Document ID: SEC-2015-1913-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2015-11-16T05:00Z

[Federal Register Volume 80, Number 220 (Monday, November 16, 2015)]
[Notices]
[Pages 70862-70864]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28860]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76391; File No. SR-FINRA-2015-044]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Establish an Examination Fee for the Securities 
Trader Qualification Examination (Series 57)

November 9, 2015.
    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 29, 2015, 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. FINRA has 
designated the proposed rule change as ``establishing or changing a 
due, fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\ 
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon receipt of this filing by the Commission. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is proposing to amend Section 4(c) of Schedule A to the FINRA 
By-Laws to establish an examination fee for the Securities Trader 
qualification examination (Series 57).
    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 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,

[[Page 70863]]

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
Background
    The SEC recently approved amendments to FINRA rules to establish 
two new registration categories for associated persons who engage in 
the securities trading activities specified in NASD Rule 1032(f) and 
for principals who supervise such activities: (1) Securities Traders; 
and (2) Securities Trader Principals.\5\ The Securities Trader 
registration category and associated examination (Series 57) \6\ will 
replace the current Equity Trader registration category and associated 
examination (Series 55).\7\ Further, unlike Equity Trader registration, 
there is no prerequisite registration requirement for Securities Trader 
registration.\8\ To qualify for registration as a Securities Trader, an 
eligible candidate must only pass the Series 57 examination. In 
addition, to qualify for registration as a Securities Trader Principal, 
an associated person must be registered as a Securities Trader and pass 
the General Securities Principal qualification examination (Series 
24).\9\
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    \5\ See Securities Exchange Act Release No. 75783 (August 28, 
2015), 80 FR 53369 (September 3, 2015) (Order Approving File No. SR-
FINRA-2015-017).
    \6\ FINRA has filed the Series 57 examination program with the 
SEC for immediate effectiveness. See SR-FINRA-2015-042 (October 13, 
2015) (Notice of Filing and Immediate Effectiveness of a Proposed 
Rule Change Relating to the New Securities Trader Qualification 
Examination (Series 57)).
    \7\ The fee for the Series 55 examination is $110.
    \8\ Before registration as an Equity Trader may become 
effective, an associated person must be registered as either a 
General Securities Representative (Series 7) or Corporate Securities 
Representative (Series 62). The fee for the Series 7 examination is 
$305, and the fee for the Series 62 examination is $95.
    \9\ The fee for the Series 24 examination is $120.
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    FINRA is expecting the national securities exchanges to also file 
amendments to their respective registration rules relating to 
securities trading activities to replace the Proprietary Trader 
qualification examination (Series 56) with the Series 57 
examination.\10\ In addition, the Series 57 examination will replace 
the Series 56 examination for those exchange registration categories, 
such as the Proprietary Trader Principal registration category, where 
the Series 56 examination is currently an acceptable prerequisite.
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    \10\ For instance, under the rules of the Chicago Board Options 
Exchange (CBOE), an individual trading permit holder or individual 
associated person who is engaged in proprietary trading, market-
making or effecting transactions on behalf of a broker-dealer is 
required to register and qualify as a Proprietary Trader. See 
Interpretation and Policy .08(a)(1) to CBOE Rule 3.6A (Qualification 
and Registration of Trading Permit Holders and Associated Persons). 
To qualify as a Proprietary Trader under the CBOE rules, an 
individual must pass the Series 56 examination or be registered as a 
General Securities Representative. See Interpretation and Policy 
.08(b) to CBOE Rule 3.6A. FINRA administers the Series 56 
examination on behalf of the national securities exchanges. The fee 
for the Series 56 examination is $195.
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Proposal
    FINRA currently administers examinations electronically through the 
PROCTOR[supreg] system \11\ at testing centers operated by vendors 
under contract with FINRA. FINRA charges an examination fee to 
candidates for FINRA-sponsored and co-sponsored examinations to cover 
the development, maintenance and delivery of these examinations.\12\ 
Consistent with this practice, FINRA is proposing to amend Section 4(c) 
of Schedule A to the FINRA By-Laws to establish a fee of $120 for the 
Series 57 examination.\13\
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    \11\ PROCTOR is a computer system that is specifically designed 
for the administration and delivery of computer-based testing and 
training.
    \12\ Delivery costs vary based on the length of the examination 
because FINRA pays its delivery vendors an hourly rate for seat time 
at test delivery centers. The length of the Series 57 examination 
will be longer than the Series 55 examination as well as the Series 
56 examination.
    \13\ Consequently, the total examination fee for associated 
persons registering as Securities Trader Principals will be $240, 
which includes the proposed fee for the Series 57 examination ($120) 
and the current fee for the Series 24 examination ($120).
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    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is expecting to implement the proposed rule change 
on January 4, 2016, which coincides with the anticipated implementation 
date for the Securities Trader registration category and examination 
program.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\14\ which requires, among 
other things, that FINRA rules provide for the equitable allocation of 
reasonable dues, fees and other charges among members and issuers and 
other persons using any facility or system that FINRA operates or 
controls.
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    \14\ 15 U.S.C. 78o-3(b)(5).
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    FINRA believes that the proposed rule change constitutes an 
equitable allocation of fees as the examination fee will be used to 
cover FINRA's costs in developing, maintaining and delivering the 
examination and will be assessed only on those individuals who will 
take the Series 57 examination. FINRA further believes that the 
proposed fee for the Series 57 examination is reasonable because it is 
aligned with the overall cost associated with the Series 57 examination 
program. Accordingly, FINRA believes that the proposed fee for the 
Series 57 examination is equitably allocated and reasonable.

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. FINRA believes that the 
establishment of the fee for the Series 57 examination will have a 
limited economic impact on the industry.
    In proposing a fee of $120 for the Series 57 examination, FINRA 
applied the same criteria as it does for establishing the fees for 
other FINRA qualification examinations. The primary factors that FINRA 
considered include the number of test questions, test session time, 
staff effort associated with test development and delivery, corporate 
overhead and operational and technology costs associated with 
maintaining the PROCTOR system (i.e., item banking, test authoring and 
test delivery). The proposed fee was also compared with the fees for 
qualification examinations with comparable test session times (e.g., 
the Series 24 and Series 27 examinations \15\), because a primary cost 
of administering examinations is vendor fees.
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    \15\ The Series 27 examination qualifies an associated person to 
function as a Financial and Operations Principal. The fee for the 
Series 27 examination is $120.
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    Moreover, the proposed rule change will reduce the examination fees 
for the registration of associated persons who are required to be 
registered to engage in or supervise securities trading.
Economic Impact Assessment
    The need for the rule and the regulatory objective are discussed 
previously.

 Economic Baseline

    Currently, associated persons who engage in the securities trading 
activities specified under NASD Rule 1032(f) or who directly supervise 
such activities, including principals, are required to take and pass 
the Series 55 examination in combination with other examinations. As 
described above, the new registration categories of Securities Trader 
and Securities Trader Principal will allow such individuals to engage 
in

[[Page 70864]]

the same trading and supervisory activities by taking and passing fewer 
examinations. Specifically, individuals will no longer be required to 
take and pass a prerequisite examination, such as the Series 7 or 
Series 62 examination, to engage in or supervise securities trading. 
Thus, the proposed rule change will reduce the overall costs, including 
the cost of having to sit for additional examinations, on individuals 
who will engage in or supervise securities trading under the new 
categories, as well as the costs on their associated firms.
    Based on a survey of Equity Traders, FINRA understands that some 
Equity Traders, albeit a limited number, currently engage in sales 
activities in addition to securities trading. Today, such individuals 
may engage in sales activities because, concurrent to registration as 
an Equity Trader, they are registered as either a General Securities 
Representative or Corporate Securities Representative. However, a 
newly-registered Securities Trader who will be engaging in sales 
activities in addition to securities trading must separately register 
in an appropriate sales-related registration category (e.g., General 
Securities Representative or Corporate Securities Representative). As a 
result, such individuals may experience an increase in their total 
examination fees.

 Economic Impacts

    The proposed rule change will reduce the examination fees for the 
registration of associated persons who are required to be registered to 
engage in or supervise securities trading. By way of example, the 
current examination fee for registering as an Equity Trader is $415 
(for associated persons who take the Series 7 and 55 examinations) or 
$205 (for associated persons who take the Series 62 and 55 
examinations). Under the proposed rule change, the examination fee for 
registering as a Securities Trader will be $120. Assuming a constant 
examination volume at the 2014 level, FINRA estimates that the 
aggregate cost savings will be approximately $188,000 per year for 
individuals who currently take the Series 7 and 55 examinations or 
Series 62 and 55 examinations to engage only in securities trading. In 
addition, the current examination fee for registering as a Proprietary 
Trader is $305 (for individuals who take the Series 7 examination) or 
$195 (for individuals who take the Series 56 examination). Assuming a 
constant volume at the 2014 level, FINRA estimates that the aggregate 
cost savings for individuals who currently take the Series 56 
examination to engage in securities trading will be approximately 
$58,200 per year.\16\
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    \16\ FINRA does not have data on the number of individuals who 
take the Series 7 examination and register as General Securities 
Representatives in order to function as Proprietary Traders and 
engage in securities trading.
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    As noted above, newly-registered persons who will engage in both 
sales and trading activities may experience an increase in their total 
examination fees. For instance, the examination fee for associated 
persons who will take the Series 7 and 57 examinations to engage in 
both sales and trading activities will be $425 compared to the current 
fee of $415 for associated persons who take the Series 7 and 55 
examinations to engage in such activities.

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\18\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act. If 
the Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(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 email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2015-044 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-2015-044. 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 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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal offices 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-2015-044, and should 
be submitted on or before December 7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
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    \19\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-28860 Filed 11-13-15; 8:45 am]
BILLING CODE 8011-01-P