[Federal Register Volume 63, Number 19 (Thursday, January 29, 1998)]
[Notices]
[Pages 4509-4510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2184]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39576; File No. SR-MSRB-98-2]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Municipal Securities Rulemaking Board Relating to Rule G-
3 on Professional Qualifications

January 23, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1935 
(``Act''),\1\ notice is hereby given that on January 21, 1998, the 
Municipal Securities Rulemaking Board (``Board'' or ``MSRB'') filed 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
a proposed rule change (File No. SR-MSRB-98-2). The proposed rule 
change is described in Items I, II, and III below, which Items have 
been prepared by the Board. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested 
persons.\2\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The Commission is concurrently publishing notice of parallel 
proposed rule changes from other self-regulatory organizations 
relating to continuing education for registered persons. See 
Securities Exchange Act Releases Nos. 39574 (NASD); 39575 (CBOE); 
and 39577 (NYSE).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Board is filing herewith an amendment to rule G-3, on 
professional qualifications (hereinafter referred to as the ``proposed 
rule change''). The proposed rule change consists of an amendment to 
rule G-3 regarding the Board's continuing education requirements. The 
text of the proposed rule change may be examined at the places 
specified in Item IV below.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Board 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 
texts of these statements may be examined at the places specified in 
Item IV below. The Board 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
    The proposed rule change is to revise the Board's continuing 
education requirements contained in rule G-3(h). Rule G-3(h) provides 
for a continuing education program for registered persons of brokers, 
dealers and municipal securities dealers. The program, which is uniform 
within the securities industry, consists of two parts--a Regulatory 
Element and a Firm Element. The Regulatory Element requires registered 
persons to participate in interactive computer-based training at 
specified intervals and encompasses regulatory and compliance issues, 
sales practice concerns and business ethics.
    The Regulatory Element program applies generally to all registered 
persons and currently does not discern between registration types or 
categories. The exiting program contains content common to registered 
representatives, supervisory persons as well as other registration 
categories. The Securities Industry/Regulatory Council on Continuing 
Education (a council of broker-dealer and self-regulatory organization 
(``SRO'') \3\ representatives that oversees and provides ongoing 
development and operation of the program) has recommended development 
of a new program component specifically for supervisors. In addition, 
it is contemplated that in the future, specific programs may be 
implemented for other registration categories. The proposed rule change 
will allow for the Board to require new programs as appropriate with 
customized training for various registration categories, with the 
supervisor's program being the first such initiative. For purposes of 
Board rules, the following registration categories shall be deemed to 
be included in the supervisory categories: Series 8 (Municipal 
Securities Sales Supervisor Examination); Series 27 (Financial and 
Operations Principal Examination); and Series 53 (Municipal Securities 
Principal Qualification Examination).
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    \3\ In addition to the Board, SROs represented on the Council 
include the American Stock Exchange, Chicago Board Options Exchange, 
National Association of Securities Dealers, New York Stock Exchange 
and Philadelphia Stock Exchange.
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    The proposed rule change also addresses the time-frames at which 
registered persons must participate in the Regulatory Element computer-
based training. Rule G-3(h) currently requires all registered persons 
to complete the training on three occasions, i.e., their second, fifth 
and tenth registration anniversaries, and also when they are the 
subject of significant disciplinary action(s). Once persons are 
registered for more than ten years, they are graduated from the program 
and are not required to participate further in the Regulatory Element 
unless they become subject to significant disciplinary action. The 
Council has recommended that this requirement be revised to require 
ongoing participation in the program by registered persons. In 
accordance with that recommendation, the proposed rule change will 
require participation in the Regulatory Element throughout a registered 
person's career, specifically on the second registration anniversary 
and every three years thereafter (i.e, the fifth, eight, eleventh, etc, 
anniversaries), with no graduation from the program.
    The proposed rule change will allow a one-time exemption for 
persons currently graduated from the program by providing that those 
persons who have been registered for more than ten years as of the 
effective date of the rule amendments, and who have not been the 
subject of a disciplinary action during the past ten years, will 
continue to be excluded from required ongoing participation in the 
Regulatory Element. However, persons registered in a

[[Page 4510]]

supervisory capacity will have to have been registered in a supervisory 
capacity for more than 10 years in order to be covered by this one-time 
provision for graduation from participation in the program. Therefore, 
those supervisors who have graduated from the program requirements 
based on their initial registration date who have not completed 10 
years as a supervisor, will be required to re-enter the program.
    The Firm Element requires that each broker, dealer and municipal 
securities dealer conduct annually an analysis of their training needs 
and administer such training, as is appropriate, to their registered 
persons who have direct contact with customers and the immediate 
supervisors of such registered persons, on an ongoing basis in topics 
specifically related to their business such as new products, sales 
practices, risk disclosure and new regulatory requirements and 
concerns. The proposed rule change will require brokers, dealers and 
municipal securities dealers to specifically focus on supervisory 
training needs in conducting their analysis of training needs and, if 
it is determined that there is a specific need for supervisory 
training, it must be addressed in the Firm Element training plan.
    These amendments, which will be adopted uniformly with rule changes 
of the other SRO Council members, will significantly enhance the 
continuing education program by requiring all registered persons to 
participate in the Regulatory Element on an ongoing basis throughout 
their securities industry careers. In addition, the Board believes that 
rule amendments allowing for the implementation of a program 
specifically geared towards supervisors and the issues that may arise 
in that role will result in more effective regulatory training of 
supervisors as well as improved front-line supervision overall of 
brokers, dealers and municipal securities dealers.
2. Statutory Basis
    The Board believes the proposed rule change is consistent with the 
Act and the rules and regulations thereunder. The Board believes that 
the proposed rule change is consistent with Section 15B(b)(2)(A) of the 
Act,\4\ which states that the rules of the Board, as a minimum, shall 
provide such standards of training, experience, competence, and such 
other qualifications as the Board finds necessary or appropriate in the 
public interest or for the protection of investors. The proposed rule 
change is also consistent with Section 15B(b)(2)(C) of the Act,\5\ 
which requires, in pertinent part, that the Board's rules be designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principals of trade, to remove impediments to and 
perfect the mechanism of a free and open market in municipal 
securities, and, in general, to protect investors and the public 
interest. Pursuant to this statutory obligation, the Board has proposed 
this rule change in order to enhance the established continuing 
education program for registered persons.
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    \4\ 15 U.S.C. 78o-4.
    \5\ 15 U.S.C. 78o-4.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Board does not believe that the proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, since it would apply equally to 
all brokers, dealers and municipal securities dealers.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    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.

IV. Solicitation of Comments

    Interested people are invited to submit written data, views, and 
arguments concerning the foregoing. People making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submissions, 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 change 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. Copies of the filing will also be 
available for inspection and copying at the Board's principal offices. 
All submissions should refer to File No. SR-MSRB-98-2 and should be 
submitted by February 19, 1998.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200-30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-2184 Filed 1-28-98; 8:45 am]
BILLING CODE 8010-01-M