[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: 94-29906]


[[Page Unknown]]

[Federal Register: December 6, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35020; File No. SR-Phlx-94-51]

 

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving a Proposed Rule Change Relating to Examination 
Specifications for the General Securities Sales Supervisor (Series 8) 
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-94-51) to revise the General 
Securities Sales Supervisor (Series 8) 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. 34842 (October 14, 1994), 59 FR 53002 (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 General Securities Sales Supervisor (``Series 8'') Examination 
is an industry-wide qualification examination for securities sales 
supervisors. The Series 8 examination is generally required under rules 
of the self-regulatory organizations (``SROs'') for persons who are 
engaged in the supervision of general securities branch offices (i.e., 
branch office managers) and of general securities registered 
representatives. The Series 8 examination tests a candidate's knowledge 
of securities industry rules and regulations and certain statutory 
provisions applicable to general securities sales supervision. The 
Series 8 Content Outline details the subject coverage and question 
allocation of the examination. The Examination Specifications detail 
the areas covered by the examination and break down the number of 
examination questions culled from each area.
    Revision of the Series 8 Examination, Examination Specifications, 
and Content Outline was recently undertaken by an industry committee 
composed of representatives from SROs (the NYSE, the American Stock 
Exchange, the Chicago Board Options Exchange, the Municipal Securities 
Rulemaking Board, the National Association of Securities Dealers and 
the Philadelphia Stock Exchange) and representatives from broker-
dealers, including branch office managers, compliance personnel and 
corporate executives, in order to update the examination in view of 
changes in relevant laws, rules and regulations, the development of new 
products, and to reflect various changes in industry practices. The 
committee reviewed the examination specifications, content areas and 
item bank and developed some new questions in new areas.
    The revised examination continues to cover the areas of knowledge 
required to supervise sales activities in securities, however, the 
focus of the content of the examination has been shifted to concentrate 
more closely on supervisory duties. Accordingly, certain questions have 
been deleted from the examination which deal with routine calculations 
and basic product knowledge and questions on new federal and SRO rules 
and regulations have been incorporated into the exam, as well as 
questions on new products, supervision and changes in industry 
practices. The revised Examination Specifications and Content Outline 
reflect the revised content of the examination. The examination will 
remain a six-hour, two-part, 200 question examination.
    The Phlx also is adopting a new paragraph to Phlx Rule 748, 
Supervision, to expressly incorporate a supervisory examination into 
Exchange rules. Specifically persons delegated supervisory 
responsibility pursuant to Rule 748 (b) and (c) will be required by 
proposed paragraph (d) to meet the Exchanges' qualification 
requirements, including successful completion of a supervisory 
examination deemed acceptable by the Exchange. This requirement is 
substantially similar to existing provision of other exchanges.\3\ 
Currently, Rule 748 requires member or participant organizations to 
supervise all registered representatives and each office, department or 
business activity. In addition, a general partner or principal 
executive officer must be designated to assume overall responsibility 
for internal supervision of the organization and compliance with 
securities laws and regulations, including establishing written 
supervisory procedures delegating supervisory responsibilities and 
instituting a supervisory review procedure.
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    \3\See e.g., NYSE Rule 342(d) and Supplementary Material .13.
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    With respect to qualifications for supervisory personnel, Rule 748 
merely requires employees with delegated supervisory responsibility to 
be ``qualified,'' and persons responsible for any group of employees to 
``reasonably discharge'' those duties. The proposed new language is 
intended to bridge this gap by expressly requiring supervisory 
personnel to qualify with the Exchange by successfully completing the 
appropriate examination, which will be indicated in the Exchange's 
memorandum to its membership. The Exchange notes that although options 
activity and personnel, including foreign currency options, are also 
subject to Rule 748, additional supervisory requirements for option 
accounts apply.\4\
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    \4\See Phlx Rules 1024 and 1025.
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    The Commission anticipates that the other appropriate SRO 
participants also will file the revised Specifications and Content 
Outline 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 believes that revising the Series 8 Examination, 
Specifications and Content Outline should help to ensure that only 
those securities sales supervisors with a comprehensive knowledge of 
current Exchange rules, as well as an understanding of the Act, will be 
able to supervise general securities branch offices and registered 
representatives. 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 supervisors. 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 sales supervisors have demonstrated an 
acceptable level of securities knowledge to carry out their 
responsibilities.
    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,\6\ that the proposed rule change (File No. SR-Phlx-94-51) is 
approved contingent upon the filing of the Examination Specifications 
and Content Outline by the other appropriate SROs and the approval of 
those filings by the Commission.

    \6\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.\7\
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    \7\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-29906 Filed 12-5-94; 8:45 am]
BILLING CODE 8010-01-M