[Federal Register Volume 63, Number 61 (Tuesday, March 31, 1998)]
[Notices]
[Pages 15474-15476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8362]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39802; File No. SR-PHLX 98-13]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc., Relating to the Continuing Education 
Requirements of Registered Persons

March 25, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 11, 1998, the 
Philadelphia Stock Exchange, Inc. (``Phlx'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commision is publishing this notice to 
solicit comments on the proposed rule change from interested persons 
and to grant accelerated approval of the proposed rule change.\2\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The Commission has already published for comment rule 
proposals by four other self-regulatory organizations which are 
virtually identical to this Phlx filing. See Securities Exchange Act 
Release Nos. 39574 (January 23, 1998), 63 FR 4510 (January 29, 
1998)(SR-NASD-98-03); 39575 (January 23, 1998), 63 FR 4507 (January 
29, 1998) (SR-CBOE-97-68); 39576 (January 23 1998), 63 FR 4509 
(January 29, 1998) (SR-MSRB-98-02); and 39577 (January 23, 1998), 63 
FR 4513 (January 29, 1998) (SR-NYSE-97-33). The Commission received 
5 comment letters, which were discussed in the order approving the 
other proposals. See Securities Exchange Act Release No. 39712 
(March 3, 1998).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx, in support of the recommendations of The Securities 
Industry/Regulatory Council on Continuing Education, proposes to amend 
both the regulatory and firm element requirements of Rule 640.

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 III 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 640 to 
strengthen the Continuing Education Requirements for registered persons 
and implement a new program specifically designed for managers and 
supervisors. Exchange Rule 640 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, sale 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 640 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 de deemed to be included in the 
supervisory category: Series 4 (Registered Options Principal 
Examination); Series 8 (General Securities Sales Supervisor 
Examination); Series 27 (Financial and Operations Principal 
Examination); Series 28 (Introducing Broker-Dealer Financial and 
Operational Principal Examination); the Series 53 (Municipal

[[Page 15475]]

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 the Phlx.
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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 640 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 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 
640 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 640 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 participations 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 to 
participate in the supervisory 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 640 will required 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.
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 establishment continuing education program for 
registered persons.
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    \4\ 15 U.S.C. 78f(c)(3).
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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

    No written comments were solicited or received with respect to the 
proposed ruled change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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 
Phlx. All submissions should refer to the file number SR-Phlx-98-13 and 
should be submitted by April 21, 1998.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission finds that the Exchange's proposal is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange. Specifically, 
the Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\5\ which 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. The Commission 
further believes that the proposed rule change is consistent with the 
provisions of Section 6(c)(3)(B) of the Act,\6\ which makes it the 
responsibility of an exchange to prescribe standards of training, 
experience, and competence for persons associated with SRO members.
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    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(c)(3)(B).
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    The Commission also believes that the proposed rule change is 
consistent with the purposes underlying Section 15(b)(7) of the Act, 
which generally prohibits a registered person from effecting any 
transaction in, or inducing the purchase or sale of, any security 
unless such registered person meets the standard of training, 
competence and other qualifications as the Commission finds necessary 
or appropriate in the public interest or for the protection of 
investors. The Commission believes that the Exchange's proposed rule 
change is an appropriate means of maintaining and reinforcing the 
initial qualification standards required of a registered person and 
will significantly enhance the continuing education program by 
requiring all registered persons to participate in the Regulatory 
Element throughout their securities industry careers.\7\
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    \7\ These amendments proposed by the Phlx on continuing 
education have been uniformly adopted by the other SRO Council 
members. See Securities Exchange Act Release Nos. 39711 (March 3, 
1998) and 39712 (March 3, 1998).
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    The Commission therefore finds good cause for approving the 
proposed rule change (SR-Phlx-98-13) prior to the

[[Page 15476]]

thirtieth day after the date of publication of notice of filing thereof 
in the Federal Register.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-Phlx-98-13) be, and 
hereby is, approved. The rule change shall become effective on July 1, 
1998.

    \8\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-8362 Filed 3-30-98; 8:45 am]
BILLING CODE 8010-01-M