Document ID: SEC-2005-0093-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2005-10-11T04:00Z

[Federal Register: October 11, 2005 (Volume 70, Number 195)]
[Notices]               
[Page 59111-59112]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11oc05-81]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52548; File No. SR-NASD-2005-111]

 
Self-Regulatory Organizations; National Association of Securities 
Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Revisions to the Series 9/10 Examination 
Program

September 30, 2005.
    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 September 13, 2005, the National Association of Securities Dealers, 
Inc. (``NASD'') 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 NASD. 
NASD has designated the proposed rule change as constituting a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization pursuant to Section 19(b)(3)(A)(i) of the Act 
\3\ and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal 
effective upon filing with 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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASD is filing revisions to the study outline and selection 
specifications for the Limited Principal--General Securities Sales 
Supervisor (Series 9/10) examination program.\5\ The proposed revisions 
update the material to reflect changes to the laws, rules, and 
regulations covered by the examination, as well as modify the content 
of the examination program to track more closely the functional 
workflow of a Series 9/10 limited principal. NASD is not proposing any 
textual changes to the By-Laws, Schedules to the By-Laws, or Rules of 
NASD.
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    \5\ NASD also is proposing corresponding revisions to the Series 
9/10 question bank, but based upon instruction from the Commission 
staff, NASD is submitting SR-NASD-2005-111 for immediate 
effectiveness pursuant to Section 19(b)(3)(A)(i) of the Act and Rule 
19b-4(f)(1) thereunder, and is not filing the question bank for 
Commission review. See letter to Alden S. Adkins, Senior Vice 
President and General Counsel, NASD Regulation, from Belinda Blaine, 
Associate Director, Division of Market Regulation (``Division''), 
Commission, dated July 24, 2000. The question bank is available for 
Commission review.
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    The revised study outline is available on NASD's Web site (http://www.nasd.com
), at NASD, and at the Commission.\6\ However, NASD has 

omitted the Series 9/10 selection specifications from this filing and 
has submitted the specifications under separate cover to the Commission 
with a request for confidential treatment pursuant to Rule 24b-2 under 
the Act.\7\
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    \6\ Telephone conversation between Mia Zur, Attorney, Jan Woo, 
Attorney, Division, Commission, and Afshin Atabaki, Counsel, NASD, 
dated September 23, 2005.
    \7\ 7 17 CFR 240.24b-2.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASD 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. NASD 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
    Pursuant to Section 15A(g)(3) of the Act,\8\ which requires NASD to 
prescribe standards of training, experience, and competence for persons 
associated with NASD members, NASD has developed examinations, and 
administers examinations developed by other self-regulatory 
organizations (``SROs''), that are designed to establish that persons 
associated with NASD members have attained specified levels of 
competence and knowledge. NASD periodically reviews the content of the 
examinations to determine whether revisions are necessary or 
appropriate in view of changes pertaining to the subject matter covered 
by the examinations.
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    \8\ U.S.C. 78o-3(g)(3).
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    NASD Rule 1022(g) states that member firms may register with NASD 
an individual as a General Securities Sales Supervisor if the 
individual's supervisory responsibilities in the investment banking and 
securities business are limited to the securities sales activities of a 
member, including the training of sales and sales supervisory personnel 
and the maintenance of records of original entry and/or ledger accounts 
of the member required to be maintained in branch offices by SEC 
recordkeeping rules. A General Securities Sales Supervisor is precluded 
from performing any of the following activities: supervision of the 
origination and structuring of underwritings; supervision of market 
making commitments; final approval of advertisements as these are 
defined in NASD Rule 2210; supervision of the custody of firm or 
customer funds and/or securities for purposes of Rule 15c3-3 \9\ under 
the Act; or supervision of overall compliance with financial 
responsibility rules for broker-dealers promulgated pursuant to the 
provisions of the Act. The Series 9/10 examination, an industry-wide 
examination, qualifies an individual to function as a General 
Securities Sales Supervisor. The Series 9/10 examination tests a 
candidate's knowledge of securities industry rules and regulations and 
certain statutory provisions pertinent to the supervision of sales 
activities.
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    \9\ 17 CFR 240.15c3-3.
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    The Series 9/10 examination program is shared by NASD and the 
following SROs: the American Stock Exchange LLC, the Chicago Board 
Options Exchange, Incorporated, the Municipal Securities Rule Making 
Board, the New York Stock Exchange, Inc., the Pacific Exchange, Inc., 
and the Philadelphia Stock Exchange, Inc.
    A committee of industry representatives, together with the staff of 
NASD and the SROs, recently undertook a periodic review of the Series 
9/10 examination program. As a result of this review, NASD is proposing 
to update the content of the examination to cover Regulation S-P,\10\ 
MSRB Rules G-37/G-38, SRO research analyst and anti-money laundering 
rules, municipal fund securities (e.g., 529 college savings plans), and 
exchange traded funds. NASD is further proposing revisions to the study 
outline to reflect the SEC short sale requirements. In addition, as 
part of an ongoing effort to align the

[[Page 59112]]

examination more closely to the supervisory duties of a Series 9/10 
limited principal, NASD is proposing to modify the content of the 
examination to track the functional workflow of a Series 9/10 limited 
principal. Also, NASD is proposing to include questions related to 
parallel rules of NASD, the options exchanges, the MSRB, and the NYSE 
in the same section of the exam.
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    \10\ 17 CFR 248.1-18; 17 CFR 248.30; and 17 CFR 248, Appendix A.
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    As a result of the revisions, NASD is proposing to modify the main 
section headings and the number of questions on each section of the 
Series 9/10 study outline as follows: Section 1--Hiring, 
Qualifications, and Continuing Education, 9 questions; Section 2--
Supervision of Accounts and Sales Activities, 94 questions; Section 3--
Conduct of Associated Persons, 14 questions; Section 4--Recordkeeping 
Requirements, 8 questions; Section 5--Municipal Securities Regulation, 
20 questions; Section 6--Options Regulation, 55 questions. Sections 1 
through 5 constitute the Series 10 portion of the examination. Section 
6 constitutes the Series 9 portion of the examination. Series 10 covers 
general securities and municipal securities, and Series 9 covers 
options. The revised examination continues to cover the areas of 
knowledge required for the supervision of sales activities.
    NASD is proposing these changes to the entire content of the Series 
9/10 examination, including the selection specifications and question 
bank. The number of questions on the Series 9/10 examination will 
remain at 200, and candidates will continue to have four hours to 
complete the Series 10 portion and one and one-half hours to complete 
the Series 9 portion. Also, each question will continue to count one 
point, and each candidate must correctly answer 70 percent of the 
questions on each series, 9 and 10, to receive a passing grade.
    NASD understands that the other SROs also will file with the 
Commission similar proposed rule changes reflecting the revisions to 
the Series 9/10 examination program.
2. Statutory Basis
    NASD believes that the proposed revisions to the Series 9/10 
examination program are consistent with the provisions of Sections 
15A(b)(6) \11\ and 15A(g)(3) of the Act,\12\ which authorize NASD to 
prescribe standards of training, experience, and competence for persons 
associated with NASD members.
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    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78o-3(g)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD 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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \13\ and Rule 19b-4(f)(1) thereunder,\14\ in 
that the proposed rule change constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule of the self-regulatory organization. 
NASD proposes to implement the revised Series 9/10 examination program 
no later than November 30, 2005. NASD will announce the implementation 
date in a Notice to Members to be published no later than 60 days after 
Notice of this filing.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(i).
    \14\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate 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.

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-NASD-2005-111 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NASD-2005-111. 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 inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the NASD. 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-NASD-2005-111 and should be submitted on or before 
November 1, 2005.
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    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
Jonathan G. Katz,
Secretary.
[FR Doc. E5-5565 Filed 10-7-05; 8:45 am]

BILLING CODE 8010-01-P