[Federal Register Volume 59, Number 134 (Thursday, July 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17100]
[[Page Unknown]]
[Federal Register: July 14, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34334; File No. SR-NYSE-94-13]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Order Approving Proposed Rule Change Relating to Interpretation to Rule
345 Establishing a New Category of Limited Registration for Floor
Clerks, and the Content Outline for the Examination Module for Floor
Clerks of Members Engaged in Public Business With Professional
Customers (Series 7B)
July 8, 1994.
I. Introduction
On March 28, 1994, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4
thereunder,\2\ a proposed interpretation to NYSE Rule 345 to establish
a new category of limited registration for floor clerks of members
engaged in public business with professional customers and to adopt the
Series 7B Examination and corresponding Content Outline for the
Examination Module for Floor Clerks of Members Engaged in Public
Business with Professional Customers.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1994).
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The proposed rule change was published for comment in Securities
Exchange Act Release No. 34033 (May 10, 1994), 59 FR 25514 (May 16,
1994). No comments were received on the proposal. This order approves
the proposed rule change.
II. Description of the Proposal
The Exchange is adopting a Series 7B Examination as a subset of the
General Securities Registered Representative Examination (``Series 7'')
to test the knowledge of relevant securities laws and Exchange rules
required of floor clerks of members who accept public orders only from
professional customers, as defined in the proposal, for execution on
the trading floor.\3\ In addition, the NYSE is amending Interpretation
.15 to Rule 345 (``Qualifications'') to establish, as a new category of
registration, limited registration for floor clerks who have
successfully completed the Series 7B Examination.
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\3\The proposal would define a professional customer to include:
a bank; a trust company; an insurance company; an investment trust;
a state or political subdivision thereof; a charitable or non-profit
educational institution regulated under the laws of the United
States or any state or pension or profit sharing plan subject to
ERISA or of an agency of the United States, or of a state or a
political subdivision thereof, or any person who has, or has under
management, net tangible assets of at least sixteen million dollars.
For purposes of the definition of professional customer, the
term ``person'' would mean the same as that term is defined in NYSE
Rule 2, except that it would not include natural persons.
The Exchange states that the above definition is derived from
the term ``designated account'' as used in NYSE Rule 431 (``Margin
Requirements'') and interpretations thereof to describe a
professional or sophisticated customer.
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Currently, a floor clerk who is associated with a member and who
takes orders from public customers must become a registered
representative and pass the Series 7 Examination. The Exchange states
that such public business is often limited to accepting orders from
professional customers.\4\ The Exchange believes that the level of
knowledge required to perform the activities engaged in by clerks who
conduct a professional public business limited to transactions in
listed securities on the Exchange floor is narrower in content and
scope than that needed to conduct an overall general securities
business with retail customers.
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\4\Telephone conversation between Mary Ann Furlong, Director,
Rule and Interpretive Standards, NYSE, and Louis A. Randazzo,
Attorney, Office of Market Supervision, SEC, Division of Market
Regulation, on June 17, 1994.
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On July 29, 1993, the Commission approved a proposed rule change by
the NYSE that adopted the Series 7A Examination as a module of the
Series 7 Examination to test floor members who only accept public
orders from professional customers.\5\ According to the Exchange, these
floor members have requested that their floor clerks who take public
orders solely from professional customers also be allowed to take a
qualifying examination more appropriate to the level of knowledge
required to serve professional customers. Consequently, the NYSE
developed the Series 7B Examination to test the knowledge of floor
clerks who accept public orders only from professional customers on
behalf of members qualified to conduct business with these professional
customers by complementing the Series 7A Examination module with
questions on basic information required to perform floor functions.\6\
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\5\See Securities Exchange Act Release No. 32698 (July 29,
1993), 58 FR 41539 (August 4, 1993) (order approving File No. SR-
NYSE-93-10).
\6\The Exchange will continue to require the successful
completion of the Series 7 Examination for any floor clerk seeking
to become a registered representative dealing with other than
professional customers. In addition, any person who has successfully
completed the Series 7 Examination will not be required to complete
the Series 7B Examination.
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The NYSE believes that the proposal is consistent with section
6(c)(3)(B) of the Act. The Exchange states that, pursuant to this
statutory obligation, it has developed examinations that are
administered to establish that Exchange floor members and persons
associated with such members performing specific functions have
attained specified levels of competence and knowledge.
III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange,
and in particular, with the requirements of sections 6(b)(5) and
6(c)(3)(B) of the Act.\7\ Section 6(b)(5) requires, among other things,
that the rules of an exchange be designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest. Section
6(c)(3)(B) provides that a national securities exchange may examine and
verify the qualifications of an applicant to become a person associated
with a member in accordance with procedures established by the rules of
the exchange, and require any person associated with a member, or any
class of such persons, to be registered with the exchange in accordance
with procedures so established.
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\7\15 U.S.C. 78f(b)(5) and (c)(3)(B) (1988).
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The Commission also believes that the proposed rule change is
consistent with section 15(b)(7) of the Act\8\ which stipulates that
prior to effecting any transaction in, or inducing the purchase or sale
of, any security, a registered broker or dealer must meet certain
standards of operational capability, and that such broker or dealer and
all natural persons associated with such broker or dealer must meet
certain standards of training, experience, competence, and such other
qualifications as the Commission finds necessary or appropriate in the
public interest or for the protection of investors.
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\8\15 U.S.C. 78o(b)(7) (1988).
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The Commission believes that the Series 7B examination requirement
should help to ensure that only those floor clerks with a comprehensive
knowledge of Exchange rules, as well as an understanding of the Act,
will be able to conduct a public business limited to accepting orders
directly from professional customers for execution on the trading
floor. In this regard, the Commission carefully reviewed the format and
the substantive areas tested on the Series 7B examination. In reviewing
the examination, the Commission focused on the comprehensiveness and
the choice of specific questions and their level of difficulty. The
Commission believes that the examination questions cover the
appropriate subject matter and include a sufficiently broad range of
topics so as to require an appropriate level of expertise by floor
clerks of members who conduct a public business limited to accepting
orders directly from professional customers. By ensuring this requisite
level of knowledge, the NYSE can remain confident that its limited
registration floor clerks have demonstrated an acceptable level of
securities knowledge to carry out their responsibilities.
The Commission also has determined that the Content Outline for the
Series 7B Examination is sufficiently detailed and covers the
appropriate information so as to provide an adequate basis for studying
the topics covered on the examination. This outline should help to
ensure that those persons taking the Series 7B fully understand the
subject matter of the examination.
Finally, the Commission believes that the proposed limited
registration requirement for floor clerks of members engaged in a
public business with professional customers is reasonable and is
consistent with the requirements of Section 6(b)(5) and 6(c)(3)(B) of
the Act. This new category of registration would permit only those
floor clerks who have demonstrated adequate skills and knowledge to
conduct a public business which is generally limited to accepting
orders directly from professional customers. The NYSE has argued that
the level of knowledge, skills and abilities necessary to conduct such
business is less than that needed to conduct a full service business
with retail customers. The Commission believes that, because the NYSE
will ensure that floor clerks handling professional customer business
are adequately qualified through the use of either the Series 7 or
Series 7B exam, it is consistent with the NYSE's regulatory
responsibilities to establish this category of limited registration.
IV Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-NYSE-94-13) is approved.
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\9\15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\F17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-17100 Filed 7-13-94; 8:45 am]
BILLING CODE 8010-01-M