[Federal Register Volume 59, Number 233 (Tuesday, December 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29905]


[[Page Unknown]]

[Federal Register: December 6, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35021; File No. SR-Phlx-94-50]

 

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving a Proposed Rule Change Relating to Examination 
Specifications for the General Securities Registered Representative 
(Series 7) Examination, and the Corresponding Content Outline

November 29, 1994.

I. Introduction

    On October 3, 1994, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ 
proposed rule change (File No. SR-Phlx-94-50) to revise the General 
Securities Registered Representative (Series 7) Examination 
Specifications and the corresponding Content Outline.
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    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\17 CFR Sec. 240.19b-4 (1994).
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    The proposed rule change was published for comment in Securities 
Exchange Act Release No. 34843 (October 14, 1994), 59 FR 53001 (October 
20, 1994). No comments were received on the proposal. This order 
approves the proposed rule change contingent upon the filing of the 
revised Examination Specifications and Content Outline by other 
appropriate self-regulatory organizations (``SROs''), and approval of 
those filings by the Commission.

II. Description of the Proposal

    The Phlx proposes to use the Series 7 as amended, as the 
appropriate qualification examination for persons seeking registration 
as general securities representatives. The Series 7 Examination was 
created in 1974 as an industry-wide qualification examination for 
persons seeking registration as general securities representatives. The 
Series 7 Examination is generally required under SRO rules for persons 
who are engaged in the solicitation, purchase, or sale of securities 
for the accounts of customers. The purpose of the Series 7 Examination 
is to ensure that registered representatives have the basic knowledge 
necessary to perform their functions and responsibilities. The Series 7 
Specifications detail the areas covered by the examination and break 
down the number of examination questions culled from each area, while 
the Content Outline details the subject coverage and question 
allocation of the examination.
    Revision of the Series 7 Examination, Specifications and Content 
Outline was initiated in April 1993 by an industry committee of SROs 
and representatives from broker-dealers in order to update the 
examination in view of changes in the securities industry, including 
changes in relevant rules and regulations, the development of new 
securities products, and changes in the job of registered 
representatives as firms offer an increasingly wide range of financial 
services.\3\ The Examination Specifications and Content Outline for the 
Series 7 have not been revised since 1986.
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    \3\SROs on the committee include the New York, American and 
Philadelphia Stock Exchanges, Chicago Board Options Exchange, the 
Municipal Securities Rulemaking Board, and the National Association 
of Securities Dealers. Broker-dealer representatives include branch 
office managers, compliance officers, training personnel and 
registered representatives.
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    The industry committee updated the existing statements of the 
critical functions of registered representatives to ensure current 
relevance and appropriateness and drafted statements of tasks expected 
to be performed by entry-level registered representatives and conformed 
the existing Content Outline to the task statements. The Content 
Outline reflects the revised content of the examination. Under the 
proposed rule change, the total number of questions in the Series 7 
Examination will remain at 250, and the revised examination will cover 
all financial product areas covered on the present Series 7 Examination 
as well as several new products, including collateralized mortgage 
obligations (``CMOs''), long term equity anticipation securities 
(``LEAPS'') and CAPS,\4\ with reduced emphasis on direct participation 
programs.
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    \4\OEX CAPS and SPX CAPS are new securities based on the S&P 100 
(OEX) and the S&P 500 (SPX) that give investors the right to 
participate to a predetermined level in upward or downward movements 
in either index.
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    The Commission anticipates that the other appropriate SRO 
participants also will file the revised specifications for approval by 
the Commission. The Phlx, and these other SROs, may use the revised 
Examination, Specifications and Content Outline after the Commission 
has approved the proposed rule changes of the other appropriate SRO 
participants.

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.\5\ 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 may 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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    \5\15 U.S.C. Sec. 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\6\ 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 
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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    \6\15 U.S.C. Sec. 78o(b)(7) (1988).
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    The Commission believes that revising the Series 7 Examination, 
Specifications and Content Outline should help to ensure that only 
those securities representatives with a comprehensive knowledge of 
current Exchange rules, as well as an understanding of the Act, will be 
able to solicit, purchase or sell securities for the accounts of 
customers. The Commission believes that the revised areas covered by 
the Examination, Specifications and Content Outline are appropriate 
subject matters and include a sufficiently broad range of topics to 
ensure an appropriate level of expertise by representatives. 
Additionally, the revised examination tests relevant subject matters in 
view of changes in applicable laws, rules, regulations, products, and 
industry practices. By ensuring this requisite level of knowledge, the 
Phlx can remain confident that securities representatives have 
demonstrated an acceptable level of securities knowledge to carry out 
their responsibilities.
    The Commission has determined that the Content Outline for the 
revised Series 7 Examination is sufficiently detailed and covers 
appropriate information so as to provide an adequate basis for 
studying the new topics covered on the revised examination. The 
revised Content Outline should help ensure that those persons taking 
the revised examination understand the full range of subject matters 
included in the examination.
    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder.

IV. Conclusion

    It is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-PHlx-94-50) is 
approved contingent upon the filing of the Examination Specifications 
and Content Outline by the other appropriate SROs and the approval of 
these findings by the Commission.

    \7\15 U.S.C. Sec. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\8\
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    \8\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-29905 Filed 12-5-94; 8:45 am]
BILLING CODE 8010-01-M