Document ID: SEC-2012-0342-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2012-03-01T05:00Z

[Federal Register Volume 77, Number 41 (Thursday, March 1, 2012)]
[Notices]
[Pages 12635-12637]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4914]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66465; File No. SR-FINRA-2012-009]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change To Amend Section 4(c) of Schedule A to the FINRA 
By-Laws To Increase Qualification Examination Fees and Assess a Service 
Charge for Regulatory Element Continuing Education Sessions Taken 
Outside the United States

February 24, 2012.
    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 February 23, 2012, 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 (1) increase qualification examination fees, and (2) assess 
a service charge for any Regulatory Element sessions taken in a test 
center located outside the territorial limits of the United States. 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, 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
    As discussed in further detail below, the proposed rule change 
amends Section 4(c) of Schedule A to the FINRA By-Laws to (1) increase 
qualification examination fees, and (2) assess a service charge for any 
Regulatory Element session taken in a test center located outside the 
territorial limits of the United States.
Qualification Examination Fees
    NASD Rules 1021(a) and 1031(a) require that persons engaged, or to 
be engaged, in the investment banking or securities business of a FINRA 
member who are to function as principals or representatives register 
with FINRA in each category of registration appropriate to their 
functions as specified in NASD Rules 1022 and 1032.\5\ Such individuals 
must pass an appropriate qualification examination before their 
registration can become effective. These mandatory qualification 
examinations cover a broad range of subjects regarding financial 
markets and products, individual responsibilities, securities industry 
rules, and regulatory structure. FINRA develops, maintains, and 
delivers all qualification examinations for individuals who are 
registered or seeking registration with FINRA. FINRA also administers 
and delivers examinations sponsored (i.e., developed) by the Municipal 
Securities Rulemaking Board (``MSRB''), the North American Securities 
Administrators Association, the National Futures Association, the 
Federal Deposit Insurance Corporation, and other self-regulatory 
organizations.
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    \5\ See also NASD Rules 1041 and 1050 and FINRA Rule 1230(b)(6) 
regarding the qualification and registration requirements for Order 
Processing Assistant Representatives, Research Analysts and 
Operations Professionals, respectively.
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    FINRA currently administers examinations via computer through the 
PROCTOR[supreg] system \6\ 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. For qualification 
examinations sponsored by a FINRA client and administered by FINRA, 
FINRA charges a delivery fee that represents either a portion of or the 
entire examination fee for the examination.\7\
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    \6\ PROCTOR is a computer system that is specifically designed 
for the administration and delivery of computer-based testing and 
training.
    \7\ The delivery fee represents a portion of the entire 
examination fee when a FINRA client has established an additional 
fee for an examination that it sponsors. For example, the fee to 
take the Series 51 (Municipal Fund Securities Limited Principal) 
examination is currently $145. Of this amount, $85 is the FINRA 
administration and delivery fee, and $60 is the development fee 
determined by the FINRA client, the MSRB. See MSRB Rule A-16.
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    FINRA regularly conducts a comprehensive review of the examination 
fee structure, including an analysis of the costs associated with 
developing, administering, and delivering examinations. Based on the 
results of its review, FINRA may propose changes to better align the 
examination fee structure with the costs associated with the programs. 
In this regard, the most recent review revealed that certain 
operational costs have increased and, based on current information, 
will continue to increase over the next few years. In particular, these 
costs consist of (1) fees that vendors charge FINRA for delivering 
qualification examinations, and (2) PROCTOR maintenance and enhancement 
expenses. FINRA believes that the proposed rule change will help

[[Page 12636]]

to better align the examination program fees with these costs.
    Therefore, FINRA is proposing to amend Section 4(c) of Schedule A 
to the FINRA By-Laws to increase the fees for the qualification 
examinations set forth in Section 4(c), except for the Series 99 
Operations Professional examination, which was implemented in late 
2011.\8\ The proposed fee changes are as follows:
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    \8\ See Securities Exchange Act Release No. 64687 (June 16, 
2011), 76 FR 36586 (June 22, 2011) (Order Approving Proposed Rule 
Change; File No. SR-FINRA-2011-013); 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).

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Series 4................................  Registered Options Principal...  From $90 to $100.
Series 6................................  Investment Company Products/     From $85 to $95.
                                           Variable Contracts
                                           Representative.
Series 7................................  General Securities               From $265 to $290.
                                           Representative.
Series 9................................  General Securities Sales         From $70 to $75.
                                           Supervisor--Options Module.
Series 10...............................  General Securities Sales         From $110 to $120.
                                           Supervisor--General Module.
Series 11...............................  Assistant Representative--Order  From $70 to $75.
                                           Processing.
Series 14...............................  Compliance Official............  From $320 to $335.
Series 16...............................  Supervisory Analyst............  From $210 to $230.
Series 17...............................  Limited Registered               From $70 to $75.
                                           Representative.
Series 22...............................  Direct Participation Programs    From $85 to $95.
                                           Representative.
Series 23...............................  General Securities Principal     From $85 to $95.
                                           Sales Supervisor Module.
Series 24...............................  General Securities Principal...  From $105 to $115.
Series 26...............................  Investment Company Products/     From $85 to $95.
                                           Variable Contracts Principal.
Series 27...............................  Financial and Operations         From $105 to $115.
                                           Principal.
Series 28...............................  Introducing Broker-Dealer        From $85 to $95.
                                           Financial and Operations
                                           Principal.
Series 37...............................  Canada Module of S7 (Options     From $160 to $175.
                                           Required).
Series 38...............................  Canada Module of S7 (No Options  From $160 to $175.
                                           Required).
Series 39...............................  Direct Participation Programs    From $80 to $90.
                                           Principal.
Series 42...............................  Registered Options               From $65 to $70.
                                           Representative.
Series 51...............................  Municipal Fund Securities        From $85 to $95.
                                           Limited Principal.
Series 52...............................  Municipal Securities             From $95 to $120. \9\
                                           Representative.
Series 53...............................  Municipal Securities Principal.  From $95 to $105.
Series 55...............................  Limited Representative--Equity   From $95 to $105.
                                           Trader.
Series 62...............................  Corporate Securities Limited     From $80 to $90.
                                           Representative.
Series 72...............................  Government Securities            From $95 to $105.
                                           Representative.
Series 79...............................  Investment Banking               From $265 to $290.
                                           Qualification Examination.
Series 82...............................  Limited Representative--Private  From $80 to $90.
                                           Securities Offering.
Series 86...............................  Research Analyst--Analysis.....  From $160 to $175.
Series 87...............................  Research Analyst--Regulatory...  From $115 to $125.
Series 99...............................  Operations Professional........  $125 (No change).
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Service Charge for Foreign Test Center Regulatory Element Sessions
    FINRA assesses a service charge of $15 for any qualification 
examination that is taken in a foreign test center (i.e., a test center 
located outside of the territorial limits of the United States) to help 
offset the higher fees that vendors charge FINRA for delivering 
qualification examinations in such locations. Vendors also charge FINRA 
higher fees for the delivery of Regulatory Element sessions in foreign 
test centers; however, all individuals are currently assessed the same 
amount for a Regulatory Element session regardless of where they take 
the session. Therefore, FINRA is proposing to assess a $15 service 
charge for any Regulatory Element session taken in a foreign test 
center to more closely align the fee with the cost of such sessions.
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    \9\ The $25 fee increase for the Series 52 examination has two 
components: (1) $15 of the fee increase is attributable to the 
MSRB's increase in the length of the examination in January 2011, 
see Securities Exchange Act Release No. 63310 (November 12, 2010), 
75 FR 70760 (November 18, 2010) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change; File No. SR-MSRB-2010-12); 
and (2) $10 of the fee increase is attributable to the increase in 
the costs associated with administering and delivering the 
examination.
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Implementation
    FINRA has filed the proposed rule change for immediate 
effectiveness. FINRA is proposing that the implementation date of the 
proposed rule change will be April 2, 2012. Specifically, the proposed 
examination fees would become effective for examination requests made 
in the CRD system on or after April 2, 2012. In addition, the proposed 
foreign test center Regulatory Element session service charge would 
become effective for Regulatory Element sessions completed on or after 
April 2, 2012.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(5) of the Act,\10\ 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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    \10\ 15 U.S.C. 78o-3(b)(5).
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    FINRA believes that the proposal constitutes an equitable 
allocation of fees as the qualification examination fees will be 
assessed only on those individuals who take qualification examinations 
and the service charge for foreign test center Regulatory Element 
sessions will be assessed only on those individuals who take such a 
session. In addition, all candidates who register for a particular 
qualification examination will be charged the same amount, and all 
individuals who take a Regulatory Element session in a foreign test 
center will be assessed the $15 service charge.
    FINRA further believes that the proposed qualification examination 
changes are reasonable because they will more closely align the overall 
examination program fees with the overall costs associated with the 
programs. In this regard, FINRA notes that the last time that it 
increased fees for any of the qualification examinations set forth in 
Schedule A to the FINRA By-Laws was January 2009.\11\ Since that time, 
vendor fees and the costs associated with the enhancement and

[[Page 12637]]

maintenance of the PROCTOR system have increased and, based on current 
information, will continue to increase over the next few years. 
Specifically, FINRA has recently completed a significant technological 
upgrade of the PROCTOR system and is working on considerable 
enhancements to the software used to deliver examinations at testing 
centers, which is scheduled for operational release in 2013. These 
increased costs, coupled with the significant decrease in the number of 
examinations taken during the past three years,\12\ has caused a 
divergence in the fees and costs associated with the examination 
programs.
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    \11\ See Securities Exchange Act Release No. 59076 (December 10, 
2008), 73 FR 76431 (December 16, 2008) (Order Approving Proposed 
Rule Change; File No. SR-FINRA-2008-053).
    \12\ In 2009, the number of examinations administered and 
delivered by FINRA decreased by approximately 27 percent. Although 
examination volumes have increased modestly since that time, they 
have not returned to 2008 levels.
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    To better align the fees and costs associated with the examination 
programs, FINRA is proposing a modest increase in examination fees. In 
this regard, FINRA notes that no examination fee will increase by more 
than $25 and the majority of examination fees will increase by only 
$10. Furthermore, to help control the overall costs of the 
qualification examination and Regulatory Element programs and thereby 
minimize fee increases, FINRA earlier this year instituted a fee for 
individuals who cancel or reschedule a qualification examination or 
Regulatory Element session three to 10 business days prior to the 
appointment date.\13\ This cancellation/rescheduling fee has helped to 
limit the amount of the proposed examination fee increases by allowing 
FINRA to (1) receive a lower examination delivery rate from one of its 
vendors, and (2) apply the revenue from the fee to help offset the 
expenses of the qualification examination programs.
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    \13\ See Securities Exchange Act Release No. 64961 (July 26, 
2011), 76 FR 45883 (August 1, 2011) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-026).
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    With respect to the proposed service charge for foreign test center 
Regulatory Element sessions, FINRA believes that the service charge is 
reasonable because it helps to offset the higher delivery costs 
associated with such sessions. Specifically, vendors charge FINRA 
higher fees for delivering Regulatory Element sessions in a foreign 
test center than they do for delivering such sessions in a U.S. test 
center.
    Accordingly, FINRA believes that the proposed qualification 
examination fee changes and the service charge for foreign test center 
Regulatory Element sessions are 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.

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 \14\ and paragraph (f)(2) of Rule 19b-4 
thereunder.\15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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-21012-009 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-2012-009. 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 on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of such filing also will be available for inspection and copying at the 
principal offices of the Exchange. 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-2012-009, and should be submitted on or before 
March 22, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4914 Filed 2-29-12; 8:45 am]
BILLING CODE 8011-01-P