.07.
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    \27\ See supra note 25.
    \28\ See supra note 25.
    \29\ See proposed General 4, Rule 1240(a)(3). As previously 
noted, General 4, Rule 1240(a)(3) currently provides that such 
individuals may be required to retake the Regulatory Element. See 
supra note 7.
    \30\ See proposed General 4, Rule 1240(a)(4).
    \31\ See proposed General 4, Rule 1240(a)(5).
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    Under the proposed rule change, the amount of content that 
registered persons would be required to complete in a three-year, 
annual cycle for a particular registration category is expected to be 
comparable to what most registered persons are currently completing 
every three years. In some years, there may be more required content 
for some registration categories depending on the volume of rule 
changes and regulatory issues. In addition, an individual who holds 
multiple registrations may be required to complete additional content 
compared to an individual who holds a single registration because, as 
noted above, individuals would be required to complete content specific 
to each registration category that they hold.\32\ However, individuals 
with multiple registrations would not be subject to duplicative 
regulatory content in any given year. The more common registration 
combinations would likely share much of their relevant regulatory 
content each year. For example, individuals registered as General 
Securities Representatives and General Securities Principals would 
receive the same content as individuals solely registered as General 
Securities Representatives, supplemented with a likely smaller amount 
of supervisory-specific content on the same topics. The less common 
registration combinations may result in less topic overlap and more 
content overall.
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    \32\ As discussed in the economic impact assessment in the FINRA 
Rule Change, individuals with multiple registrations represent a 
smaller percentage of the population of registered persons.
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b. Recognition of Other Training Requirements for Firm Element and 
Extension of Firm Element to All Registered Persons
    To better align the Exchange's rulebook with FINRA's rulebook, and, 
in addition, to better align the Firm Element requirement with other 
required training, the Exchange proposes amending General 4, Rule 
1240(b) to expressly allow firms to consider training relating to the 
AML compliance program and the annual compliance meeting toward 
satisfying an individual's annual Firm Element requirement.\33\ The 
Exchange also proposes amending the rule to extend the Firm Element 
requirement to all registered persons, including individuals who 
maintain solely a permissive registration consistent with General 4, 
Rule 1210.02 (Permissive Registrations), thereby further aligning the 
Firm Element requirement with other broadly-based training 
requirements.\34\ In conjunction with this proposed change, the 
Exchange proposes modifying the current minimum training criteria under 
General 4, Rule 1240(b) to instead provide that the training must cover 
topics related to the role, activities or responsibilities of the 
registered person and to professional responsibility.\35\
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    \33\ See proposed General 4, Rule 1240(b)(2)(D).
    \34\ See proposed General 4, Rule 1240(b)(1). As noted earlier, 
the current requirement only applies to ``covered registered 
persons'' and not all registered persons.
    \35\ See proposed General 4, Rule 1240(b)(2)(B).
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c. Maintenance of Qualification After Termination of Registration
    The Exchange proposes adopting paragraph (c) under General 4, Rule 
1240 and Supplementary Material .01 and .02 to General 4, Rule 1240 to 
provide eligible individuals who terminate any of their representative 
or principal registrations the option of maintaining their 
qualification for any of the terminated registrations by completing 
continuing education.\36\ The proposed rule change would not eliminate 
the two-year qualification period. Rather, it would provide such 
individuals an alternative means of staying current on their regulatory 
and securities knowledge following the termination of a 
registration(s). Eligible individuals who elect not to participate in 
the proposed continuing education program would continue to be subject 
to the current two-year qualification period. The proposed rule change 
is generally aligned with other professional continuing education 
programs that allow individuals to maintain their qualification to work 
in their respective fields during a period of absence from their 
careers (including an absence of more than two years) by satisfying 
continuing education requirements for their credential.
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    \36\ The proposed option would also be available to individuals 
who terminate any permissive registrations as provided under General 
4, Rule 1210.02. However, the proposed option would not be available 
to individuals who terminate a limited registration category that is 
a subset of a broader registration category for which they remain 
qualified. As previously noted, such individuals currently have the 
option of reregistering in the more limited registration category 
without having to requalify by examination or obtain an examination 
waiver so long as they continue to remain qualified for the broader 
registration category. In addition, the proposed option would not be 
available to individuals who are maintaining an eliminated 
registration category, such as the category for Corporate Securities 
Representative, or individuals who have solely passed the Securities 
Industry Essentials examination, which does not, in and of itself, 
confer registration.
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    The proposed rule change would impose the following conditions and 
limitations:
    <bullet> Individuals would be required to be registered in the 
terminated registration category for at least one year immediately 
prior to the termination of that category; \37\
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    \37\ See proposed General 4, Rule 1240(c)(1).
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    <bullet> individuals could elect to participate when they terminate 
a registration or within two years from the termination of a 
registration; \38\
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    \38\ See proposed General 4, Rule 1240(c)(2). Individuals who 
elect to participate at the later date would be required to 
complete, within two years from the termination of their 
registration, any continuing education that becomes due between the 
time of their Form U5 (Uniform Termination Notice for Securities 
Industry Registration) submission and the date that they commence 
their participation. In addition, FINRA would enhance its systems to 
notify individuals of their eligibility to participate, enable them 
to affirmatively opt in, and notify them of their annual continuing 
education requirement if they opt in.
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    <bullet> individuals would be required to complete annually all 
prescribed continuing education; \39\
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    \39\ See proposed General 4, Rule 1240(c)(3). However, upon a 
participant's request and for good cause shown, the Exchange would 
have the ability to grant an extension of time for the participant 
to complete the prescribed continuing education. A participant who 
is also a registered person must directly request an extension of 
the prescribed continuing education from the Exchange. The 
continuing education content for participants would consist of a 
combination of Regulatory Element content and content selected by 
FINRA and the CE Council from the Firm Element content catalog 
discussed below. The content would correspond to the registration 
category for which individuals wish to maintain their 
qualifications. Participants who are maintaining their qualification 
status for a principal registration category that includes one or 
more corequisite representative registrations must also complete 
required annual continuing education for the corequisite 
registrations in order to maintain their qualification status for 
the principal registration category. The proposed rule change 
clarifies that the prescribed continuing education must be completed 
by December 31 of the calendar year, which is consistent with the 
timing for the proposed annual Regulatory Element.

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[[Page 15290]]

    <bullet> individuals would have a maximum of five years in which to 
reregister; \40\
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    \40\ See proposed General 4, Rule 1240(c). In addition, 
individuals applying for reregistration must satisfy all other 
requirements relating to the registration process (e.g., submit a 
Form U4 (Uniform Application for Securities Industry Registration or 
Transfer) and undergo a background check).
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    <bullet> individuals who have been CE inactive for two consecutive 
years, or who become CE inactive for two consecutive years during their 
participation, would not be eligible to participate or continue; \41\ 
and
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    \41\ See proposed General 4, Rules 1240(c)(4) and (c)(5).
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    <bullet> individuals who are subject to a statutory 
disqualification, or who become subject to a statutory disqualification 
following the termination of their registration or during their 
participation, would not be eligible to participate or continue.\42\
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    \42\ See proposed General 4, Rules 1240(c)(1) and (c)(6). 
Further, any content completed by participants would be 
retroactively nullified upon disclosure of the statutory 
disqualification. The following example illustrates the application 
of the proposed rule change to individuals who become subject to a 
statutory disqualification while participating in the proposed 
continuing education program. Individual A participates in the 
proposed continuing education program for four years and completes 
the prescribed content for each of those years. During year five of 
his participation, he becomes subject to a statutory 
disqualification resulting from a foreign regulatory action. In that 
same year, the Exchange receives a Form U4 submitted by a member on 
behalf of Individual A requesting registration with the Exchange. 
The Form U4 discloses the statutory disqualification event. The 
Exchange would then retroactively nullify any content that 
Individual A completed while participating in the proposed 
continuing education program. Therefore, in this example, in order 
to become registered with the Exchange, he would be required to 
requalify by examination. This would be in addition to satisfying 
the eligibility conditions for association with an Exchange member 
firm. See Exchange Act Sections 3(a)(39) and 15(b)(4) and General 3, 
Rule 1002.
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    The proposed rule change also includes a look-back provision that 
would, subject to specified conditions, extend the proposed option to 
individuals who have been registered as a representative or principal 
within two years immediately prior to the implementation date of the 
proposed rule change and individuals who have been FSAWP participants 
immediately prior to the implementation date of the proposed rule 
change.\43\
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    \43\ See proposed Supplementary Material .01 to General 4, Rule 
1240. Such individuals would be required to elect whether to 
participate by the implementation date of the proposed rule change. 
If such individuals elect to participate, they would be required to 
complete their initial annual content by the end of the calendar 
year in which the proposed rule change is implemented. In addition, 
if such individuals elect to participate, their initial 
participation period would be adjusted based on the date that their 
registration was terminated. The current waiver program for FSAWP 
participants would not be available to new participants upon 
implementation of the proposed rule change. See proposed General 4, 
Rule 1210.09. However, individuals who are FSAWP participants 
immediately prior to the implementation date of the proposed rule 
change could elect to continue in that waiver program until the 
program has been retired. As noted above, FSAWP participants may 
participate for up to seven years in that waiver program, subject to 
specified conditions. See supra note 7. As discussed above, the 
proposed rule change provides a five-year participation period for 
participants in the proposed continuing education program. So as not 
to disadvantage FSAWP participants, the Exchange has determined to 
preserve that waiver program for individuals who are participating 
in the FSAWP immediately prior to the implementation date of the 
proposed rule change. Because the proposed rule change transitions 
the Regulatory Element to an annual cycle, FSAWP participants who 
remain in that waiver program following the implementation of the 
proposed rule change would be subject to an annual Regulatory 
Element requirement. See proposed General 4, Rule 1240(a)(1). 
Finally, the proposed rule change preserves the Exchange's ability 
to extend the time by which FSAWP participants must complete the 
Regulatory Element for good cause shown. See proposed General 4, 
Rule 1240(a)(2).
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    In addition, the proposed rule change includes a re-eligibility 
provision that would allow individuals to regain eligibility to 
participate each time they reregister with a firm for a period of at 
least one year and subsequently terminate their registration, provided 
that they satisfy the other participation conditions and 
limitations.\44\ Finally, the Exchange proposes making conforming 
amendments to General 4, Rule 1210, including adding references to 
proposed Rule 1240(c) under General 4, Rule 1210.08.
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    \44\ See proposed Supplementary Material .02 to General 4, Rule 
1240.
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    The proposed rule change will have several important benefits. It 
will provide individuals with flexibility to address life and career 
events and necessary absences from registered functions without having 
to requalify each time. It will also incentivize them to stay current 
on their respective securities industry knowledge following the 
termination of any of their registrations. The continuing education 
under the proposed option will be as rigorous as the continuing 
education of registered persons, which promotes investor protection. 
Further, the proposed rule change will enhance diversity and inclusion 
in the securities industry by attracting and retaining a broader and 
diverse group of professionals.
    Significantly, the proposed rule change will be of particular value 
to women, who continue to be the primary caregivers for children and 
aging family members and, as a result, are likely to be absent from the 
industry for longer periods.\45\ In addition, the proposed rule change 
will provide longer-term relief for women, individuals with low incomes 
and other populations, including older workers, who are at a higher 
risk of a job loss during certain economic downturns and who are likely 
to remain unemployed for longer periods.\46\
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    \45\ See The Female Face of Family Caregiving (November 2018), 
available at https://www.nationalpartnership.org/our-work/resources/economic-justice/female-face-family-caregiving.pdf.
    \46\ See The COVID-19 Recession is the Most Unequal in Modern 
U.S. History (September 30, 2020), available at https://www.washingtonpost.com/graphics/2020/business/coronavirus-recession-equality/ and Unemployment's Toll on Older Workers Is Worst in Half 
a Century (October 21, 2020), available at https://www.aarp.org/work/working-at-50-plus/info-2020/pandemic-unemployment-older-workers.
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d. CE Program Implementation
    As stated in the FINRA Rule Change, FINRA and the CE Council also 
plan to enhance the CE Program in other ways, and these additional 
enhancements do not require any changes to the FINRA rules.\47\ As it 
relates to the rule changes themselves, the changes relating to the 
Maintaining Qualifications Program (paragraph (c) of General 4, Rule 
1240) and the Financial Services Affiliate Waiver Program (FSAWP) 
(Supplementary Material .09 to General 4, Rule 1210) will become 
effective March 15, 2022. All other changes related to the FINRA Rule 
Change, including the changes relating to the Regulatory Element, Firm 
Element and the two-year qualification period, will become effective 
January 1, 2023.\48\
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    \47\ See supra note 3. As described in more detail in the FINRA 
Rule Change, FINRA will work with the CE Council to develop and 
incorporate additional resources in connection with the Regulatory 
and Firm Elements. Similar to FINRA, these additional enhancements 
do not require any changes to the Exchange rules.
    \48\ See FINRA Regulatory Notice 21-41 at https://www.finra.org/rules-guidance/notices/21-41.
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Manual Signature
    General 4, Rule 1250(c) currently provides that every initial and 
transfer electronic Form U4 filing and any amendments to the disclosure 
information on Form U4 must be based on a manually signed Form U4 
provided to the member or applicant for membership by the person on 
whose behalf the Form U4 is being filed, consistent with FINRA Rule 
1010(c). Similarly, the Exchange's Supplementary Material .03 currently

[[Page 15291]]

provides that in the event a member is not able to obtain an associated 
person's manual signature or written acknowledgement of amended 
disclosure information on that person's Form U4 prior to filing of such 
amendment reflecting the information pursuant to Rule 1250(c)(3), the 
member must enter ``Representative Refused to Sign/Acknowledge'' or 
``Representative Not Available'' or a substantially similar entry in 
the electronic Form U4 field for the associated person's signature. 
However, FINRA has since amended their Rule 1010(c) to permit firms to 
choose to rely on electronic signatures to satisfy the signature 
requirements when filing Form U4.\49\ Cboe Exchange, Inc. (``CBOE'') 
has also updated its Rule 3.34 to reflect FINRA's updated Rule 
1010(c).\50\
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    \49\ See Securities Exchange Release No. 91262 (March 5, 2021), 
86 FR 13935 (March 11, 2021) (SR-FINRA-2021-003).
    \50\ See Securities Exchange Release No. 92562 (August 4, 2021), 
86 FR 143701 (August 10, 2021) (SR-CBOE-2021-043).
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    The Exchange proposes to amend Rule 1250(c) and Supplementary 
Material .03 to similarly allow firms to rely on electronic signatures 
when filing Form U4, consistent with FINRA Rule 1010(c). Specifically, 
the Exchange proposes to remove the term ``manual'' from ``manual 
signature'' and the term ``manually'' from ``manually signed.'' The 
proposed rule change provides members, and applicants for membership, 
with an opportunity to better manage operational challenges. 
Particularly, the COVID-19 pandemic amplified the need to better manage 
operational challenges like those that arose during the pandemic and 
that may continue to arise in the future. Additionally, the proposed 
rule change would not require the use of a particular type of 
technology to obtain a valid electronic signature from the associated 
person. The Exchange believes that some firms may be unable to obtain 
the manual signature of applicants for registration resulting in a 
significant operational backlog. By permitting these firms to rely on 
electronic signatures to satisfy the signature requirements of Exchange 
Rule 1250 and Supplementary Material .03, the proposed rule change may 
reduce or eliminate this backlog. For purposes of the proposed rule 
change, a valid electronic signature would be any electronic mark that 
clearly identifies the signatory and is otherwise in compliance with 
the Electronic Signatures in Global and National Commerce Act (``E-Sign 
Act'') and the guidance issued by the SEC relating to the E-Sign 
Act.\51\
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    \51\ See accord Securities Exchange Act Release No. 85282 (March 
11, 2019), 84 FR 9573 (March 15, 2019) (Order Approving File No. SR-
FINRA-2018-040) (discussing valid electronic signatures under 
existing guidance).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\52\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\53\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest.
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    \52\ 15 U.S.C. 78f(b).
    \53\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed changes to the Regulatory 
Element and Firm Element will ensure that all registered persons 
receive timely and relevant training, which will, in turn, enhance 
compliance and investor protection. Further, the Exchange believes that 
establishing a path for individuals to maintain their qualification 
following the termination of a registration will reduce unnecessary 
impediments to requalification and promote greater diversity and 
inclusion in the securities industry without diminishing investor 
protection.
    As it relates to the proposed changes to General 4, Rule 1250(c), 
the Exchange believes the proposed rule change provides firms with the 
flexibility to rely on electronic signatures to satisfy the signature 
requirements of Rule 1250(c). Specifically, the Exchange proposes to 
amend Exchange Rule 1250(c) and Supplementary Material .03, similar to 
the amendments made by FINRA and CBOE, to provide the option of filing 
an initial or a transfer Form U4 based on a manually or an 
electronically signed copy of the form provided to the member, or 
applicant for membership, by the individual on whose behalf the form is 
being filed. Considering the technological advancements that provide 
for enhanced authentication and security of electronic signatures, the 
Exchange believes that it is appropriate to amend Rule 1250(c) and 
Supplementary Material .03 to provide such flexibility. The proposed 
rule change also addresses the ongoing public health risks stemming 
from the outbreak of COVID-19 and the operational challenges that firms 
continue to face as a result of pandemic repercussions. By permitting 
these firms to rely on electronic signatures to satisfy the signature 
requirements of Rule 1250(c) and Supplementary Material .03, the 
proposed rule change may reduce or eliminate an operational backlog due 
to the difficulty firms may have faced in obtaining the manual 
signature of applicants for registration as a result of the impact of 
the pandemic on daily work environments.
    The Exchange believes the proposal is consistent with the Act for 
the reasons described above and for the reasons outlined in the 
approval order for SR-FINRA-2021-015 and as noticed in SR-FINRA-2021-
003.\54\
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    \54\ See supra notes 3 and 4.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. All members would be subject to 
the proposed rule change. The proposed rule change relating to the 
Exchange's CE Program, which is materially identical to the FINRA Rule 
Change, is designed to result in a more efficient CE Program that 
addresses relevant regulatory requirements and provides individuals 
with improved tools and resources to understand and comply with such 
requirements, enhancing investor protection. Moreover, the proposed 
rule change would provide new channels for individuals to maintain 
their qualification status for a terminated registration category and, 
in so doing, could increase the likelihood that professionals who need 
to step away from the industry for a period could return, subject to 
satisfying all other requirements relating to the registration process.
    As it relates to the proposed amendments to General 4, Rule 1250, 
the proposed rule change relating to manual signatures is, in all 
material respects, substantively identical to recent rule changes 
adopted by FINRA and CBOE. The Exchange believes the proposed change 
will reduce a regulatory filing burden for members by allowing them to 
rely on Form U4 copies with an electronic signature. All members will 
have the option to rely on such forms with an electronic signature (or 
continue to rely on forms with a manual signature).

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

    No written comments were either solicited or received.

[[Page 15292]]

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 \55\ and Rule 19b-
4(f)(6) thereunder.\56\
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    \55\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \56\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), the Commission may 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 this proposed 
rule change may become operative immediately upon filing. Rule 19b-
4(f)(6)(iii) \57\ requires a self-regulatory organization to give the 
Commission written notice of its intent to file a proposed rule change 
under that subsection at least five business days prior to the date of 
filing, or such shorter time as designated by the Commission. The 
Exchange has provided such notice.
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    \57\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    Waiver of the 30-day operative delay would allow the Exchange to 
implement proposed changes to the Maintaining Qualifications Program 
and the FSAWP by March 15, 2022 to coincide with FINRA's announced 
implementation date, thereby eliminating the possibility of a 
significant regulatory gap between the FINRA and Nasdaq rules and 
providing more uniform standards across the securities industry. For 
the proposal related to the manual signature requirement, waiver of the 
30-day operative delay would provide immediate relief to firms 
currently experiencing a significant operational backlog because of the 
requirement to obtain manual signatures, ultimately benefitting the 
investing public. The proposed rule change to Rule 1250(c) and 
Supplementary Material .03 will provide immediate relief to these firms 
by allowing them to rely on electronic signatures to clear the backlog. 
Moreover, as noted above, the proposed manual signature rule change is 
based on a similar rule change by FINRA that has already taken effect. 
For these reasons, the Commission believes that waiver of the 30-day 
operative delay for this proposal is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\58\
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    \58\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#95e7e0f9f0b8f6faf8f8f0fbe1e6d5e6f0f6bbf2fae3"><span class="__cf_email__" data-cfemail="8dfff8e1e8a0eee2e0e0e8e3f9fecdfee8eea3eae2fb">[email protected]</span></a>. Please include 
File Number SR-NASDAQ-2022-021 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2022-021. 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 such 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-NASDAQ-2022-021 and should be submitted 
on or before April 7, 2022.
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    \59\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\59\
Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2022-05597 Filed 3-16-22; 8:45 am]
BILLING CODE 8011-01-P


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