Document ID: SEC-2006-1012-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Association of Securities Dealers, Inc.
Posted Date: 2006-08-07T04:00Z

[Federal Register: August 7, 2006 (Volume 71, Number 151)]
[Notices]               
[Page 44745-44747]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au06-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54245; File No. SR-NASD-2006-086]

 
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 55 Examination Program

July 31, 2006.
    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 July 14, 2006, the National Association of Securities Dealers, Inc. 
(``NASD'') filed with the Securities and Exchange Commission 
(``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 receipt of this filing by the Commission. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.

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 Representative--Equity Trader (Series 
55) examination program.\5\ The proposed revisions update the material 
to reflect changes to the laws, rules and regulations covered by the 
examination and to better reflect the duties and responsibilities of an 
equity trader representative. NASD is not proposing any textual changes 
to the

[[Page 44746]]

By-Laws, Schedules to the By-Laws, or Rules of NASD.
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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).
    \5\ NASD also is proposing corresponding revisions to the Series 
55 question bank, but based upon instruction from the Commission 
staff, NASD is submitting SR-NASD-2006-086 for immediate 
effectiveness pursuant to Section 19(b)(3)(A) 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\ The Series 55 

selection specifications have been submitted to the Commission under 
separate cover 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, Special Counsel, 
Division, Commission, and Afshin Atabaki, Counsel, NASD, dated July 
19, 2006.
    \7\ 17 CFR 240.2-b-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
    Section 15A(g)(3) of the Act \8\ requires NASD to prescribe 
standards of training, experience, and competence for persons 
associated with NASD members. In accordance with that provision, NASD 
has developed examinations, and administers examinations developed by 
other self-regulatory organizations, 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\ 15 U.S.C. 78o-3(g)(3).
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    Pursuant to NASD Rule 1032(f), the Series 55 examination is 
required, with certain limited exceptions, for associated persons who 
are engaged in or directly supervise proprietary trading or the 
execution of transactions on an agency basis with respect to 
transactions in equity, preferred or convertible debt securities 
effected otherwise than on a securities exchange. There is an exception 
from the Series 55 examination requirement for any person associated 
with a member whose trading activities are conducted principally on 
behalf of an investment company that is registered with the Commission 
pursuant to the Investment Company Act of 1940 and that controls, is 
controlled by, or is under common control with the member.
    A committee of industry representatives, together with NASD staff, 
recently undertook a review of the Series 55 examination program. As a 
result of this review, NASD is proposing to make the following 
revisions to the study outline to reflect changes to the laws, rules 
and regulations covered by the examination and to better reflect the 
duties and responsibilities of an equity trader representative. NASD is 
proposing to add a section on Rules 600 (NMS Security Designation and 
Definitions),\9\ 602 (Dissemination of Quotations in NMS 
Securities),\10\ 604 (Display of Customer Limit Orders),\11\ 605 
(Disclosure of Order Execution Information),\12\ 606 (Disclosure of 
Order Routing Information) \13\ and 612 (Minimum Price Increments) \14\ 
of SEC Regulation NMS. NASD also is proposing to add sections on NASD 
Rules 2111 (Trading Ahead of Customer Market Orders) and 3380 (Order 
Entry and Execution Practices). NASD further is proposing to modify the 
section on the NASDAQ Market Center--Execution Services to add specific 
references to NASD Rules 4701(Definitions), 4704 (Opening Process for 
NASDAQ-Listed Securities), 4706 (Order Entry Parameters), 4707 (Entry 
and Display of Quotes/Orders), 4709 (NASDAQ Closing Cross), 4710 
(Participant Obligations in the NASDAQ Market Center), 4714 (Routing 
NASDAQ-Listed Securities), 4715 (Adjustment of Open Quotes and/or 
Orders) and 4719 (Anonymity).
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    \9\ 17 CFR 242.600.
    \10\ 17 CFR 242.602.
    \11\ 17 CFR 242.604.
    \12\ 17 CFR 242.605.
    \13\ 17 CFR 242.606.
    \14\ 17 CFR 242.612.
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    NASD is proposing to add a section on the NASDAQ Initial Public 
Offering Process (NASDAQ Head Trader Alert 2005-096) and to modify the 
section on SEC Regulation SHO to add specific references to Rules 200 
(Definition of ``Short Sale'' and Marking Requirements) \15\ and 203 
(Borrowing and Delivery Requirements).\16\ Further, NASD is proposing 
to add references to the specific types of NASDAQ securities covered by 
the Series 55 examination, add two additional modifiers (.ST (Pre-Open 
and Aftermarket Trades Not Reported Within 90 Seconds) and .W (Stop 
Orders)) to the list of Trade Reporting Service modifiers and add a 
section on reporting cancelled trades.
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    \15\ 17 CFR 242.200.
    \16\ 17 CFR 242.203.
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    In addition, NASD is proposing to revise the study outline to 
remove the following sections: SEC Rules 11Ac1-1 (formerly 
Dissemination of Quotations),\17\ 11Ac1-4 (formerly Display of Customer 
Limit Orders),\18\ 11Ac1-5 (formerly Disclosure of Order Execution 
Information) \19\ and 11Ac1-6 (formerly Disclosure of Order Routing 
Information);\20\ NASDAQ Levels 1, 2 and 3 Service; SEC Rule 10b-10 
(Confirmation of Transactions);\21\ and NASD Rules 3360 (Short Interest 
Reporting), 3370 (Purchases) and 4643 (Customer Confirmations).
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    \17\ 17 CFR 240.11Ac1-1.
    \18\ 17 CFR 240.11Ac1-4.
    \19\ 17 CFR 240.11Ac1-5.
    \20\ 17 CFR 240.11Ac1-6.
    \21\ 17 CFR 240.10b-10.
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    As a result of the revisions discussed above, the number of 
questions on each section of the study outline were modified as 
follows: NASDAQ and Over-The-Counter Markets, decreased from 42 to 41 
questions; NASDAQ Display, Execution and Trading Systems, increased 
from 15 to 17 questions; Trade Reporting Requirements, increased from 
16 to 19 questions; and General Industry Standards, decreased from 27 
to 23 questions.
    NASD is proposing these changes to the entire content of the Series 
55 examination, including the selection specifications and question 
bank. The number of questions on the Series 55 examination will remain 
at 100, and candidates will continue to have 3 hours to complete the 
exam. Also, each question will continue to count one point, and each 
candidate must correctly answer 70 percent of the questions to receive 
a passing grade.
2. Statutory Basis
    NASD believes that the proposed revisions to the Series 55 
examination program are consistent with the provisions of Sections 
15A(b)(6) \22\ and 15A(g)(3) of the Act,\23\ which authorize NASD to 
prescribe standards of training, experience, and competence for persons 
associated with NASD members.
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    \22\ 15 U.S.C. 78o-3(b)(6).
    \23\ 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.

[[Page 44747]]

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 \24\ and Rule 19b-4(f)(1) thereunder,\25\ 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 55 examination program on 
August 15, 2006. NASD will announce the implementation date in a Notice 
to Members to be published on the same date as this filing.
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    \24\ 15 U.S.C. 78s(b)(3)(A)(i).
    \25\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of such 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 No. SR-NASD-2006-086 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASD-2006-086. 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 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-2006-086 and should be submitted on or before August 28, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-12704 Filed 8-4-06; 8:45 am]

BILLING CODE 8010-01-P