Document ID: SEC-2015-2107-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.,
Posted Date: 2015-12-21T05:00Z

[Federal Register Volume 80, Number 244 (Monday, December 21, 2015)]
[Notices]
[Pages 79362-79364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31921]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76650; File No. SR-FINRA-2015-052]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend NASD Rules 1022 (Categories of Principal 
Registration) and 1032 (Categories of Representative Registration)

December 15, 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 December 4, 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 and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ 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\ 17 CFR 240.19b-4(f)(6).
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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 NASD Rule 1022 (Categories of Principal 
Registration) and NASD Rule 1032 (Categories of Representative 
Registration) to remove the deadline by

[[Page 79363]]

which eligible registrants must complete a firm-element continuing 
education requirement to engage in a security futures business, and to 
remove reference to a revised examination.
    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
    In 2002, FINRA modified the following registration categories to 
include the activities of engaging in and supervising securities 
futures: (1) Registered Options Principal (Series 4); (2) Limited 
Principal--General Securities Sales Supervisor (Series 9/10); (3) 
General Securities Representative (Series 7); and (4) Registered 
Options Representative (Series 42).\4\ FINRA also required that persons 
currently registered or becoming registered in these categories 
complete a firm-element continuing education requirement addressing 
security futures before they conducted any security futures business. 
FINRA instituted this continuing education requirement to ensure that 
registered personnel, who may not be familiar with risks, trading 
characteristics, terms and nomenclature of these products, or the fact 
that they are subject to the joint jurisdiction of the SEC and CFTC, 
receive the necessary training. Notably, FINRA specified the content of 
the continuing education program pursuant to NASD Rule 1120(b)(4) (now 
FINRA Rule 1250(b)(4)).\5\
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    \4\ See Securities Exchange Act Release No. 46663 (October 15, 
2002), 67 FR 64944 (October 22, 2002) (Order Approving File No. SR-
NASD-2002-40).
    \5\ Because the introduction of security futures in the United 
States presented extraordinary circumstances, FINRA (then NASD) 
determined to use its authority under NASD Rule 1120(b)(4) to 
specify the content of firm-element continuing education. See 
Securities Exchange Act Release No. 46186 (July 11, 2002), 67 FR 
47412, 47422 (July 18, 2002) (Notice of Filing File No. SR-NASD-
2002-40); see also NASD Notice to Members 02-73, at 747-748 
(November 2002).
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    Consequently, in 2002, FINRA, the National Futures Association 
(``NFA''), and the Institute for Financial Markets collaborated to 
develop a free web-based training program consisting of a series of 
modules intended to satisfy FINRA's firm-element continuing education 
requirement and NFA's training requirement (``Security Futures Training 
Modules''). Although the Security Futures Training Modules are not the 
only program that FINRA and NFA Members can use to satisfy their 
security futures training requirements, FINRA is not aware of any 
alternative training programs used by firms. Moreover, even if a firm 
were to use an alternative training program, the program must cover all 
applicable subjects specified in the content outline provided by FINRA. 
Since inception in 2002 through May 2015, just over 15,000 individuals 
have completed the Security Futures Training Modules. In 2014, only 180 
registered individuals completed the Security Futures Training Modules 
(18 FINRA registrants and 162 NFA-only registrants).
    At the time trading in security futures commenced, FINRA considered 
replacing the firm-element continuing education requirement with 
revised qualification examinations for the registration categories that 
address security futures; however, due to low trading volume in 
security futures and limited interest for registered representatives to 
engage in security futures business, such qualification examinations 
have not been implemented. Accordingly, on three prior occasions, FINRA 
has extended the deadline for completing a firm-element continuing 
education requirement.\6\
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    \6\ See Securities Exchange Act Release No. 54617 (October 17, 
2006), 71 FR 62498 (October 25, 2006) (Notice of Filing and 
Immediate Effectiveness of File No. SR-NASD-2006-118) (extending the 
deadline to December 31, 2009); Securities Exchange Act Release No. 
61231 (December 23, 2009), 74 FR 69173 (December 30, 2009) (Notice 
of Filing and Immediate Effectiveness of File No. SR-FINRA-2009-092) 
(extending the deadline to December 31, 2012); and Securities 
Exchange Act Release No. 68468 (December 19, 2012), 77 FR 76112 
(December 26, 2012) (Notice of Filing and Immediate Effectiveness of 
File No. SR-FINRA-2012-055) (extending the deadline to December 31, 
2015).
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    Current data on trading volume has shown there to be very limited 
trading activity in security futures.\7\ Given the continued low 
trading volume in security futures, the limited interest for registered 
representatives to engage in security futures business, and the 
comprehensiveness of the required firm-element continuing education 
training, FINRA has determined not to impose qualification examinations 
for security futures. Rather, FINRA will continue to require eligible 
registrants to complete the mandated security futures firm-element 
continuing education training before engaging in any security futures 
business. Moreover, FINRA, in coordination with NFA, will continue to 
monitor security futures volume and the number of persons taking the 
Security Futures Training Modules, as well as the number of 
disciplinary matters and complaints involving security futures, in 
considering whether a qualification examination should be developed at 
a later date. Accordingly, the proposed rule change amends NASD Rule 
1022 and NASD Rule 1032 to remove the deadline by which eligible 
registrants must complete the firm-element continuing education 
requirement to engage in a security futures business, and to remove the 
references to a revised qualification examination.
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    \7\ Between January 2015 and September 2015, security futures 
had an average daily trading volume of approximately 47,640 
contracts. See OneChicago, PR2015, http://www.onechicago.com/?page_id=20539 (last visited Oct. 28, 2015). In comparison, over the 
same time period option contracts clearing through the Options 
Clearing Corporation (``OCC'') had an average daily trading volume 
of approximately 16.9 million contracts. See OCC, Market Data, Daily 
Volume Statistics, http://www.optionsclearing.com/webapps/daily-volume-statistics (last visited Nov. 2, 2015).
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    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the SEC waive the requirement that 
the proposed rule change not become operative for 30 days after the 
date of the filing, so that FINRA can implement the proposed rule 
change on December 31, 2015.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of section 15A(b)(6) of the Act,\8\ 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. The proposed rule change is necessary to continue to 
allow eligible registrants to complete a firm-element continuing 
education program that will qualify them to engage in a security 
futures business in lieu of a qualification examination.
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    \8\ 15 U.S.C. 78o-3(b)(6).

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[[Page 79364]]

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 proposed rule change will 
allow eligible registrants to complete a firm-element continuing 
education program that will qualify them to engage in a security 
futures business in lieu of a qualification examination.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to section 19(b)(3)(A)(iii) of the Act \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of filing.\11\ 
Rule 19b-4(f)(6)(iii), however, permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\12\ The Exchange has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing. The Exchange has stated that 
waiver of the operative delay is necessary in order to implement the 
proposed rule change by December 31, 2015. The Commission notes that 
very few individuals are involved in the sale of security futures 
products and the regulators have decided that continuing education 
sufficiently mitigates the risk of trading these products. FINRA, in 
coordination with NFA, will continue to monitor security futures volume 
and the number of persons taking the Security Futures Training Modules, 
as well as the number of disciplinary matters and complaints involving 
security futures, in considering whether a qualification examination 
should be developed at a later date. For these reasons, the Commission 
believes waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission hereby waives the operative delay and designates the 
proposal operative upon filing.\13\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ Id.
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) 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.

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-2015-052 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-2015-052. 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 office 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-2015-052, and should 
be submitted on or before January 11, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-31921 Filed 12-18-15; 8:45 am]
BILLING CODE 8011-01-P