[Federal Register Volume 63, Number 19 (Thursday, January 29, 1998)]
[Notices]
[Pages 4513-4515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2185]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39577; File No. SR-NYSE-97-33]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Continuing 
Education for Registered Persons

January 23, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 8, 1997, the New 
York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the Exchange. 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 39576 (MSRB).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Rule 345A (``Continuing 
Education for Registered Persons''). Below is the text of the proposed 
rule change. Proposed new language is italicized; proposed deletions 
are in brackets.

Continuing Education for Registered Persons

Rule 345A
    (a) Regulatory Element--No member or member organization shall 
permit any registered person to continue to, and no registered person 
shall continue to, perform duties as a registered person, unless such 
person has complied with the continuing education requirements of 
Section (a) of this Rule.
    Each registered person shall complete the Regulatory Element of the 
continuing education program on [three occasions, after] the occurrence 
of their second[, fifth and tenth] registration anniversary date[s] and 
every three years thereafter or as otherwise prescribed by the 
Exchange. On each [of the three] occasion[s], the Regulatory Element 
must be completed within one hundred twenty days after the person's 
registration anniversary date. A person's initial registration date 
shall establish the cycle of anniversary dates for purposes of this 
Rule. The content of the Regulatory Element of the program shall be 
[prescribed] determined by the Exchange for each registration category 
of persons subject to the rule.
    (1) [Registered] Persons who have been continuously registered for 
more than ten years as of the effective date of this rule [shall be] 
are exempt from the requirements of this rule relative to participation 
in the Regulatory Element of the continuing education program, provided 
such persons have not been subject to any disciplinary action within 
the last ten years as enumerated in subsection (a)(3)(i)-(ii) of this 
Rule. However, persons delegated supervisory responsibility or 
authority pursuant to Rule 342 and registered in such supervisory 
capacity are exempt from participation in the Regulatory Element under 
this provision only if they have been continuously registered in a 
supervisory capacity for more than ten years as of the effective date 
of this rule and provided that such supervisory person has not been 
subject to any disciplinary action under subsection (a)(3)(i)-(ii) of 
this Rule.
    In the event that a registered person who is exempt from 
participation in the Regulatory Element subsequently becomes the 
subject of a disciplinary action as enumerated in subsection (a)(3)(i)-
(ii), such person shall be required to satisfy the requirements of the 
Regulatory Element as if the date the disciplinary action becomes final 
is the person's initial registration anniversary date. [Persons who 
have been currently registered for ten years or less as of the 
effective date of this Rule shall initially participate in the 
Regulatory Element of the continuing education program within one 
hundred twenty days after the occurrence of the second, fifth or tenth 
registration anniversary date, whichever anniversary date first 
applies, and on the applicable registration anniversary dates 
thereafter. Such persons will have satisfied the requirements of the 
Regulatory Element of the program after participation on the tenth 
registration anniversary.]
    [All registered persons who have satisfied the requirements of the 
Regulatory Element shall be exempt from further participation in the 
Regulatory Element of the program, subject to re-entry into the program 
as set forth in subsection (a)(3) of this Rule.]
    (2) No change.

[[Page 4514]]

    (3) Re-entry into the program--Unless otherwise determined by the 
Exchange, a registered person will be required to re-enter the 
Regulatory Element of the program and satisfy the program's 
requirements in their entirety in the event such person:
    (i)-(iii) No change.
    Re-entry shall commence with initial participation within one 
hundred twenty days of the registered person becoming subject to the 
statutory disqualification, in the case of (i) above, or the completion 
of the sanction or the disciplinary action becoming final, in the case 
of (ii) and (iii) above. [, and on three additional occasions 
thereafter, after the occurrence of their second, fifth and tenth 
anniversary dates of re-entry into the program, notwithstanding that 
such person has completed all or part of the program requirements based 
on length of time as a registered person or completion of ten years of 
participation in the program] The date that the disciplinary action 
becomes final will be deemed the person's initial registration 
anniversary date for purposes of this Rule.
    (b) Firm Element:
    (1) No change.
    (2) Standards
    (i) Each member and member organization must maintain a continuing 
and current education program for its covered registered persons to 
enhance their securities knowledge, skills and professionalism. At a 
minimum, each member and member organization shall at least annually 
evaluate and prioritize its training needs and develop a written 
training plan. The plan must take into consideration the member's or 
member organization's size, organizational structure, and scope of 
business activities, as well as regulatory developments and the 
performance of covered registered persons in the Regulatory Element. If 
a member's or member organization's analysis determines a need for 
supervisory training for persons with supervisory responsibilities, 
such training must be included in the member's or member organization's 
training plan.
    (ii)-(iii) No Change.
    (3) No change.
    (4) No change.
    * * * Supplementary Material.
    .10  No change.
    .20  No change.
    [.30  A registered person who has been continuously registered for 
more than ten years as of the date of implementation of this Rule who 
has been subject to a disciplinary action as enumerated in subsections 
(a) (3)(i)-(ii) of the Rule within the last ten years, will be required 
to satisfy the requirements of the Regulatory Element of the continuing 
education program by participation for the period from the date of 
implementation of this rule to ten years after the occurrence of the 
disciplinary action.]
    [.40] .30  Any registered person who has terminated associated with 
a registered broker or dealer and who has, within two years of the date 
of termination, become reassociated in a registered capacity with a 
registered broker or dealer shall participate in the Regulatory Element 
of the continuing education program [on three occasions, after the 
occurrence of their second, fifth or tenth] at such intervals that 
apply (second registration anniversary and every three years 
thereafter) based on the initial registration anniversary date, rather 
than based on the date of reassociation in a registered capacity.
    Any former registered person who becomes reassociated in a 
registered capacity with a registered broker or dealer more than two 
years after termination as such will be required to satisfy the 
program's requirements in their entirety [on three occasions] (second 
registration anniversary and every three years thereafter), based on 
the most recent registration date.
    [.50] .40  No change in text.

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 Exchange included statements 
concerning the purpose of, and statutory basis for, the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The Exchange 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 purpose of the proposed rule change is to revise Rule 345A. 
Exchange Rule 345A provides for a continuing education program for 
registered persons of Exchange members and member organizations. The 
program, which is uniform within the 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 existing 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 amendments 
to Rule 345A will allow for the Exchange to require specific new 
programs as appropriate with customized training for various 
registration categories, with the supervisor's program, being the first 
such initiative. For purposes of Exchange rules, the following 
registration categories shall be deemed to be included in the 
supervisory category: Series 4 (Registered Options Principal 
Examination); Series 8 (General Securities Sales Supervisor 
Examination); Series 12 (NYSE Branch Manager Examination); Series 14 
(NYSE Compliance Official Examination); Series 16 (NYSE Supervisory 
Analyst Examination); Series 27 (Financial and Operations Principal 
Examination); Series 28 (Introducing Broker-Dealer Financial and 
Operational Principal Examination); and the Series 53 (Municipal 
Securities Principal Qualification Examination).
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    \3\ SROs represented on the Council include the American Stock 
Exchange, Chicago Board Options Exchange, Municipal Securities 
Rulemaking Board, National Association of Securities Dealers, New 
York Stock Exchange, and Philadelphia Stock Exchange.
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    The proposed amendments also address the time-frames at which 
registered persons must participate in the Regulatory Element computer-
based training. Rule 345A 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 currently graduated from the program and 
are not required to participate further in the Regulatory Element 
unless they become subject to significant

[[Page 4515]]

disciplinary action. The Council has recommended that the requirement 
be revised to require ongoing participation in the program by 
registered persons. In accordance with that recommendation, the 
proposed amendments to Rule 345A 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, eighth, eleventh, etc. 
anniversaries), with no graduation from the program.
    Proposed amended Rule 345A 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 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, but who have not completed 10 
years as a supervisor, will be required to re-enter the program.
    The Firm Element requires that each member and member organization 
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 
amendments to Rule 345A will require members and member organizations 
to additionally 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, address such training needs 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, we believe 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 members and member 
organizations.
2. Statutory Basis
    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 Section 6(c)(3) of the 
Act.\4\ Under that Section, it is the Exchange's responsibility to 
prescribe standards of training, experience and competence for persons 
associated with Exchange members and member organizations. Pursuant to 
this statutory obligation, the Exchange 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. 78f(c)(3).
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    The proposed rule change is also consistent with the requirements 
of Section 6(b)(5) 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.
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    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposal does not impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act.

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 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 persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons 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 submission, 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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NYSE. All submissions should refer to the file number SR-NYSE-97-33 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. 98-2185 Filed 1-28-98; 8:45 am]
BILLING CODE 8010-01-M