Document ID: SEC-2009-0320-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2009-03-10T04:00Z

[Federal Register: March 10, 2009 (Volume 74, Number 45)]
[Notices]               
[Page 10317-10319]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10mr09-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59484; File No. SR-FINRA-2009-006]

 
Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to a 
New Limited Representative Registration Category for Investment Banking 
Professionals

March 2, 2009.
    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 17, 2009, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), and amended on February 27, 2009,\3\ the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by FINRA. The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 to SR-FINRA-2009-006 replaced and superseded 
the original rule filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to establish NASD Rule 1032(i), a new limited 
representative registration category for investment banking 
professionals. The proposed rule change also sets forth the 
registration requirements for principals who supervise investment 
banking activities.
    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
    Section 15A(g)(3) of the Act \4\ requires FINRA to prescribe 
standards of training, experience, and competence for persons 
associated with FINRA members. In accordance with that provision, FINRA 
has developed examinations, and administers examinations developed by 
other self-regulatory organizations, that are designed to establish 
that persons associated with FINRA members have attained specified 
levels of competence and knowledge.
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    \4\ 15 U.S.C. 78o-3(g)(3).
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    NASD Rule 1031 requires that each person associated with a member 
who functions as a representative must be registered in a category 
appropriate to the function that person performs. The rule defines a 
``representative'' as, among others, a person associated with a member 
who is ``engaged in the investment banking or securities business for 
the member including the functions of supervision, solicitation or 
conduct of business in securities or who [is] engaged in the training 
of persons associated with a member for any of these functions.'' 
Pursuant to NASD Rule 1032, a person who functions as a registered 
representative must pass the General Securities Representative (Series 
7) examination or certain equivalent examinations, unless such person's 
activities are so limited as to qualify him or her for a limited 
representative category for which a more dedicated examination is 
prescribed.
    The proposed rule change would create a new limited representative 
category--Limited Representative--Investment Banking--for persons whose 
activities are limited to investment banking, including those who work 
on the equity and debt capital markets and syndicate desks. More 
specifically, the proposed registration category would encompass those 
associated persons whose activities primarily involve: (1) Advising on 
or facilitating debt or equity securities offerings through a private 
placement or a public offering, including but not limited to 
origination, underwriting, marketing, structuring, syndication, and 
pricing of such securities and managing the allocation and 
stabilization activities of such offerings, or (2) advising on or 
facilitating mergers and acquisitions, tender offers, financial 
restructurings, asset sales, divestitures or other corporate 
reorganizations or business combination transactions, including but not 
limited to rendering a fairness, solvency or similar opinion. The 
proposed registration category would not cover individuals whose 
investment banking work is limited to public (municipal) finance 
offerings or direct participation program offerings as defined in NASD 
Rule 1022(e)(2). The proposed registration category further would not 
cover individuals whose investment banking work is limited to effecting 
private securities offerings as defined in NASD Rule 1032(h)(1)(A).
    FINRA is in the process of developing an accompanying qualification 
examination that will provide a more targeted assessment of the job 
functions performed by the individuals that would fall within the 
proposed

[[Page 10318]]

registration category.\5\ The exam would be taken in lieu of the Series 
7 exam (or equivalent exams) by the individuals who perform solely 
those job functions. Any person whose activities go beyond those 
proposed for the Limited Representative-Investment Banking registration 
category would be required to separately qualify and register in the 
appropriate category or categories of registration attendant to such 
activities.
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    \5\ The examination itself, including the content outline and 
test specifications, and fees associated with it will be the subject 
of separate proposed rule changes after Commission approval of this 
proposed rule change to establish the new registration category.
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    Those who already hold the Series 7 registration, as well as those 
who have passed the United Kingdom (Series 17) or Canada (Series 37/38) 
Modules of the Series 7 examination or hold a Limited Representative-
Corporate Securities (Series 62) registration, would be 
``grandfathered'' and not required to take the new qualification exam. 
Such individuals would be provided a period of six months during which 
they may ``opt in'' to the Limited Representative-Investment Banking 
registration, provided that at the time the proposed rule change is 
implemented, such individuals are engaged in investment banking 
activities covered by the proposed rule change.\6\ Those individuals 
who choose to opt in would still retain their Series 7 registered 
representative registration in addition to the investment banking 
registration. After the six-month opt-in period, any individual holding 
a Series 7 registration that wishes to engage in the specified 
investment banking activities would be required to pass the Limited 
Representative-Investment Banking exam.
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    \6\ No associated persons of a member will be eligible for the 
opt in unless the member's current Form BD indicates that the member 
engages in investment banking activities.
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    To ease the transition and to allow firms time to create 
qualification examination preparation programs, FINRA would permit new 
Limited Representative-Investment Banking candidates who are in the 
process of qualifying in the new registration category when the rule 
becomes effective to take either the Series 7 or Limited 
Representative-Investment Banking exam. This accommodation would remain 
in effect for six months after the implementation date of the proposed 
rule change.
    FINRA understands that some member firms have created training 
programs in which certain new employees are exposed to the firm's 
various business lines by rotating among departments, including 
investment banking, where the employee's activities might fall within 
the proposed definition of a Limited Representative-Investment Banking. 
Depending on the activities performed by the employee during the 
training program, the firm may or may not require the employee to pass 
the Series 7 examination and become a registered representative. In 
recognition of such training programs, the proposed rule change would 
not require an employee placed in such programs to register as a 
Limited Representative-Investment Banking for a period of up to six 
months from the time the employee first engages in activities that 
otherwise would trigger registration as a Limited Representative-
Investment Banking. This exception would be available for up to two 
years after the employee commences the training program. Firms that 
wish to avail themselves of this exception would be required to 
maintain documents evidencing the details of the training program and 
identifying the program participants who engage in activities that 
otherwise would require registration as a Limited Representative-
Investment Banking and the date on which such participants commenced 
such activities.
    Individuals who wish to act as a general principal for activities 
set forth in the proposed rule change would be required to obtain the 
proposed Limited Representative-Investment Banking registration--either 
by opting in or passing the exam--and also pass the General Securities 
Principal exam. Such individuals would be limited to acting as a 
general principal for the investment banking activities covered by the 
proposed rule change. Individuals who wish to function in the capacity 
of general principal for broader securities-related activities would be 
required to take another appropriate qualification examination, such as 
the Series 7 or Series 62, in addition to the General Securities 
Principal exam. Those individuals currently functioning as a general 
principal supervising investment banking activities as described in the 
proposed rule change would be granted the same six-month grace period 
during which they could opt in to the Limited Representative-Investment 
Banking registration.
    FINRA believes the creation of a proposed Limited Representative-
Investment Banking registration and accompanying exam would provide for 
a more targeted assessment of the competency of investment banking 
personnel to perform their unique job functions and, as a result, 
translate into better quality service for investors. FINRA further 
believes that the proposed requirement for principals who supervise 
investment banking activities to register and qualify as a Limited 
Representative-Investment Banking will enhance investor protection and 
member compliance with applicable FINRA rules and the federal 
securities laws. Finally, FINRA believes that the proposed rule change 
would enable members to allocate their training resources more 
efficiently.
    The implementation date will be 90 days after the effectiveness of 
a future proposed rule change to establish the corresponding 
qualification examination.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6),\7\ 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,\8\ which authorizes 
FINRA to prescribe standards of training, experience, and competence 
for persons associated with FINRA members.
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    \7\ 15 U.S.C. 78o-3(b)(6).
    \8\ 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.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 10319]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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-FINRA 2009-006 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 No. SR-FINRA-2009-006. 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 changes 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, 100 F Street, NE., 
Washington, DC 20549, 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 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 No. SR-FINRA-2009-006 and should be 
submitted on or before March 31, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E9-4961 Filed 3-9-09; 8:45 am]

BILLING CODE 8011-01-P