[Federal Register Volume 63, Number 6 (Friday, January 9, 1998)]
[Notices]
[Pages 1520-1521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-539]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39516; File No. SR-NASD-97-21]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change and Amendment No. 1 by the National Association of Securities
Dealers, Inc. Relating to Registration Category, Study Outline and
Specifications for Series 55 Examination, Equity Trader
January 2, 1998.
I. Introduction
On March 26, 1997, the National Association of Securities Dealers,
Inc. (``NASD'' or ``Association'') 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 rule change to adopt a new registration
category, Equity Trader, and a new examination, Series 55.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change and Amendment No. 1 \3\ were published for
comment in the Federal Register on April 28, 1997.\4\ One comment was
received on the proposal.\5\ This order approves the proposal, as
amended.
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\3\ See Letter from Craig L. Landauer, Associate General
Counsel, NASD Regulation, to Yvonne Fraticelli, Esq., Division of
Market Regulation, Commission, dated April 11, 1997 (``Amendment No.
1''). In Amendment No. 1, the Association clarified that registered
representatives who have been ``grandfathered'' from taking the
General Securities Representative (Series 7) or Limited
Representative-Corporate Securities Examination (Series 62) will not
be required to take either examination in order to qualify to take
the Limited Representative-Equity Trader Examination (Series 55).
\4\ See Securities Exchange Act Release No. 38534 (April 21,
1997), 62 FR 22984.
\5\ See Letter from Dennis Marino, Chairman, and John N.
Tognino, President, Security Traders Association (``STA''), to
Jonathan G. Katz, Secretary, Commission, dated June 2, 1997. In its
letter, the STA supported the proposed Series 55 examination, noting
that ``[e]ntry qualifications and testing are the foundation for
building investor confidence in the securities market.''
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II. Description of the Proposal
The NASD proposes to adopt NASD Rule 1032(f)(1), which will require
each registered representative who engages in proprietary or agency
trades of equities, preferred securities or convertible debt
securities, or who directly supervises such activities, to register as
a limited representative-equity trader. In order to register as a
limited representative-equity trader, the representative must be
registered as a general securities representative or as a limited
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representative-corporate securities, and must pass the Series 55
examination.\6\ The proposed rule contains an exemption for
representatives whose principal trading activities involve executing
orders on behalf of an affiliated investment company which is
registered with the Commission under the Investment Company Act of
1940. The Association believes the exemption is appropriate because
such traders generally are in the same position as buy-side
professionals employed by investment companies, who would not be
subject to the examination requirement.
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\6\ Representatives who have been ``grandfathered'' from taking
the Series 7 or the Series 62 will not be required to take either
examination in order to take the Series 55. See Amendment No. 1,
supra note 3.
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The proposal provides that presently registered representatives who
file an application to take the Series 55 within 30 days of the
effective date of the rule must pass the Series 55 examination within
two years of the effective date of the rule. A currently registered
representative who fails to file an application to take the Series 55
within 30 days of the effective date of the rule must pass the Series
55 examination before conducting the activities described in NASD Rule
1032(f)(1). The Association believes that the two-year time period will
provide representatives with sufficient time to study and to pass the
Series 55 examination. The Series 55 examination will consist of 90
questions, and candidates will have three hours to complete the
examination. The passing score for the examination will be 70%.
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
association.\7\ Specifically, the Commission believes the proposal is
consistent with the requirements of Sections 15(b)(7),\8\ 15A(b)(6),\9\
and 15A(g)(3),\10\ of the Act. Section 15(b)(7) \11\ states that a
registered broker or dealer may not effect any transaction, or induce
the purchase or sale of, any security unless such broker or dealer
meets such standards of operational capability and all those associated
with such broker or dealer meet certain standards of training,
experience, competence, and such other qualifications as the Commission
finds appropriate in the public interest or for the protection of
investors. Section 15A(b)(6) \12\ requires, in relevant part, that the
rules of a registered national securities association be designed to
prevent fraudulent and manipulative acts as practices, to promote just
and equitable principles of trade, and to protect investors and the
public interests. Section 15A(g)(3) \13\ provide that a registered
national securities association may deny membership to, or condition
the membership of, a registered broker or dealer if such broker or
dealer does not meet the requisite standards of knowledge and
competence.
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\7\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78o(b)(7).
\9\ 15 U.S.C. 78o-3(b)(6).
\10\ 15 U.S.C. 78o-3(g)(3).
\11\ 15 U.S.C. 78o(b)(7).
\12\ 15 U.S.C. 78o-3(b)(6).
\13\ 15 U.S.C. 78o-3(g)(3).
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The Commission believes that the Series 55 examination will help to
ensure that registered representatives required to take the examination
have adequate knowledge of current NASD rules and of the Act. The
Commission recognizes the importance to investors of the NASD's efforts
to ensure that registered persons have an appropriate level of
knowledge and expertise regarding applicable laws and regulations. By
helping to establish this level of knowledge, the Commission believes
that the Series 55 examination will help registered representatives
carry out their responsibilities under the federal securities laws.
The Commission believes that the proposed examination focuses on
relevant subject matter in view of changes in applicable laws, rules,
regulations and industry practices. The Commission further believes
that the topics covered by the Series 55 examination are appropriate
and include a reasonably broad range of subject matter. Finally, the
Commission believes that the two-year time period provided for
currently registered representatives to pass the examination is
reasonable and should provide currently registered representatives with
sufficient time to prepare for the examination.\14\
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\14\ As noted above, registered persons who file an application
to take the Series 55 examination within thirty days after the
effective date of the rule must pass the Series 55 within two years
of the effective date of the rule.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\15\ that the proposed rule change (SR-NASD-97-21), including
Amendment No. 1, is approved.
\15\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-539 Filed 1-8-98; 8:45 am]
BILLING CODE 8010-01-M