Document ID: SEC-2006-1014-0001
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 44742-44743]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au06-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54243; File No. SR-NASD-2006-084]

 
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 28 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.
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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--Introducing Broker-Dealer 
Financial and Operations (Series 28) 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 introducing broker-dealer 
financial and operations 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 
28 question bank, but based upon instruction from the Commission 
staff, NASD is submitting SR-NASD-2006-084 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 28 

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 240.24b-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
    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 1022(c), members that are subject to the net 
capital requirements of SEC Rule 15c3-1,\9\ other than those members 
that are subject to the net capital requirements of SEC Rules 15c3-
1(a)(1)(ii),\10\ (a)(2)(i) \11\ or (a)(8),\12\ are required to 
designate as a Limited Principal--Introducing Broker-Dealer Financial 
and Operations those individuals associated with them who are 
responsible for the members' financial and operational management, 
including, but not limited to, final approval and responsibility for 
the accuracy of financial reports submitted to regulators. In addition, 
Rule 1022(c) provides that the chief financial officer of such members 
must be a Limited Principal--Introducing Broker-Dealer Financial and 
Operations. The Series 28 examination is an NASD examination that 
qualifies an individual to function as a Limited Principal--Introducing 
Broker-Dealer Financial and Operations.
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    \9\ 17 CFR 240.15c3-1.
    \10\ 17 CFR 240.15c3-1(a)(1)(ii).
    \11\ 17 CFR 240.15c3-1(a)(2)(i).
    \12\ 17 CFR 240.15c3-1(a)(8).
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    A committee of industry representatives, together with NASD staff, 
recently undertook a review of the Series 28 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 introducing broker-dealer financial 
and operations principal. NASD is

[[Page 44743]]

proposing to add a section on Municipal Securities Rulemaking Board 
Rule G-37 (Political Contributions and Prohibitions on Municipal 
Securities Business). NASD also is proposing to add a section on SEC 
Regulation SHO, including Rules 200 (Definition of ``Short Sale'' and 
Marking Requirements) \13\ and 203 (Borrowing and Delivery 
Requirements).\14\
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    \13\ 17 CFR 242.200.
    \14\ 17 CFR 242.203.
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    NASD is proposing to add sections on NASD Rules 1150 (Executive 
Representatives), 2350 (Broker-Dealer Conduct on the Premises of 
Financial Institutions), 2370 (Borrowing from or Lending to Customers), 
3012 (Supervisory Control System), 3013 (Annual Certification of 
Compliance and Supervisory Processes), 3510 (Business Continuity Plan) 
and 9800 (Temporary Cease and Desist Orders).
    In addition, NASD is proposing to revise the study outline to 
remove the sections on NASD Rules 1100 (Foreign Associates), 1110 
(formerly Registration of Government Securities Principals and 
Representatives) and 2320 (Best Execution and Interpositioning). NASD 
also is proposing to remove the sections on Form X17F-1A (Report for 
Missing, Lost, Stolen, or Counterfeit Securities), NASD Certificate of 
Incorporation and certain articles (Articles VII, XII, XIII and XV) of 
the NASD By-Laws.
    Further, NASD is proposing to add a new section covering certain 
rules of the NASD Uniform Practice Code (``Uniform Practice Rules''). 
NASD is proposing to add the Uniform Practice Rules under Section 4 and 
to move the section on Other Relevant Regulations and Interpretations 
(formerly under Section 4) to Section 5, a new section.
    As a result of the revisions discussed above, the number of 
questions on several sections of the study outline were modified as 
follows: Keeping and Preservation of Records and Broker-Dealer 
Financial Reporting Requirements, increased from 15 to 16 questions; 
Uniform Practice Rules (new section), 5 questions; and Other Relevant 
Regulations and Interpretations, increased from 24 to 28 questions.
    NASD is proposing these changes to the entire content of the Series 
28 examination, including the selection specifications and question 
bank. The number of questions on the Series 28 examination will 
increase from 85 to 95 questions. Candidates will continue to have 2 
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 28 
examination program are consistent with the provisions of Sections 
15A(b)(6) \15\ and 15A(g)(3) of the Act,\16\ which authorize NASD to 
prescribe standards of training, experience, and competence for persons 
associated with NASD members.
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    \15\ 15 U.S.C. 78o-3(b)(6).
    \16\ 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 \17\ and Rule 19b-4(f)(1) thereunder,\18\ 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 28 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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    \17\ 15 U.S.C. 78s(b)(3)(A)(i).
    \18\ 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-2006-084 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-2006-084. 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-2006-084 and should be submitted on or before August 28, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris
Secretary.
 [FR Doc. E6-12686 Filed 8-4-06; 8:45 am]

BILLING CODE 8010-01-P