Document ID: SEC-2011-1630-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2011-10-21T04:00Z

[Federal Register Volume 76, Number 204 (Friday, October 21, 2011)]
[Notices]
[Pages 65546-65549]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27262]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65580; File No. SR-FINRA-2011-060]

 Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Order Granting Accelerated 
Approval of Proposed Rule Change To Amend the Implementation Provision 
in FINRA Rule 1230(b)(6) (Operations Professional)

October 17, 2011.
    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 October 14, 2011, 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, 
and II, which Items have been substantially prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons. For the reasons discussed 
below, the Commission is granting accelerated approval of the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend FINRA Rule 1230(b)(6) (Operations 
Professional) to provide persons who are required to register as an 
Operations Professional from October 18, 2011 through December 16, 2011 
and must pass a qualification examination to qualify as an Operations 
Professional until April 14, 2012 to pass the Operations Professional 
qualification examination (or an eligible qualification 
examination),\3\ during which time such

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persons may function as an Operations Professional.
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    \3\ FINRA Rule 1230(b)(6)(D) sets forth an exception to the 
Operations Professional qualification examination requirement for 
persons who currently hold certain registrations (each an ``eligible 
registration'') or have held one during the two years immediately 
prior to registering as an Operations Professional. The exception 
also applies to persons who do not hold an eligible registration, 
but prefer an alternative to taking the Operations Professional 
examination. Such persons may register in an eligible registration 
category (subject to passing the corresponding ``eligible 
qualification examination'' or obtaining a waiver) and use such 
registration to qualify for Operations Professional registration.
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    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA, on the 
Commission's Web site at http://www.sec.gov, 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
    On June 16, 2011, the Commission approved FINRA Rule 1230(b)(6), 
which establishes a registration category and qualification examination 
requirement for certain operations personnel--Operations 
Professionals.\4\ FINRA is expanding its registration provisions to 
require registration of certain individuals (``covered persons'') who 
are engaged in, responsible for or supervising certain member 
operations functions (``covered functions'') to enhance the regulatory 
structure surrounding these areas.\5\
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    \4\ See Securities Exchange Act Release No. 64687 (June 16, 
2011), 76 FR 36586 (June 22, 2011) (Order Approving File No. SR-
FINRA-2011-013). In addition to adopting FINRA Rule 1230(b)(6), the 
rule change adopted NASD Rule 1120 (Continuing Education 
Requirements) as new FINRA Rule 1250 (Continuing Education 
Requirements) with certain changes, including expanding the scope of 
``covered registered persons'' subject to the Firm Element to 
include persons registered as Operations Professionals. See also 
Securities Exchange Act Release No. 65222 (August 30, 2011), 76 FR 
55443 (September 7, 2011) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-041) 
and Securities Exchange Act Release No. 65221 (August 30, 2011), 76 
FR 55441 (September 7, 2011) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-042).
    \5\ See Regulatory Notice 11-33 (July 2011) and Regulatory 
Notice 11-42 (September 2011).
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    FINRA Rule 1230(b)(6)(E)(i) provides that any person who is 
required to register as an Operations Professional as of October 17, 
2011 (a ``Day-One Professional,'' i.e., a person who meets the depth of 
personnel criteria as a covered person and is engaged in one or more 
covered functions as of October 17, 2011) must request registration as 
an Operations Professional via Form U4 in the Central Registration 
Depository (``CRD[supreg] '') within 60 days after October 17, 2011 
(i.e., on or before December 16, 2011). Any Day-One Professional who 
must pass the Operations Professional qualification examination \6\ (or 
an eligible qualification examination) to qualify for Operations 
Professional registration is allowed a period of 12 months beginning on 
October 17, 2011 to pass such qualifying examination, during which time 
such person may function as an Operations Professional.
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    \6\ Candidates for the Series 99 examination will be able to 
schedule and take the examination starting on October 17, 2011. 
Because this is a new examination for a new registration category, 
FINRA will be assessing the effectiveness of the examination by, in 
part, evaluating the candidates' performance during the first 60 
days of the administration of the examination. Therefore, candidates 
who take the examination within the first 60 days (between October 
17, 2011 and December 16, 2011) will not receive their test results 
on the day that they take the examination. Instead, such candidates' 
firms will be notified of test results (i.e., the candidate's score 
and whether the candidate has passed or failed the examination) on 
or shortly after December 16, 2011. The test results will be posted 
to the CRD system at that time. Candidates who fail the examination 
during the initial 60-day rollout will be provided an opportunity to 
retake the examination at no additional cost.
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    FINRA Rule 1230(b)(6)(E)(ii) provides that any person who is 
required to register as an Operations Professional after October 17, 
2011 (a ``non-Day-One Professional,'' i.e., a person who does not meet 
the depth of personnel criteria as a covered person and/or is not 
engaged in one or more covered functions as of October 17, 2011, or 
persons hired after October 17, 2011, who will be subject to the 
registration requirements) must register as an Operations Professional 
and, if applicable, pass the Operations Professional qualification 
examination (or an eligible qualification examination) prior to 
engaging in any activities that would require such registration. 
However, any non-Day-One Professional who must pass the Operations 
Professional qualification examination (or an eligible qualification 
examination) to qualify for Operations Professional registration is 
allowed a period of 120 days beginning on the date such person requests 
Operations Professional registration to pass such qualifying 
examination, during which time such person may function as an 
Operations Professional.
    The proposed rule change would amend FINRA Rule 1230(b)(6)(E) to 
afford non-Day-One Professionals who must register as an Operations 
Professional within the first 60 days of the effective date of FINRA 
Rule 1230(b)(6), and must pass a qualification examination to qualify, 
additional time to pass the Operations Professional qualification 
examination (or an eligible qualification examination). Under FINRA 
Rule 1230(b)(6)(E)(ii), as non-Day-One Professionals, such persons are 
required to pass a qualification examination within 120 days of 
requesting registration as an Operations Professional and do not get 
the benefit of the 12-month period to pass a qualification examination 
available only to Day-One Professionals.
    The content outline for the Operations Professional examination was 
posted on FINRA's Web site on August 23, 2011. Given the short time 
period between August 23, 2011 and October 17, 2011, the effective date 
of FINRA Rule 1230(b)(6), test preparation and firm training materials 
may not be readily available for candidates who must register within 
the first 60 days of the effective date of the rule and do not have the 
benefit of the 12-month period to pass an examination for Day-One 
Professionals. Accordingly, non-Day-One Professionals who must register 
as an Operations Professional on or before December 16, 2011 may have 
difficulty preparing for and passing the Operations Professional 
examination within 120 days of requesting registration as an Operations 
Professional.\7\
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    \7\ See letter from John Polanin and Claire Santaniello, Co-
Chairs, Compliance and Regulatory Policy Committee 2011, Securities 
Industry and Financial Markets Association, to Elizabeth M. Murphy, 
Secretary, SEC, dated September 30, 2011 (Re: Release No. 34-65222; 
File No. SR-FINRA-2011-041).
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    The proposed rule change would provide that any person who is 
required to register as an Operations Professional from October 18, 
2011 through December 16, 2011 must register as an Operations 
Professional and, if applicable, pass the Operations Professional 
qualification examination (or an eligible qualification examination) 
prior to engaging in any activities that would require such 
registration. However, any such person who must pass the Operations 
Professional qualification examination (or an eligible qualification 
examination) to qualify for Operations Professional registration would 
be allowed until April 14, 2012 to pass

[[Page 65548]]

such qualifying examination, during which time such person may function 
as an Operations Professional.
    Any person who is required to register as an Operations 
Professional on or after December 17, 2011 would be required to 
register as an Operations Professional and, if applicable, pass the 
Operations Professional qualification examination (or an eligible 
qualification examination) prior to engaging in any activities that 
would require such registration. However, any such person who must pass 
the Operations Professional qualification examination (or an eligible 
qualification examination) to qualify for Operations Professional 
registration would be allowed a period of 120 days beginning on the 
date such person requests Operations Professional registration to pass 
such qualifying examination, during which time such person may function 
as an Operations Professional.
    FINRA notes that members are responsible for tracking and 
monitoring their associated persons to ensure that they are registered, 
and conducting their activities, in compliance with the time frames 
described in FINRA Rule 1230(b)(6)(E).
    The effective date of the proposed rule change will be October 17, 
2011, the effective date of FINRA Rule 1230(b)(6) (Operations 
Professional).
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\8\ 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. Given the short time period between the posting of the 
content outline for the Operations Professional examination on FINRA's 
Web site on August 23, 2011 and October 17, 2011, the effective date of 
FINRA Rule 1230(b)(6), non-Day-One Professionals who must register as 
an Operations Professional within the first 60 days of the effective 
date of FINRA Rule 1230(b)(6), and pass the Operations Professional 
examination (or an eligible qualification examination) to qualify, may 
have difficulty preparing for and passing such examination within 120 
days of requesting registration as an Operations Professional. FINRA 
believes it is appropriate to provide such persons until April 14, 2012 
to pass the Operations Professional qualification examination (or an 
eligible examination).
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    \8\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    Written comments were neither solicited nor received.

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to FINRA and, in particular, the requirements of 
Section 15A of the Act,\9\ and the rules and regulations thereunder. 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 15A(b)(6) of the Act which requires, among 
other things, that the rules of a registered national securities 
association be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and to 
protect investors and the public interest, because, by providing 
additional time for non-Day-One Professionals who must register as an 
Operations Professional within the first 60 days of the effective date 
of FINRA Rule 1230(b)(6) to pass the qualification examination, the 
proposed rule change will provide additional time for improvements in 
examination preparation resources for the new registrants, enhancing 
registrants' abilities in their roles, and will improve FINRA members' 
ability to comply with the rule.
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    \9\ 15 U.S.C. 78o-3. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
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    The Commission also finds good cause, pursuant to Section 19(b)(2) 
of the Act,\10\ for approving the proposed rule change prior to the 
30th day after the date of publication of notice in the Federal 
Register. The Commission finds good cause for approving the proposed 
rule on an accelerated basis because the proposed rule will assist 
member firms in transitioning to the new requirement for registration 
of Operations Professionals and provide needed clarification in 
response to concerns regarding the ability of non-Day-One Professionals 
who must register as an Operations Professional within the first 60 
days of the effective date of FINRA Rule 1230(b)(6), and pass a 
qualification examination to qualify, to prepare for and pass the 
Operations Professional qualification examination (or an eligible 
qualification examination) within 120 of requesting registration as an 
Operations Professional. Accelerating the approval of this proposed 
rule to coincide with the effective date of the registration 
requirements will permit these non-Day-One Professionals to take the 
extended examination window into account when they schedule their 
examinations.
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    \10\ 15 U.S.C. 78s(b)(2).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2011-060 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2011-060. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10

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a.m. and 3 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-FINRA-2011-060 and should be 
submitted on or before November 14, 2011.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-FINRA-2011-060) be, and it 
hereby is, approved on an accelerated basis.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-27262 Filed 10-20-11; 8:45 am]
BILLING CODE 8011-01-P