Document ID: SEC-2016-0035-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Series 9/10 Examination Program
Posted Date: 2016-01-07T05:00Z

[Federal Register Volume 81, Number 4 (Thursday, January 7, 2016)]
[Notices]
[Pages 834-837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-33311]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76812; File No. SR-FINRA-2015-058]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to the Series 9/10 Examination Program

December 31, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``SEA'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on December 23, 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 
``constituting a stated policy, practice, or interpretation with 
respect to the meaning, administration, or enforcement of an existing 
rule'' under Section 19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) 
thereunder,\4\ which

[[Page 835]]

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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is filing revisions to the content outline and selection 
specifications for the 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 and to incorporate the functions and associated tasks 
currently performed by a General Securities Sales Supervisor. In 
addition, FINRA is proposing to make changes to the format of the 
content outline. FINRA is not proposing any textual changes to the By-
Laws, Schedules to the By-Laws or Rules of FINRA.
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    \5\ FINRA also is proposing corresponding revisions to the 
Series 9/10 question bank. Based on instruction from SEC staff, 
FINRA is submitting this filing 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 review. See Letter to Alden 
S. Adkins, Senior Vice President and General Counsel, NASD 
Regulation, from Belinda Blaine, Associate Director, Division of 
Market Regulation, SEC, dated July 24, 2000. The question bank is 
available for SEC review.
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    The revised content outline is attached.\6\ The Series 9/10 
selection specifications have been submitted to the Commission under 
separate cover with a request for confidential treatment pursuant to 
SEA Rule 24b-2.\7\
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    \6\ The Commission notes that the revised content outline is 
attached to the proposed rule change, and is available for viewing 
on FINRA's Web site. The content outline is not attached to this 
notice.
    \7\ 17 CFR 240.24b-2.
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    The text of [sic] 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
    Section 15A(g)(3) of the Act \8\ authorizes FINRA to prescribe 
standards of training, experience, and competence for persons 
associated with FINRA members. In accordance with that provision, FINRA 
has developed examinations that are designed to establish that persons 
associated with FINRA members have attained specified levels of 
competence and knowledge, consistent with applicable registration 
requirements under FINRA rules. FINRA 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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    NASD Rule 1022(g) states that members may register with FINRA an 
individual as a General Securities Sales Supervisor if the individual's 
supervisory responsibilities in the investment banking and securities 
business are limited solely 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 ledger accounts of 
the member required to be maintained in branch offices by SEC 
recordkeeping rules.\9\ A General Securities Sales Supervisor is 
precluded from performing any of the following activities: (1) 
Functioning in a principal capacity with responsibility over any area 
of business activity not stated above; (2) supervision of the 
origination and structuring of underwritings; (3) supervision of market 
making commitments; (4) supervision of the custody of firm or customer 
funds or securities for purposes of SEA Rule 15c3-3; or (5) supervision 
of overall compliance with financial responsibility rules for broker-
dealers promulgated pursuant to the provisions of the Act. Further, a 
General Securities Sales Supervisor is not qualified to be included for 
purposes of the principal numerical requirements of NASD Rule 
1021(e)(1).
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    \9\ NASD Rule 1022(g) also includes additional requirements 
applicable to General Securities Sales Supervisors engaged in 
securities futures activities.
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    To register as a General Securities Sales Supervisor, an individual 
must be registered pursuant to the NASD Rule 1030 Series as a General 
Securities Representative. In addition, the individual must pass the 
Series 9/10 examination.
    In consultation with a committee of industry representatives, FINRA 
recently undertook a review of the Series 9/10 examination program. As 
a result of this review, FINRA is proposing to make revisions to the 
content outline to reflect changes to the laws, rules and regulations 
covered by the examination and to incorporate the functions and 
associated tasks currently performed by a General Securities Sales 
Supervisor. FINRA also is proposing to make changes to the format of 
the content outline.
Current Content Outline
    The current content outline is divided into six sections. The 
following are the six sections and the number of questions associated 
with each of the sections, denoted Section 1 through Section 6:
    1. Hiring, Qualifications, and Continuing Education, 9 questions;
    2. Supervision of Accounts and Sales Activities, 94 questions;
    3. Conduct of Associated Persons, 14 questions;
    4. Recordkeeping Requirements, 8 questions;
    5. Municipal Securities Regulation, 20 questions;
    6. Options Regulation, 55 questions.
    Each section also includes the applicable laws, rules and 
regulations associated with that section. The current content outline 
also includes a preface (addressing, among other things, the purpose, 
administration and scoring of the examination), sample questions and 
reference materials.
Proposed Revisions
    FINRA is proposing to divide the content outline into two parts 
with eight major job functions that are performed by a General 
Securities Sales Supervisor. The following are the two parts each with 
four major job functions, denoted as Parts 1 and 2 with Function 1 
through Function 4, respectively, with the associated number of 
questions:
Part 1
    Function 1: Supervise Associated Persons and Personnel Management 
Activities, 28 questions;
    Function 2: Supervise the Opening and Maintenance of Customer 
Accounts, 49 questions;
    Function 3: Supervise Sales Practices and General Trading 
Activities, 52 questions;
    Function 4: Supervise Communications with the Public, 16 questions.

[[Page 836]]

Part 2
    Function 1: Supervise the Opening and Maintenance of Customer 
Options Accounts, 18 questions;
    Function 2: Supervise Sales Practices and General Options Trading 
Activities, 19 questions;
    Function 3: Supervise Options Communications, 5 questions;
    Function 4: Supervise Associated Persons and Personnel Management 
Activities, 13 questions.
    FINRA is proposing to adjust the number of questions assigned to 
each major job function to ensure that the overall examination better 
reflects the key tasks performed by a General Securities Sales 
Supervisor. The questions on the revised Series 9/10 examination will 
place greater emphasis on key tasks such as supervision of registered 
persons, sales practices and compliance.
    Each function also includes specific tasks describing activities 
associated with performing that function. In Part 1, there are five 
tasks (1.1-1.5) associated with Function 1; four tasks (2.1-2.4) 
associated with Function 2; five tasks (3.1-3.5) associated with 
Function 3; and four tasks (4.1-4.4) associated with Function 4. In 
Part 2, there are three tasks (1.1-1.3) associated with Function 1; 
four tasks (2.1-2.4) associated with Function 2; three tasks (3.1-3.3) 
associated with Function 3; and one task (4.1) associated with Function 
4.\10\ By way of example, one such task (Task 4.2 in Part 1) is review 
retail communications and determine appropriate approval.\11\ Further, 
the content outline lists the knowledge required to perform each 
function and associated tasks (e.g., types of retail communications, 
required approvals).\12\ In addition, where applicable, the content 
outline lists the laws, rules and regulations a candidate is expected 
to know to perform each function and associated tasks. These include 
the applicable FINRA Rules (e.g., FINRA Rule 2210), MSRB Rules (e.g., 
MSRB Rule G-27(e)) and SEC rules (e.g., Rule 135a under the Securities 
Act of 1933).\13\ FINRA conducted a job analysis study of General 
Securities Sales Supervisors, which included the use of a survey, in 
developing each function and associated tasks and updating the required 
knowledge set forth in the revised content outline. The functions and 
associated tasks, which appear in the revised content outline for the 
first time, reflect the day-to-day activities of a General Securities 
Sales Supervisor.
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    \10\ See Exhibit 3a, Outline Pages 5-26.
    \11\ See Exhibit 3a, Outline Page 17.
    \12\ See Exhibit 3a, Outline Page 17.
    \13\ See Exhibit 3a, Outline Page 17-18.
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    As noted above, FINRA also is proposing to revise the content 
outline to reflect changes to the laws, rules and regulations covered 
by the examination. Among other revisions, FINRA is proposing to revise 
the content outline to reflect the adoption of rules in the 
consolidated FINRA rulebook (e.g., NASD Rule 2310 (Recommendations to 
Customers (Suitability)), NASD Rule 2212 (Telemarketing) and NASD Rule 
3110 (Books and Records) were adopted as FINRA Rule 2111 (Suitability), 
FINRA Rule 3230 (Telemarketing) and FINRA Rule 4510 Series (Books and 
Records Requirements), respectively).\14\
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    \14\ See Rule Conversion Chart, available at http://www.finra.org/Industry/Regulation/FINRARules/p085560.
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    FINRA is proposing similar changes to the Series 9/10 selection 
specifications and question bank.
    Finally, FINRA is proposing to make changes to the format of the 
content outline, including the preface, sample questions and reference 
materials. Among other changes, FINRA is proposing to: (1) Add a table 
of contents; \15\ (2) provide more details regarding the purpose of the 
examination; \16\ (3) provide more details on the application 
procedures; \17\ (4) provide more details on the development and 
maintenance of the content outline and examination; \18\ (5) explain 
that the passing scores are established by FINRA staff, in consultation 
with a committee of industry representatives, using a standard setting 
procedure, and that a statistical adjustment process known as equating 
is used in scoring exams; \19\ and (6) note that each candidate will 
receive a report at the end of the test session, which will indicate a 
pass or fail status and include a score profile listing the candidate's 
performance on each major content area covered on the examination.\20\
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    \15\ See Exhibit 3a, Outline Page 1.
    \16\ See Exhibit 3a, Outline Page 2.
    \17\ See Exhibit 3a, Outline Page 2.
    \18\ See Exhibit 3a, Outline Page 3.
    \19\ See Exhibit 3a, Outline Page 4.
    \20\ See Exhibit 3a, Outline Page 4.
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    The number of questions on the Series 9/10 examination will remain 
at 200 multiple-choice questions (55 on the Series 9 and 145 on the 
Series 10).\21\ Candidates will have 90 minutes to complete the Series 
9 exam and 240 minutes to complete the Series 10 exam. The passing 
score for the Series 9 is 70 percent and the passing score for the 
Series 10 is 70 percent. These are unchanged.
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    \21\ Consistent with FINRA's practice of including ``pretest'' 
items on certain qualification examinations, which is designed to 
ensure that new examination items meet acceptable testing standards 
prior to use for scoring purposes, the examinations include 15 
additional, unidentified pretest items that do not contribute 
towards the candidate's score. Therefore, the examination actually 
consists of 215 items, 200 of which are scored. The 15 pretest items 
are randomly distributed throughout the examination.
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Availability of Content Outline
    The current Series 9/10 content outline is available on FINRA's Web 
site, at www.finra.org/brokerqualifications/exams. The revised Series 
9/10 content outline will replace the current content outline on 
FINRA's Web site.
    FINRA is filing the proposed rule change for immediate 
effectiveness. FINRA proposes to implement the revised Series 9/10 
examination program on March 7, 2016. FINRA will announce the proposed 
rule change and the implementation date in a Regulatory Notice.
2. Statutory Basis
    FINRA believes that the proposed revisions to the Series 9/10 
examination program are consistent with the provisions of Section 
15A(b)(6) of the Act,\22\ 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, and 
Section 15A(g)(3) of the Act,\23\ which authorizes FINRA to prescribe 
standards of training, experience, and competence for persons 
associated with FINRA members. FINRA believes that the proposed 
revisions will further these purposes by updating the examination 
program to reflect changes to the laws, rules and regulations covered 
by the examination and to incorporate the functions and associated 
tasks currently performed by a General Securities Sales Supervisor.
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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

    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. The updated examination aligns 
with the functions and associated tasks currently performed by a 
General Securities Sales Supervisor and tests knowledge of the most 
current laws, rules, regulations and skills relevant to those functions

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and associated tasks. As such, the proposed revisions would make the 
examination more efficient and effective.

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 \24\ and paragraph (f)(1) of Rule 19b-4 
thereunder.\25\ 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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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f)(1).
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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-2015-058 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-2015-058. 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-2015-058, and should 
be submitted on or before January 28, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-33311 Filed 1-6-16; 8:45 am]
 BILLING CODE 8011-01-P