Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 33427 

22 15 U.S.C. 78f(b). In approving this proposed 

rule change, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

23 15 U.S.C. 78f(b)(5). 

24See Letter to Brett Redfearn, Director, Division 

of Trading & Markets, from Cboe Global Markets, 

Inc. the Listed Options Trading Committee of the 

Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), and the Listed Options 

Committee of the Security Traders Association 

(‘‘STA’’), dated June 4, 2018, available at http://

cdn.batstrading.com/resources/comment_letters/ 

Cboe-Joint-Letter-with-SIFMA-and-The-STA-onOptions-Market-Structure.pdf. 

25See Securities Exchange Act Release No. 91609 

(April 19, 2021), 86 FR 21773 (April 23, 2021) (SR– 

CBOE–2021–024). 

26See Nasdaq ISE Options 3, Section 13(d)(3), 

which governs allocations at the conclusion of ISE’s 

price improvement mechanism and allocates an 

agency order across non-Priority Customer interest 

‘‘based upon the percentage of the total number of 

contracts available at the price that is represented 

by the size of such interest’’; and MIAX Options 

Rule 515A(a)(2)(iii), which governs allocations at 

the conclusion of MIAX’s price improvement 

mechanism and allocates an agency order across 

Professional interest on a pro-rata basis. 

27See Nasdaq ISE Options 3, Section 11(d)(3), 

which governs the allocations at the conclusion of 

ISE’s solicitation mechanism and allocates an 

agency order across non-Priority Customer interest 

‘‘based upon the percentage of the total number of 

contracts available at the best price that is 

represented by the size of the non-Priority Customer 

[interest]’’. 

28Pursuant to EDGX Options Rules 

21.19(e)(1)(C)–(D) and (e)(2)(B)–(C), Priority Orders 

or all other contra-side interest, as applicable, are 

allocated pursuant to EDGX Options Rule 21.8(c), 

which provides that all option classes on EDGX 

Options have a pro-rata base algorithm for orders 

resting at the same best price. 

29 15 U.S.C. 78s(b)(2). 

30 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

Complex Orders (in a pro-rata manner), 

if the Exchange has designated the class 

as eligible for Priority Complex Order 

Plus status, immediately following 

Priority Customer allocations and prior 

to any Initiating TPH allocations, 

pursuant to Rule 5.38(e)(1)(A) (if the C– 

AIM Auction results in no price 

improvement) and Rule 5.38(e)(2) (if the 

C–AIM Auction results in price 

improvement for the Agency Order and 

the Initiating TPH selected a singleprice submission). 

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange and, in particular, 

with Section 6(b) of the Act.22 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,23 which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest, and 

that the rules of a national securities 

exchange not be designed to permit 

unfair discrimination between 

customers, issuers, brokers or dealers. 

The Commission believes that the 

proposed new Priority Order Plus 

allocation status may encourage further 

competition in the AIM and C–AIM in 

exclusively listed classes, by 

encouraging aggressive quoting from 

Users. According to the Exchange, price 

improvement auctions have provided 

the market with benefits (such as 

providing an efficient manner of access 

to liquidity for customers), however, the 

options industry overall has observed 

that quoted liquidity on the book has 

decreased, quotes have widened, and 

options market makers have reduced 

their participation in the market, which 

the Exchange believes has impacted 

market quality.24 By providing market 

participants, particularly Market-Makers 

and other liquidity providers, the 

opportunity to receive priority over the 

Initiating TPH in exclusively listed 

index classes if they post more 

aggressive markets, the Commission 

believes the potential for increased 

competition within an individual AIM 

or C–AIM auction may enhance 

displayed liquidity, provide for tighter 

markets, and ultimately provide better 

execution prices for all market 

participants in classes available 

exclusively for trading on the Exchange. 

While the Commission recognizes that 

the loss of Initiating TPH priority to 

Users with Priority Order Plus status 

may potentially result in fewer auctions 

being initiated, the Commission believes 

that those individual auctions should be 

more competitive, as Users may be 

encouraged by the prospect of Priority 

Order Plus status to submit competitive 

orders/quotes. This may benefit the 

Agency Order by providing more 

opportunity for price improvement 

within an individual auction. The AIM 

Auction in particular should benefit 

from potentially increased competition, 

especially since the AIM Auction no 

longer provides guaranteed price 

improvement for smaller orders (except 

where the NBBO spread is $0.01).25

The Commission also believes that 

updating the allocation of Priority 

Orders and other contra-side interest 

(including non-Priority Customer nondisplayed Reserve Quantity) to be prorata for all AIM- or SAM-eligible classes 

(as applicable), as opposed to pricetime, may enhance competition by 

encouraging market participants to bring 

more liquidity into the auctions and 

provide competitive bids and offers 

throughout an auction. The Commission 

notes that pro-rata allocation is 

consistent with the manner in which 

other options exchanges allocate agency 

orders at the conclusion of comparable 

price improvement auctions 26 and 

solicitation auctions on those 

exchanges.27 Further, the proposed prorata allocation for Priority Orders and 

all other contra-side interest at the 

conclusion of an AIM Auction is 

consistent with the manner in which the 

same orders currently receive 

allocations at the conclusion of an AIM 

auction on the Exchange’s affiliated 

options exchange, Cboe EDGX 

Exchange, Inc. (‘‘EDGX Options’’).28

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,29 that the 

proposed rule change (SR–CBOE–2021– 

025), is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13244 Filed 6–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92183; File No. SR–FINRA– 

2021–015] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Amend 

FINRA Rules 1210 (Registration 

Requirements) and 1240 (Continuing 

Education Requirements) 

June 15, 2021. 

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 June 3, 

2021, the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by FINRA. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 


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33428 Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 

3See also Rule 1210.07 (All Registered Persons 

Must Satisfy the Regulatory Element of Continuing 

Education). 

4See 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 

FINRA in the Central Registration Depository 

(‘‘CRD®’’) 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. Nonregistered individuals who are participating in the 

waiver program under 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 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 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. 

5See Rule 1240(a)(2) (Failure to Complete). 

6See supra note 5. 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. 

7This 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. 

8The S101 (General Program for Registered 

Persons) and the S201 (Registered Principals and 

Supervisors). 

9The 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. 

10The rule defines ‘‘covered registered persons’’ 

as any registered person who has direct contact 

with customers in the conduct of a member’s 

securities sales, trading and investment banking 

activities, any individual who is registered as an 

Operations Professional or a Research Analyst, and 

the immediate supervisors of any such persons. See 

Rule 1240(b)(1) (Persons Subject to the Firm 

Element). 

11See Rule 1240(b)(2) (Standards for the Firm 

Element). 

12See supra note 11. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to amend FINRA 

Rule 1240 (Continuing Education 

Requirements). The proposed rule 

change also makes conforming 

amendments to FINRA Rule 1210 

(Registration Requirements). Among 

other changes, the proposed rule change 

requires that the Regulatory Element of 

continuing education be completed 

annually rather than every three years 

and provides a path through continuing 

education for individuals to maintain 

their qualification following the 

termination of a registration. 

The text of the proposed rule change 

is available on FINRA’s website at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA 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. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

(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 selfregulatory organizations (‘‘SROs’’). The 

CE Program for registered persons of 

FINRA members is codified under Rule 

1240.3

a. Regulatory Element 

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.4 FINRA may extend 

these time frames for good cause 

shown.5 Registered persons who have 

not completed the Regulatory Element 

within the prescribed time frames will 

have their FINRA registrations deemed 

inactive and will be designated as ‘‘CE 

inactive’’ in the CRD system until the 

requirements of the Regulatory Element 

have been satisfied.6 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).7

The Regulatory Element consists of a 

subprogram for registered persons 

generally, and a subprogram for 

principals and supervisors.8 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.9

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 

FINRA 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 

Rule 1240(b) (Firm Element) currently 

requires each firm to develop and 

administer an annual Firm Element 

training program for covered registered 

persons.10 The rule requires firms to 

conduct an annual needs analysis to 

determine the appropriate training.11

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 

(3) applicable regulatory 

requirements.12

A firm, consistent with its needs 

analysis, may determine to apply 


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Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 33429 

13See FINRA Rules 3310(e) and 3110(a)(7). 

14See 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 FINRA 

receives a new application for registration. The twoyear 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 FINRA Rule 8310 

(Sanctions for Violation of the Rules) may only 

requalify by retaking the applicable representativeor 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 caseby-case basis under Rule 1210.03 (Qualification 

Examinations and Waivers of Examinations) or as 

part of the waiver program under Rule 1210.09. 

15The proposed 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/councilrecommendations-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 brokerdealers. 

16When 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). 

17See proposed Rules 1240(a)(1) and (a)(4). Some 

commenters supported the proposed change to an 

annual requirement, while others disagreed with it 

or expressed concerns with the burdens it would 

impose on firms and registered persons. See infra 

Item II.C.(a) and (b)(i). 

18See proposed Rules 1210.07 and 1240(a)(1). 

Commenters generally supported the development 

of tailored content that is specific to each 

registration category. See infra Item II.C.(a). 

However, some commenters questioned whether 

there would be sufficient content for certain 

registration categories in a given year, while others 

were concerned that some individuals could be 

subject to duplicate or excessive content. See infra 

Item II.C.(a) and (b)(i). 

19See proposed Rules 1240(a)(1) and (a)(4). 

20See proposed Rule 1240(a)(1). 

21See proposed Rule 1240(a)(4). 

22See proposed Rule 1240(a)(2). In Regulatory 

Notice 20–05 (February 2020), FINRA had proposed 

a 15-day grace period prior to being designated as 

CE inactive, provided that the member documented 

the reasons for the individual’s failure to complete 

the Regulatory Element within the prescribed 

calendar year and retained the documentation for 

recordkeeping purposes. Some commenters noted 

that the proposed grace period would increase 

administrative and operational burdens, while one 

commenter requested that FINRA provide a longer 

grace period. See infra Item II.C.(b)(i). FINRA has 

determined to eliminate the proposed grace period 

to avoid any unnecessary burdens. 

23See supra note 22. 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. 

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,13 for purposes of satisfying 

Firm Element training. 

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 principallevel examination or if they obtain a 

waiver of such examination(s) (the 

‘‘two-year qualification period’’).14 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. 

(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 proposes the 

following changes to the CE Program 

under Rule 1240.15

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.16 Therefore, to provide 

registered persons with more timely and 

relevant training on significant 

regulatory developments, FINRA 

proposes amending Rule 1240(a) to 

require registered persons to complete 

the Regulatory Element annually by 

December 31.17 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.18

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.19 For example, a firm could 

require its registered persons to 

complete both their Regulatory Element 

and Firm Element by October 1 of each 

year. 

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.20 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.21

Consistent with current requirements, 

individuals who fail to complete their 

Regulatory Element within the 

prescribed period would be 

automatically designated as CE 

inactive.22 However, the proposed rule 

change preserves FINRA’s ability to 

extend the time by which a registered 

person must complete the Regulatory 

Element for good cause shown.23

FINRA also proposes amending 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 


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24See supra note 22. 

25See supra note 22. 

26See proposed Rule 1240(a)(3). As previously 

noted, Rule 1240(a)(3) currently provides that such 

individuals may be required to retake the 

Regulatory Element. See supra note 4. 

27See proposed Rule 1240(a)(4). 

28See proposed Rule 1240(a)(5). 

29As previously noted, some commenters 

questioned whether there would be sufficient 

annual content for certain registration categories 

and some commenters were concerned that some 

individuals might be subject to duplicate or 

excessive content on an annual basis. See supra 

note 18; see infra Item II.C.(a) and (b)(i). 

30As discussed in the economic impact 

assessment, individuals with multiple registrations 

represent a smaller percentage of the population of 

registered persons. 

31See proposed Rule 1240(b)(2)(D). Commenters 

overwhelmingly supported this proposed change. 

See infra Item II.C.(b)(ii). 32See proposed Rule 1240(b)(1). As noted earlier, 

the current requirement only applies to ‘‘covered 

registered persons’’ and not all registered persons. 

Not all commenters agreed with this proposed 

change. See infra Item II.C.(b)(ii). 33See proposed Rule 1240(b)(2)(B). In Regulatory 

Notice 20–05, FINRA had proposed to retain the 

current minimum training criteria under Rule 

1240(b)(2)(B). One commenter stated that the 

current criteria is overly prescriptive and that the 

requirement should be more flexible. See infra Item 

II.C.(b)(ii). FINRA is revising the rule in response. 

34Commenters overwhelmingly supported this 

proposed change. See infra Item II.C.(b)(iii). The 

proposed option would also be available to 

individuals who terminate any permissive 

registrations as provided under 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. 

35One commenter requested that FINRA 

eliminate the two-year qualification period. See 

infra Item II.C.(b)(iii). 

36See proposed Rule 1240(c)(1). 

37See proposed 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. 

period, to return to active status; 24 (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 

terminate their registrations; 25 (3) 

individuals who become subject to a 

significant disciplinary action may be 

required to complete assigned 

continuing education content as 

prescribed by FINRA; 26 (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; 27 and (5) the Regulatory 

Element requirements apply to 

individuals who are registered, or in the 

process of registering, as a 

representative or principal.28 In 

addition, FINRA proposes making 

conforming amendments to Rule 

1210.07. 

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.29 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.30

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 supervisoryspecific content on the same topics. The 

less common registration combinations 

may result in less topic overlap and 

more content overall. 

b. Recognition of Other Training 

Requirements for Firm Element and 

Extension of Firm Element to All 

Registered Persons 

To better align the Firm Element 

requirement with other required 

training, FINRA proposes amending 

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.31 FINRA 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 Rule 1210.02 

(Permissive Registrations), thereby 

further aligning the Firm Element 

requirement with other broadly-based 

training requirements.32 In conjunction 

with this proposed change, FINRA 

proposes modifying the current 

minimum training criteria under 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.33

c. Maintenance of Qualification After 

Termination of Registration 

FINRA proposes adopting paragraph 

(c) under Rule 1240 and Supplementary 

Material .01 and .02 to 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.34 The 

proposed rule change would not 

eliminate the two-year qualification 

period.35 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. 

The proposed rule change would 

impose the following conditions and 

limitations: 

• 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; 36

• individuals could elect to 

participate when they terminate a 

registration or within two years from the 

termination of a registration; 37


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38See proposed Rule 1240(c)(3). However, upon 

a participant’s request and for good cause shown, 

FINRA 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 FINRA. 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. One commenter 

suggested that the content, subject matter and 

volume of training be the same for both participants 

and registered persons. See infra Item II.C.(b)(iii). 

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. In Regulatory Notice 20–05, 

FINRA had proposed that participants complete the 

prescribed continuing education annually. 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. 

39See proposed Rule 1240(c). As described in 

greater detail in Item II.C. of this filing, in 

Regulatory Notice 20–05, FINRA had proposed a 

seven-year participation period, and some 

commenters suggested that there should not be any 

time limit on the participation period. See infra 

Item II.C.(b)(iii). However, based on discussions 

with NASAA and its support for a participation 

period of five years, the proposed rule change 

provides a five-year participation period in the 

interest of consistency and promoting registration 

efficiency. See infra Item II.C.(b)(iii). The proposed 

five-year participation period would continue to 

serve the diversity and inclusion goals of the 

proposed rule change. 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). 

40See proposed Rules 1240(c)(4) and (c)(5). 

41See proposed Rules 1240(c)(1) and (c)(6). 

Individuals who are subject to a statutory 

disqualification would not be eligible to enter the 

proposed continuing education program. 

Individuals who become subject to a statutory 

disqualification while participating in the proposed 

continuing education program would not be eligible 

to continue in the program. Further, any content 

completed by such 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, FINRA receives 

a Form U4 submitted by a member on behalf of 

Individual A requesting registration with FINRA. 

The Form U4 discloses the statutory 

disqualification event. FINRA 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 FINRA, 

he would be required to requalify by examination. 

This would be in addition to satisfying the 

eligibility conditions for association with a FINRA 

member firm. See Exchange Act Sections 3(a)(39) 

and 15(b)(4) and Article III of the FINRA By-Laws. 

42See proposed Supplementary Material .01 to 

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 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 4. In Regulatory Notice 

20–05, FINRA had proposed to eliminate the 

FSAWP given that the participation period of seven 

years for FSAWP participants would have been the 

same for participants in the proposed continuing 

education program. 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, FINRA 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 Rule 1240(a)(1). Finally, the proposed 

rule change preserves FINRA’s ability to extend the 

time by which FSAWP participants must complete 

the Regulatory Element for good cause shown. See 

proposed Rule 1240(a)(2). 

43See proposed Supplementary Material .02 to 

Rule 1240. 

44See The Female Face of Family Caregiving 

(November 2018), available at https://

www.nationalpartnership.org/our-work/resources/ 

economic-justice/female-face-family-caregiving.pdf. 

45See 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. 

• individuals would be required to 

complete annually all prescribed 

continuing education; 38

• individuals would have a maximum 

of five years in which to reregister; 39

• 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; 40 and 

• 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.41

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.42

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.43 Finally, 

FINRA proposes making conforming 

amendments to Rule 1210, including 

adding references to proposed Rule 

1240(c) under Rule 1210.08. 

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. Moreover, if the proposed 

rule change is implemented, FINRA will 

evaluate its efficacy following 

implementation to ensure that it is 

meeting its goals. 

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.44 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.45


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46These additional enhancements do not require 

any changes to the FINRA rules. Most commenters 

supported these enhancements, while some 

commenters had concerns and questions. See infra 

Item II.C.(b)(iv). 

47 If there are any other critical rule changes or 

other regulatory developments that arise during a 

given year, FINRA and the CE Council will work 

to provide registered persons timely and sufficient 

training on such rule changes and developments. 

48See infra Item II.C.(b)(i). 

49 15 U.S.C. 78o–3(b)(6). 

50 15 U.S.C. 78o–3(g)(3). 

51The number of registered persons has been 

decreasing at an annual rate of approximately 1% 

per year. See, e.g., 2020 FINRA Industry Snapshot, 

available at https://www.finra.org/rules-guidance/ 

guidance/reports-studies/2020-industry-snapshot. 

d. Other Enhancements to CE Program 

FINRA and the CE Council also plan 

to enhance the CE Program in other 

ways.46 FINRA will work with the CE 

Council to incorporate a variety of 

instructional formats to present the 

Regulatory Element content. In addition, 

FINRA will work with the CE Council 

to publish in advance the Regulatory 

Element learning topics for the next 

year.47 This will allow firms to review 

the Regulatory Element topics when 

developing their Firm Element training 

plan to avoid unnecessary duplication 

of topics. The proposed transition to an 

annual Regulatory Element requirement 

would increase the number of registered 

persons who would be required to 

complete the Regulatory Element on an 

annual basis. To assist compliance with 

this proposed change, FINRA would 

enhance its systems to provide firms 

and registered persons with additional 

notification, management and tracking 

functionality. In response to comments, 

FINRA would also make the Regulatory 

Element available via a mobile 

compatible format.48

FINRA and the CE Council also will 

improve the guidance and resources 

available to firms to develop effective 

Firm Element training programs, such as 

updated guidance for developing and 

documenting training plans and specific 

principles. Further, FINRA and the CE 

Council will develop a catalog of 

continuing education content that 

would serve as an optional resource for 

firms to select relevant Firm Element 

content and create learning plans for 

their registered persons. The catalog 

would include content developed by 

third-party training providers, FINRA 

and the other SROs participating in the 

CE Program. Firms would have the 

option of using the content in the 

catalog for purposes of their Firm 

Element training; they would not be 

obligated to select content from the 

catalog. 

If the Commission approves the 

proposed rule change, FINRA will 

announce the implementation dates of 

the proposed rule change in a 

Regulatory Notice to be published no 

later than 90 days following 

Commission approval. 

2. Statutory Basis 

The proposed rule change is 

consistent with the provisions of 

Section 15A(b)(6) of the Act,49 which 

requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest, and Section 15A(g)(3) of 

the Act,50 which authorizes FINRA to 

prescribe standards of training, 

experience and competence for persons 

associated with FINRA members. 

FINRA 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, FINRA 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. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change would result in 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. All members 

would be subject to the proposed rule 

change. 

Economic Impact Assessment 

FINRA has undertaken an economic 

impact assessment, as set forth below, to 

further analyze the regulatory need for 

the proposed rule change, its potential 

economic impacts, including 

anticipated costs, benefits, and 

distributional and competitive effects, 

relative to the current baseline, and the 

alternatives FINRA considered in 

assessing how best to meet its regulatory 

objective. 

Regulatory Need 

FINRA is proposing to make changes 

to the CE Program, including the related 

FINRA rules, as part of ongoing efforts 

to address and implement the CE 

Council’s recommendations. As 

described above, the proposed rule 

change focuses on: (1) Ensuring that all 

registered persons receive relevant and 

sufficient Regulatory Element and Firm 

Element training on an annual basis; (2) 

providing a path through continuing 

education for individuals to maintain 

their qualification following the 

termination of a registration; and (3) 

providing firms with the guidance and 

resources necessary to design effective 

and efficient Firm Element training 

programs. 

The proposed rule change is expected 

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. 

Economic Baseline 

The economic baseline for the 

proposed rule change is the existing CE 

Program. As described above, registered 

persons of broker-dealers are required to 

participate in continuing education 

consisting of a Regulatory Element and 

a Firm Element. The Regulatory Element 

is generally delivered every three years 

and focuses on regulatory requirements 

and industry standards, while the Firm 

Element is an annual requirement and 

focuses on securities products, services 

and strategies firms offer, firm policies 

and industry trends. 

As stated above, under the current 

regime, individuals generally have a 

two-year window from the termination 

of their association with a member to 

reregister without requalifying by 

examination or obtaining a waiver. 

According to FINRA’s analysis, the total 

number of registered persons, 

approximately 620,000, has shown a 

slow decrease over the past few years 

even as individual registered persons 

regularly change their status by ending 

and renewing their association with a 

firm.51 Across this pool of registered 

persons, approximately 65% hold only 

one FINRA registration category (for 

example either a General Securities 

Representative (Series 7) registration or 

an Investment Company and Variable 

Contracts Products Representative 

(Series 6) registration), 25% hold two 

FINRA registrations (for example a 

General Securities Representative 


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52The minimum 60 days for employment gap 

follows the definition used in the 2020 FINRA 

Industry Snapshot, available at https://

www.finra.org/rules-guidance/guidance/reportsstudies/2020-industry-snapshot. 

53The period of 2007–2009 covers the events 

before, during and after the 2008 financial crisis. 

These events had an effect on the number of 

individuals leaving the industry, which indeed rose 

during this period. However, the trends observed 

for these years do not appear to be extreme outliers 

and, moreover, potentially reflect changes in labor 

markets that the proposed rule change is targeting. 

Further, the three years selected for the analysis 

provide the means to study the trends of 

individuals returning to the industry for up to a 

period of 10 years of being away from it. 

registration and an Investment Banking 

Representative registration), and the 

remainder hold three FINRA 

registrations or more. Moreover, across 

the pool of registered persons, in 

addition to the FINRA registration, 

approximately 90% hold at least one 

state registration, and 50% hold more 

than five state registrations. With 

respect to registration with a FINRA 

member, in recent years, out of the 

approximately 620,000 registered 

persons, approximately 90,000 end their 

registration with all firms with whom 

they are registered at some point during 

the year. Out of these, about half do not 

renew their registration and are 

considered to have left the securities 

industry. 

Under the current baseline, registered 

persons who terminate a registration are 

given a two-year grace period in which 

they can reregister without being 

required to retake a qualification 

examination or obtain an examination 

waiver. Individuals who seek to 

reregister more than two years after 

terminating their association are 

required to requalify by passing an 

examination or obtaining an 

examination waiver. Requalification 

imposes costs in the form of time spent 

preparing for and taking the 

examinations, potential limitations to 

the activities permitted to be conducted 

until the requalification is completed, 

opportunity costs for the individual and 

the potential employers in terms of lost 

business, and the direct registration 

costs. FINRA understands anecdotally 

that these costs currently deter some 

significant portion of the population 

that give up their registrations from 

reregistering. 

Figure 1, as an example, presents a 

plot of the number of registered persons 

that reregister within a given number of 

years after having terminated their 

registrations for at least 60 days.52 The 

focus is on registered persons who 

terminated their registrations in either 

2007, 2008 or 2009 and the period of 

time until they reregister with the same 

or a different firm.53 Each bar in Figure 

1 represents a 100-day period and, 

roughly speaking, three-and-a-half bars 

represent one year. As can be observed 

in Figure 1, for all three origination 

years, there is an increase in the number 

of previously registered persons who 

reregister towards the end of the second 

year from their date of termination. This 

is consistent with the incentive in the 

current rule permitting individuals to 

reregister without having to requalify by 

passing an examination or having to 

obtain an examination waiver (i.e., the 

current two-year qualification period) 

and supports the assumption that the 

requalification process imposes direct 

and indirect economic costs. After this 

point, there is a significant drop in the 

number of individuals who reregister. 

Moreover, following the end of the 

second year after terminating their 

registrations, the number of individuals 

reregistering remains low and tapers off 

slowly. Finally, an analysis of the stage 

in the Regulatory Element cycle at 

which registered persons terminate their 

registrations, on average, across the time 

period of 2007–2016, suggests that 

registered persons who terminate their 

registrations tend to do so 

approximately 530 days before their 

next Regulatory Element would be due 

(i.e., on average in the middle of a 

current three-year Regulatory Element 

cycle). 

Figure 1: Plot of the number of 

previously registered persons that 

reregister within a given number of 

years after having terminated their 

registrations for at least 60 days in either 

2007, 2008 or 2009. Each bar represents 

100 days, and every year is accordingly 

represented by approximately threeand-a-half bars. 


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33434 Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices 

54 In general, the CFA requires 20 hours of 

continuing education on an annual basis. See CFA’s 

Continuing Education (CE) Program, available at 

https://www.cfainstitute.org/en/membership/ 

professional-development/pl. The American 

Institute of CPAs (‘‘AICPA’’) requires 120 credit 

hours of continuing education over a three-year 

period, with the requirement of 40 credit hours per 

year. See AICPA’s Continuing Professional 

Education (CPE) Requirements for CPAs, available 

at https://www.aicpa.org/cpe-learning/ 

cperequirements.html. The continuing education 

requirement for lawyers is different across states, 

but it generally ranges between 10–15 credit hours 

per year. See https://www.americanbar.org/content/ 

dam/aba/directories/policy/aba_model_rule_

comparison_by_state_meet_model_rule_noted.pdf. 

None of these three professions requires members 

to be active practitioners to maintain their 

credentials. 

55See, e.g., Christy Spivey, Time Off at What 

Price? The Effects of Career Interruptions on 

Earnings, 59(1) Indus. & Lab. Rel. Rev. 119–140 

(2005); Jill K. Hayter, Career Interrupted for What 

Reason? Job Interruptions and Their Wage Effects, 

30(4) J. App. Bus. Res. 1197–1210 (2014). Spivey 

(2005) uses the National Longitudinal Survey of 

Youth (‘‘NLSY’’) data, and finds that the total time 

spent out of the labor force for men was 2.9 years 

on average, with a standard deviation of 3.7. The 

paper finds that women spent on average 5.3 years 

out of the labor force, with a standard deviation of 

5.1. Finally, the paper reports that the average 

number of interruptions was 2.53 for women and 

0.93 for men. Hayter (2014) also studies the NLSY 

data. The paper reports the percentage of women 

and men in the sample who experienced various 

types of employment disruptions, and the average 

cumulative length of disruptions by type, 

conditional on having at least one interruption. 

Non-family disruptions are found to have similar 

impacts across genders. However, women are much 

more likely (15% versus 2%) to experience familyrelated disruptions and the total reported length out 

of the work force resulting from the disruption is 

three times longer for women versus men (150 

weeks versus 53 weeks). 

56FINRA has repeated the analysis presented in 

Figure 1, separating registered persons by gender. 

The analysis found that female registered persons 

are underrepresented, at an approximate ratio of 

one to four. With respect to the pattern of 

reregistering under the baseline that is presented in 

Figure 1, the analysis found that the pattern was 

similar for either male or female registered persons, 

when studied separately. However, this does not 

rule out that female registrants could especially 

benefit from the proposed rule change, for the 

reasons discussed above. 

57See supra Item II.A.1.(ii)d. 

With respect to firms, the economic 

baseline is derived from the current 

processes and procedures used to 

implement the existing CE Program. 

Firms are currently responsible for the 

appropriate monitoring of the 

compliance of their registered persons 

with the three-year Regulatory Element 

cycle and for administering the annual 

Firm Element. Further, firms may 

experience material negative impact 

where they are not able to retain 

qualified experienced persons because 

of professional and personal events that 

require such individuals to take an 

extended leave of absence from the 

industry. 

Economic Impacts 

FINRA believes that economic 

impacts of the proposed rule change 

would result in both benefits and costs 

to firms and registered persons and 

would potentially benefit the investor 

community. FINRA will undertake an 

evaluation of the efficacy of the program 

within a reasonable period following the 

implementation date. The aim of such 

an evaluation is to ensure that the 

program is meeting its goals and 

objectives, without resulting in 

unintended diminished investor 

protections, or unintended increase in 

regulatory burden on any relevant 

parties. 

Anticipated Benefits 

FINRA believes that the proposed rule 

change would result in two main 

benefits to registered persons. 

First, as discussed above, the 

proposed rule change would transition 

the Regulatory Element from a threeyear requirement to an annual 

requirement. Such an annual 

requirement is implemented for other 

professionals, such as Certified Public 

Accountants (‘‘CPAs’’), Chartered 

Financial Analysts (‘‘CFAs’’) and 

lawyers.54 The 2015 transition to CE 

Online resulted in a more efficient 

program and added a new dimension of 

flexibility to the CE Program in terms of 

the content, timing and availability of 

the program. This change would allow 

the Regulatory Element to focus on 

current issues and recent regulatory 

changes and enhance registered persons’ 

understanding of the changes through 

more frequent assessments. A transition 

to an annual cycle is expected to benefit 

registered persons by helping to ensure 

that they understand recent regulatory 

changes and are thus able to perform 

their work in a compliant and effective 

manner. Under the current program, a 

regulatory change could take place in 

the beginning of a three-year Regulatory 

Element cycle and thus result in some 

portion of the individuals in that cycle 

being assessed on their knowledge of 

the change at a significantly later date. 

Second, FINRA believes that a 

significant benefit of the proposed rule 

change for registered persons would be 

the increased flexibility in terms of 

maintaining their qualification for a 

terminated registration category. As can 

be observed in Figure 1, there is an 

increase in the number of individuals 

who reregister towards the end of the 

two-year period, which is the current 

grace period for maintaining their 

qualification status. Extending this 

period to five years through the 

completion of continuing education 

would provide flexibility to individuals, 

as well as potentially result in increased 

retention of expertise in the industry. 

With respect to increased flexibility, 

extending the current two-year period to 

five years would allow individuals to 

manage significant life events, including 

professional changes and development 

(such as pursuing educational goals, a 

career change to a role in the firm that 

is not part of the broker-dealer, working 

overseas for an extended period due to 

a career change or an attempt at a 

different career path) or personal life 

events (such as birth or adoption of a 

child, unexpected loss in the family or 

relocation due to family needs).55

Through discussions with industry 

representatives, FINRA has learned that 

the proposed rule change could 

potentially lower the barrier to reentry 

to the industry. Some firms indicated 

that a significant benefit may arise in 

cases where an individual leaves the 

broker-dealer to gain experience in an 

affiliate of a parent company, for 

instance in an affiliated commercial 

bank, investment adviser or foreign 

affiliate. Other firms indicated that the 

proposed rule change could potentially 

be relevant for under-represented 

populations in the securities industry, 

such as, for example, female 

registrants.56

With respect to firms, FINRA believes 

that the proposed rule change will result 

in three main benefits. First, FINRA 

believes that the transition to an annual 

Regulatory Element cycle will reduce 

firms’ regulatory risk, as well as 

enhance compliance and reduce 

compliance-related costs. This benefit 

would potentially result from the 

enhanced timeliness and relevance 

afforded by the proposed annual cycle. 

Second, the proposed rule change 

would further enhance and streamline 

the Firm Element requirement. These 

changes include an express recognition 

of existing firm training programs, such 

as the annual compliance meeting, 

toward satisfying a registered 

individual’s Firm Element requirement, 

potentially saving firms compliance 

resources currently devoted to 

developing and implementing different 

training programs. In addition, in 

conjunction with the proposed rule 

change, FINRA and the CE Council 

would develop a content catalog, 

managed by FINRA, that would serve as 

an optional resource from which firms 

could select or supplement their Firm 

Element content.57 Such a catalog could 

provide firms with a more cost-efficient 

resource for Firm Element content. 

Third, with respect to the extended 

time period for maintaining a 

qualification status, FINRA believes that 


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58As of November 2020, out of the approximately 

620,000 FINRA registered persons, approximately 

84% held a Series 7 or a Series 6. This population 

is expected to potentially be impacted by regulatory 

differences (or an estimate of the percentage of the 

relevant population that may be constrained by 

differences between FINRA and state rules). 

Further, approximately 78% of the total registered 

persons population have at least one state license. 

Depending on roles and responsibilities of FINRA 

registered persons, there is not always a state 

licensure requirement (specifically, non-customerfacing roles). The anticipated benefits of the 

proposed rule change might be more fully achieved 

for these individuals. Finally, the impacts of the 

potential differences may be particularly 

pronounced in a few states that have more than 

200,000 individuals licensed in them. For these 

states, approximately 90% of these individuals (on 

average across these states) hold a Series 7 or a 

Series 6. 

59However, as discussed above, 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. See supra 

Item II.A.1.(ii)a. Some commenters expressed 

concerns regarding the costs and burdens that the 

proposed annual requirement would impose on 

firms and registered persons. See infra Item II.C.(a) 

and (b)(i). FINRA recognizes that the transition to 

an annual Regulatory Element requirement may 

result in potential costs and burdens. However, 

FINRA believes that any such costs and burdens are 

appropriate and justified given the significant 

regulatory benefit of more tailored and timelier 

Regulatory Element. Further, FINRA believes that 

some of the potential costs and burdens would be 

mitigated by the proposed enhancements to the 

program. 

60Some commenters noted that the extension of 

the Firm Element to all registered persons could 

result in unnecessary costs and burdens, and they 

also noted that this proposed change could have a 

disparate impact on firms with large home offices 

and firms with large numbers of registered support 

staff and others holding permissive registrations. 

See infra Item II.C.(b)(ii). 

61One commenter suggested that the transition to 

an annual Regulatory Element could increase 

administrative workloads and costs on smaller 

firms and independent contractors. See infra Item 

II.C.(b)(i). 

the proposed rule change could result in 

added flexibility for firms in terms of 

hiring qualified candidates. This could 

ultimately extend the potential pool of 

securities industry professionals and 

potentially benefit firms regardless of 

their size. Through discussions with 

industry representatives, FINRA has 

learned that this could permit firms to 

better retain skilled professionals, more 

easily provide individuals with 

professional development outside the 

broker-dealer, and facilitate the hiring 

process for experienced professionals 

who have required the career flexibility. 

In addition, FINRA believes that the 

investor community will ultimately 

benefit from the proposed rule change. 

These benefits will stem from the 

potential increase in the knowledge and 

ongoing training of registered persons, 

as well as through the increased 

flexibility of retention of skill and 

experience in the industry. 

Finally, FINRA notes that these 

benefits may be limited for individuals 

seeking to maintain FINRA and state 

registrations if there are significant 

differences between the relevant 

requirements across the various 

regulatory frameworks. For instance, 

currently, state regulators require an 

individual to retake examinations for 

terminated licenses after two years. 

Some individuals may be dissuaded 

from remaining in the industry where 

the state requirements are more binding 

than those proposed in this filing. 

Others may be dissuaded from taking 

advantage of the flexibility provided by 

the proposed rule change at the expense 

of other obligations. As discussed above, 

approximately 90% of registered 

individuals hold some combination of 

FINRA and state registrations. This may 

serve as an upper bound on an estimate 

of the proportion of the population that 

may be limited in the full advantages of 

the proposed rule change, depending on 

the combinations of registrations held 

and individual state rules.58

Anticipated Costs 

FINRA believes that, alongside the 

anticipated benefits discussed above, 

the proposed rule change would also 

result in costs for both firms and 

registered persons. 

With respect to registered persons, 

FINRA anticipates three main costs that 

may result from the proposed rule 

change. First, the move to an annual 

Regulatory Element cycle will increase 

the frequency of the required training 

and the associated impact of failing to 

complete the annual content.59 Further, 

this anticipated increase in burdens is 

expected to be smaller for individuals 

with a single registration category than 

for individuals with more than one 

registration category. Individuals with 

more than one registration category 

(approximately 35% of registered 

persons) may have more Regulatory 

Element content (including the 

associated time commitment) in a given 

year, in comparison to individuals with 

only a single registration category. 

Second, the introduction of Regulatory 

Element notifications directly to 

registered persons could shift some of 

the time management burden to them. 

Third, the eligibility requirements for 

maintaining a qualification status for a 

terminated registration category will 

require an individual to have been 

registered with FINRA in that 

registration category for at least one 

year, which could limit potential career 

changes that may occur within a shorter 

period. 

With respect to firms, FINRA 

anticipates some costs that may result 

from the proposed rule change. The 

transition to an annual Regulatory 

Element requirement could ultimately 

increase the administrative and 

operational burden on firms due to 

changes to compliance systems. This is 

anticipated in terms of the resources 

required to implement and monitor 

compliance with the program on an 

annual basis. These resources would 

also need to be potentially further 

increased to address the proposed 

extension of the Firm Element 

requirement to all registered persons.60

It is anticipated that costs stemming 

from the change to an annual Regulatory 

Element requirement will tend to 

increase with the number of 

representatives at a firm and thus be 

higher in aggregate at larger firms. 

However, economies of scale likely exist 

in the application of the proposed 

requirements. Thus, the average 

additional cost per representative at 

larger firms will likely be lower than 

that at smaller firms.61

Alternatives Considered 

FINRA has considered a range of 

alternatives in developing the proposed 

rule change. These included alternative 

frequency of the Regulatory Element 

requirement (periodic versus annual), 

alternative time periods for becoming 

eligible to maintain a qualification 

status for a terminated registration 

category (one year versus more than one 

year) and alternative time periods for 

maintaining a qualification status (seven 

years versus 10 or five years). 

The proposed rule change reflects a 

consideration of the various 

alternatives. Within each of these 

alternatives there is a trade-off between 

providing the flexibility to encourage 

more registered persons to remain in the 

industry when other, outside demands 

arise versus ensuring that those 

individuals are likely to be aware of 

current regulations and best practices. 

For example, with respect to 

maintaining qualifications, FINRA 

believes that a length of five years could 

achieve the main goals and anticipated 

benefits of the program. FINRA 

considered whether a seven-year period 

would better balance flexibility against 

investor protection risks. Such a sevenyear period would also likely provide a 

reasonable upper limit on the length of 

the proposed requalification option, in 

so far as a longer period might erode the 

benefits of the proposed option. While 

the proposed participation period of five 

years may limit some individuals’ 

ability to remain in the industry, it may 

better mitigate the impact of differences 


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62Some commenters expressed support for an 

indefinite participation period. See infra Item 

II.C.(b)(iii). 

63See infra Item II.C.(b)(iii). 

64See supra note 15. 

65See supra note 15. 

66See SR–FINRA–2021–015 (Form 19b–4, Exhibit 

2d) for a list of abbreviations assigned to 

commenters (available on FINRA’s website at 

http://www.finra.org). 

with state licensing requirements.62

Considering the discussion above 

regarding economic impacts, issues 

stemming from other regulatory 

frameworks, as well as the views 

expressed by commenters in response to 

Regulatory Notice 20–05, including 

NASAA’s support for a participation 

period of five years, FINRA believes that 

a five-year period is more appropriate.63

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

(a) Comments Relating to Regulatory 

Notice 18–26 

In September 2018, the CE Council 

published an initial document outlining 

several potential enhancements to the 

CE Program under consideration by the 

CE Council. In support of the CE 

Council, FINRA published Regulatory 

Notice 18–26 (September 2018) (‘‘Notice 

18–26’’) requesting comment on the 

potential enhancements. In response to 

Notice 18–26, FINRA, on behalf of the 

CE Council, received 22 comment 

letters. A copy of Notice 18–26 is 

available on FINRA’s website at http:// 

www.finra.org. Copies of the comment 

letters received in response to Notice 

18–26 are also available on FINRA’s 

website. 

Most commenters generally supported 

the potential enhancements outlined by 

the CE Council. The commenters 

expressed overwhelming interest in 

implementing a mechanism for allowing 

previously registered individuals to 

maintain their qualification after the 

termination of their registrations for 

longer than the current two-year period. 

In addition, most commenters agreed 

that there is value in moving to an 

annual Regulatory Element requirement 

in order to provide registered persons 

with more timely and relevant 

education and training. However, many 

expressed concern that doing so could 

increase the administrative and 

operational burden on both firms and 

registered persons, particularly for firms 

with a narrowly focused business model 

(e.g., the sale of mutual funds and 

variable annuities). One commenter 

expressed concern that increasing the 

frequency of the Regulatory Element 

may exacerbate the existing burden on 

those without ready access to a highspeed internet connection, which is 

currently required for online access. 

Many commenters supported Regulatory 

Element content that is tailored and 

specific to each registration category 

rather than content that applies 

generally to all registered persons. Some 

of these commenters questioned 

whether there are sufficient regulatory 

developments occurring annually that 

would be relevant to individuals with 

limited registrations, such as registered 

persons engaged in the sale of mutual 

funds and variable annuities. Further, 

commenters widely supported the 

creation of a content catalog that firms 

could leverage for administering 

education and training for their Firm 

Element programs. Finally, several 

commenters requested more guidance 

on the Firm Element component, 

including express guidance that other 

training requirements may count toward 

satisfying the Firm Element 

requirement. 

Following a review of the public 

comments and further discussions with 

industry and SRO participants, in 

September 2019, the CE Council 

published its recommendations to 

enhance the CE Program.64 As 

previously noted, the proposed rule 

change is based on the CE Council’s 

recommendations.65

(b) Comments Relating to Regulatory 

Notice 20–05 

The proposed rule change was 

published for comment in Regulatory 

Notice 20–05 (February 2020) (‘‘Notice 

20–05’’). FINRA received 26 comment 

letters in response to Notice 20–05. A 

copy of Notice 20–05 is available on 

FINRA’s website at http://

www.finra.org. Copies of the comment 

letters received in response to Notice 

20–05 are also available on FINRA’s 

website.66

Below is a summary of the comments 

on Notice 20–05 and FINRA’s 

responses. 

(i) Transition to Annual Regulatory 

Element for Each Registration Category 

Most of the commenters addressing 

the proposed annual Regulatory 

Element requirement supported the 

change. Some of these commenters 

qualified their support. ARM supported 

the proposed change if individuals with 

multiple registrations would not be 

subject to additional or duplicative 

requirements. SIFMA, Morgan Stanley, 

LPL and Fidelity suggested an annual 

‘‘cap’’ on the number of modules that 

individuals must complete. Huntington 

was concerned about the potential 

increase in compliance and supervisory 

burdens and duplicative training. 

Monahan & Roth requested that the cost 

of the annual requirement be 

proportionately less. STANY requested 

that FINRA be mindful of the impact of 

costs and compliance efforts, especially 

for smaller firms. 

Further, Integrated Solutions 

suggested that registrations that have 

been held for longer periods be subject 

to less frequent Regulatory Element. 

CFA suggested that an individual’s 

‘‘primary’’ registration be subject to an 

annual requirement and that the 

individual’s other registrations be 

subject to less frequent Regulatory 

Element. PFS requested that Investment 

Company and Variable Contracts 

Products Representatives be subject to 

less frequent Regulatory Element 

because there may not be enough 

material to develop annual content for 

such individuals. Morgan Stanley 

suggested that FINRA consider a phased 

approach followed by a cost-benefit 

analysis to further assess the impact of 

the transition. ARM and Foreside stated 

that the 15-day grace period for 

completing the Regulatory Element, 

which was originally proposed in 

Regulatory Notice 20–05, would 

increase administrative and operational 

burdens. Morgan Stanley requested that 

FINRA provide a 30-day grace period. 

Morgan Stanley and SIFMA also 

requested that FINRA provide hiring 

firms with information regarding an 

individual’s Regulatory Element status 

at the prehire stage, subject to the 

individual’s consent. 

Several commenters did not support 

the proposed annual Regulatory 

Element requirement or raised other 

concerns with the proposed change. 

Executive Advisors, MML, Nationwide 

and Pacer did not support the proposed 

annual requirement. FSI stated that the 

proposed change would potentially 

increase administrative workloads and 

costs on smaller firms and independent 

contractors as well as duplicative 

training. FSI also requested clarification 

regarding the impact of a CE inactive 

status on an individual’s state 

registrations, including advisory 

registrations, and adequate time for 

firms to implement the proposed rule 

change. PFS stated that the proposed 

change to an annual requirement would 

disparately impact those without 

broadband internet, which is currently 

required to complete the Regulatory 

Element. 

Registered persons would not be 

subject to duplicative regulatory content 

in any given year, regardless of how 

many registrations they hold. Further, 

FINRA does not believe that it is 


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necessary to establish an annual ‘‘cap’’ 

on the amount of regulatory content as 

suggested by some commenters. Rather, 

with respect to individuals who hold a 

significant number of registrations, 

FINRA and the CE Council would 

review the amount of content that such 

individuals would be required to 

complete each year and, if necessary, 

the amount would be adjusted so that it 

is reasonable and balanced. FINRA will 

file a separate proposed rule change to 

establish the session fee for the 

proposed annual Regulatory Element; 

we generally expect that the fee for the 

annual Regulatory Element would be 

reduced and be the same for all 

registered persons, regardless of the 

amount of content that they would be 

required to complete (that is, an 

individual who holds multiple 

registrations would be subject to the 

same annual fee as an individual who 

holds a single registration). 

FINRA believes that the 

implementation of less frequent 

Regulatory Element for certain 

registration categories or a phased 

implementation as suggested by some 

commenters would be overly complex 

and cause confusion. FINRA will work 

with the CE Council to ensure that there 

is sufficient and appropriate content for 

each registration category. With respect 

to the originally proposed 15-day grace 

period prior to being designated as CE 

inactive, FINRA has eliminated the 

grace period from the proposed rule 

change to avoid any unnecessary 

burdens on firms and registered 

persons, as was suggested by some 

commenters. However, the proposed 

rule change preserves the ability of a 

firm to request an extension of time for 

an individual, if necessary. In addition, 

as is currently the case, an individual’s 

CE inactive status would impact the 

individual’s ability to function in a 

FINRA-registered capacity. As is the 

case today, any questions regarding the 

impact of a CE inactive status on state 

registrations should be directed to the 

appropriate state securities regulator. 

Finally, in conjunction with the 

proposed rule change, FINRA would 

enhance its systems to reduce the 

overall burden on firms and registered 

persons. As part of these enhancements, 

FINRA would work with firms to 

determine what information would be 

helpful and appropriate prior to 

associating with or hiring individuals. 

FINRA would also provide firms with 

adequate time to implement the 

proposed rule change. Further, to 

mitigate any potential disparate impact 

on individuals who do not have ready 

access to a high-speed internet 

connection, FINRA would make the 

Regulatory Element available via a 

mobile compatible format. 

(ii) Recognition of Other Training 

Requirements for Firm Element and 

Extension of Firm Element to All 

Registered Persons 

Commenters overwhelmingly 

supported the express recognition of 

AML compliance program training and 

annual compliance meeting training 

toward satisfying the Firm Element. 

Some of these commenters requested 

additional flexibility and clarification 

regarding the Firm Element 

requirement. 

Foreside requested that firms be 

provided with the flexibility to combine 

the requirements of the Regulatory 

Element, Firm Element and annual 

compliance meeting. Cambridge 

suggested that completion of additional 

modules of Regulatory Element be 

applied toward satisfying the Firm 

Element. Cambridge also recommended 

that ethics and professional 

responsibility training be included in 

the Regulatory Element rather than the 

Firm Element. Monahan & Roth stated 

that the current Firm Element training 

criteria is overly prescriptive and that 

the requirement should be more 

flexible, allowing firms to train to the 

scope of their business and changing 

environment. NRS stated that other 

training should count toward satisfying 

Firm Element training if the other 

training is applicable to an individual’s 

job function. STANY requested that 

industry conferences count toward 

satisfying the Firm Element. SIFMA 

requested that firms should continue to 

have the flexibility to determine if 

leveraging other training makes sense 

given their business model and the 

flexibility to cover the topics in the 

Regulatory Element in Firm Element 

training. SIFMA also requested that the 

Firm Element requirement recognize the 

unique needs of limited purpose brokerdealers and suggested that Firm Element 

training be designed to apply to other 

professional designations or training 

requirements. NASAA stated that 

satisfaction of AML compliance 

program training or annual compliance 

meeting training alone should not 

satisfy Firm Element training. 

Not all commenters supported the 

extension of the Firm Element 

requirement to all registered persons. 

FSI and STANY recommended that it be 

optional for registered persons who are 

not currently covered under the rule. 

STANY stated that extending the 

requirement to individuals holding 

permissive registrations could create 

unnecessary burdens and discourage 

permissive registrations. LPL stated that 

the proposed change may result in 

unnecessary costs. MML stated that it 

would have a disparate impact on firms 

with large home offices. SIFMA stated 

that it would be overly burdensome, 

particularly for firms with large 

numbers of registered support staff and 

others holding permissive registrations 

who are not currently covered under the 

rule. 

The Regulatory Element cannot be 

combined with other training 

requirements. Registered persons must 

complete prescribed regulatory content 

provided by FINRA to establish that 

they have an appropriate level of 

knowledge relating to regulatory 

requirements. However, the Firm 

Element and annual compliance 

meeting may be combined, provided 

that the criteria for each requirement is 

satisfied. 

FINRA and the CE Council will 

consider the possibility of making 

additional Regulatory Element topics 

available to firms, which they could 

apply toward satisfying Firm Element 

training based on their needs analysis. 

FINRA and the CE Council will also 

consider whether ethics and 

professional responsibility training 

should be covered in the Regulatory 

Element. 

In response to comments, FINRA has 

revised the proposed rule change to 

replace the current prescriptive Firm 

Element criteria with a requirement that 

the training cover topics related to the 

role, activities or responsibilities of the 

registered person and to professional 

responsibility. Nothing in the proposed 

rule change would preclude firms from 

covering the Regulatory Element topics 

in their Firm Element training, 

consistent with their needs analysis. 

Further, consistent with their needs 

analysis, firms would continue to have 

the flexibility to determine whether 

other training, including industry 

conferences, may be applied toward the 

Firm Element. In addition, the CE 

Council will consider issuing best 

practices and guidance to help firms 

evaluate other financial industry 

continuing education programs for 

purposes of satisfying the Firm Element. 

The recognition of other training 

requirements toward satisfying the Firm 

Element would still require firms to 

conduct a needs analysis to determine 

the appropriateness of applying such 

other training toward the Firm Element. 

However, based on a needs analysis, a 

firm may determine that such other 

training requirements fully satisfy the 

Firm Element requirement. FINRA is 

not considering developing Firm 

Element training specifically to satisfy 

other professional designations or 


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67Participants who fail to complete the required 

annual content for a registration category that has 

been terminated for two or more years would not 

be eligible to continue. For example, if the proposed 

rule change were implemented on January 1, 2022, 

a participant who completes the required annual 

content for the General Securities Representative 

category in 2022, 2023 and 2024 but fails to 

complete the 2025 annual content would not be 

eligible to continue beyond 2025. In the example 

above, if the individual reregisters with a firm as 

a General Securities Representative in 2025, the 

individual would be required to complete any 

annual Regulatory Element applicable to the 

General Securities Representative registration 

category by December 31, 2025. If the individual 

fails to complete such Regulatory Element by 

December 31, 2025, the individual would be 

designated as CE inactive in the CRD system 

beginning on January 1, 2026. Alternatively, if the 

individual decides to reregister with a firm as a 

General Securities Representative at any point 

beyond 2025, the individual would be required to 

requalify by examination, or obtain an examination 

waiver, in order to reregister. 

68 In this regard, it should be noted that if an 

individual who holds a single registration 

terminates that registration and elects not to 

participate, the registration would be subject to the 

two-year qualification period. Similarly, if an 

individual with multiple registration categories 

terminates only some of those registration 

categories (that is, files a partial termination) and 

elects not to participate, the terminated registration 

category or categories would also be subject to the 

two-year qualification period, unless the terminated 

category is a subset of a broader registration 

category for which they remain qualified. 

training requirements, but some existing 

training is, and would continue to be, 

appropriate for both Firm Element and 

other professional requirements. 

The extension of the Firm Element 

requirement to all registered persons 

would ensure that firms enhance the 

securities knowledge, skill and 

professionalism of all registered 

persons, which is consistent with the 

overall goal of the Firm Element. It 

would also ensure that registered 

persons are provided more specific 

learning materials relevant to their dayto-day activities, which will provide 

each registered person a more complete 

training cycle. As indicated by 

commenters, some firms already require 

that all their registered persons 

complete Firm Element training. In 

addition, while firms with a larger 

number of registered persons, including 

individuals who are permissively 

registered, may incur additional 

burdens in implementing the proposed 

rule change, some of that burden would 

be mitigated based on the express 

recognition of other training 

requirements toward satisfying the Firm 

Element requirement. In some cases, 

registered persons may not have to 

complete any additional training 

beyond what they are required to 

complete today. For example, with 

respect to permissively registered 

persons working in a clerical or 

administrative capacity for a firm, the 

firm may determine, based on a needs 

analysis, that such individuals have 

satisfied the annual Firm Element 

requirement by participating in the firmwide annual compliance meeting. 

(iii) Maintenance of Qualification After 

Termination of Registration 

Commenters overwhelmingly 

supported the proposed change to 

provide individuals the option of 

maintaining their qualification 

following the termination of a 

registration by completing annual 

continuing education. Some 

commenters requested additional 

changes, which are discussed below. 

NASAA supported the goals of the 

proposed rule change, but it had 

concerns regarding the seven-year 

participation period originally proposed 

in Regulatory Notice 20–05. NASAA has 

expressed support for a participation 

period of five years. CFA, Fidelity, 

Foreside, Integrated Solutions and 

STANY stated that there should not be 

any time limit on the participation 

period. FSI, Foreside, MML, SIFMA and 

STANY requested that the proposed 

rule change also extend to state licenses. 

Cambridge suggested that the content, 

subject matter and volume of training be 

the same for both participants and 

registered persons. Cambridge also 

suggested that the learning topics for 

participants be available to firms so that 

they may elect to apply it to their 

registered persons. FSI recommended 

that individuals who elect to participate 

at a later date following their Form U5 

submission should not be required to 

complete any content that is outdated. 

MML wanted to know what would 

happen if a participant misses an annual 

cycle. In addition, MML requested that 

individuals who became CE inactive 

within three years prior to the 

implementation date of the proposed 

rule change should be able to 

participate. SIFMA requested that hiring 

firms be provided with information 

regarding a participant’s status. CFA 

recommended that the current two-year 

qualification period be eliminated. 

The proposed time limit for 

participation is necessary to ensure that 

previously registered individuals 

maintain an appropriate level of 

securities experience throughout their 

professional careers. FINRA believes 

that a seven-year period better serves 

the diversity and inclusion goals of the 

proposed rule change. However, FINRA 

also recognizes the benefits to the 

industry of having further alignment 

between FINRA qualification 

requirements and state licensing 

requirements. Therefore, in the interest 

of consistency and promoting 

registration efficiency, the proposed rule 

change provides individuals a 

maximum of five years in which to 

reregister, which will still serve the 

diversity and inclusion goals. As noted 

above, following implementation of the 

proposed rule change, FINRA will 

review the efficacy of the program, 

which will include a review of the 

participation period. In addition, FINRA 

will work with NASAA and state 

regulators to provide for an appropriate 

process and system support to allow 

states to track and process registration 

requests for individuals operating under 

the two- or five-year examination 

provisions. 

Participants, including registered 

persons who elect to participate for a 

terminated registration category, may be 

subject to more overall content 

compared to registered persons who are 

not participants because participants 

would be required to complete a 

minimum amount of non-regulatory 

content selected by FINRA and the CE 

Council. FINRA and the CE Council will 

consider publishing the learning topics 

for participants for those firms that may 

elect to apply it to their registered 

persons. FINRA and the CE Council will 

also work to ensure that eligible 

individuals who elect to participate are 

not subject to outdated content. 

Participants who miss an annual cycle 

for a registration category would be 

provided with an opportunity to 

continue by completing any missed 

content, provided that the registration 

category has not been terminated for 

two or more years.67 Individuals who 

have been CE inactive for two 

consecutive years prior to the 

implementation date of the proposed 

rule change would not be eligible to 

participate because of the long lapse in 

continuing education. FINRA would 

work with firms to determine what 

information regarding a participant’s 

status would be helpful and 

appropriate. The current two-year 

qualification period would not be 

eliminated because participation is 

optional and eligible individuals may 

elect not to participate.68

(iv) Other Enhancements to CE Program 

Most commenters supported the other 

enhancements to the CE Program. 

However, some commenters had 

concerns and questions. SIFMA 

requested that consideration be given to 

potential technical limitations and 

challenges of registrants when designing 

diverse instructional formats for the 

Regulatory Element. FSI, MML and 

SIFMA requested that the Regulatory 

Element learning topics for each 

upcoming year be published early. 


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69 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

SIFMA suggested that firms be 

allowed to set the timing and frequency 

of FINRA-generated notifications to 

registered persons, especially where the 

firm’s Regulatory Element deadline is 

sooner than December 31. SIFMA also 

suggested that FINRA should consider 

providing firms with the means to 

‘‘audit’’ notifications sent to registered 

persons regarding the Regulatory 

Element via the FINRA Financial 

Professional Gateway (‘‘FinPro®’’) 

system and that continuing education 

completion information, including 

information relating to participants who 

elect the proposed option, should be 

displayed on BrokerCheck®. Morgan 

Stanley requested that FINRA provide 

firms with the option to communicate 

directly with registered persons so firms 

may set their own internal timelines to 

fulfill the annual Regulatory Element 

requirement. MML suggested that 

sending a notification to the personal 

email of a registered person via the 

FinPro system is inconsistent with 

general supervision and recordkeeping 

requirements relating to businessrelated electronic communications. 

NRS supported the development of a 

centralized Firm Element content 

directory, which includes course title, 

description and length, intended 

audience, learning objectives and skill 

level, rather than the development of a 

content catalog. Among other reasons, 

NRS stated that SROs should not create 

Firm Element content because it may 

have the unintended consequence of 

being considered regulatory guidance. 

FINRA and the CE Council will work 

to create optimal instructional formats 

for the Regulatory Element, taking into 

consideration the user experience. 

Further, FINRA and the CE Council will 

consider the possibility of publishing 

the Regulatory Element learning topics 

for each upcoming year early to provide 

firms with sufficient time to design their 

training for the upcoming year. FINRA 

will work with firms to determine the 

necessary enhancements to the FinPro 

system to facilitate the proposed 

transition to an annual Regulatory 

Element requirement. The use of the 

FinPro system notification functionality 

would not be inconsistent with the 

requirements relating to electronic 

communications. Firms that elect to use 

the functionality would receive copies 

of the system-generated notifications, 

which they could review and retain. 

With respect to the availability of 

continuing education information on 

BrokerCheck, an individual’s CE 

inactive status is currently displayed on 

BrokerCheck and it will continue to be 

displayed under the proposed rule 

change. FINRA will also consider 

whether the continuing education status 

of participants who elect the proposed 

option should be displayed on 

BrokerCheck. Finally, with respect to 

the development of a Firm Element 

content catalog, which most 

commenters supported, SROs have 

historically created Firm Element 

content and have provided firms with 

the option of using such content. FINRA 

and the CE Council are considering 

creating a centralized location for such 

content and to partner with third-party 

training providers to include their 

content in the catalog. Based on the 

comments and industry feedback, a 

content catalog would be a valuable 

resource and would facilitate 

compliance by all firms, regardless of 

firm type. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2021–015 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2021–015. 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 FINRA. 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–FINRA– 

2021–015 and should be submitted on 

or before July 15, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.69

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13286 Filed 6–23–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92167; File No. SR– 

CboeEDGX–2021–028] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend 

Open-Close Data Fees 

June 14, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 1, 

2021, Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) 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 Exchange. The Commission is 


khammond on DSKJM1Z7X2PROD with NOTICES