[Federal Register Volume 65, Number 215 (Monday, November 6, 2000)]
[Notices]
[Pages 66576-66578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-28386]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43492; File No. SR-NASD-00-64]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to the Regulatory Element of the Continuing Education Requirements

October 27, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 25, 2000, the National Association of Securities Dealers, 
Inc. (``NASD''), through its wholly owned subsidiary, NASD Regulation, 
Inc. (``NASD Regulation''), filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by NASD 
Regulation. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation proposes to amend NASD Rule 1120(a) to permit the 
in-firm delivery of the Regulatory Element of the Continuing Education 
Requirements. Currently, this computer-based training program can be 
administered to registered persons only at the location of an outside 
vendor. Below is the text of the proposed rule change. Proposed new 
language is in italics.

1000. Membership, Registration and Qualification Requirements * * *

1120. Continuing Education Requirements
    This Rule prescribes requirements regarding the continuing 
education of certain registered persons subsequent to their initial 
qualification and registration with the Association. The requirements 
shall consist of a Regulatory Element and a Firm Element as set forth 
below.
    (a) Regulatory Element
    (1) through (5) No change
    (6) In-Firm Delivery of the Regulatory Element Members will be 
permitted to administer the continuing education Regulatory Element 
program to their registered persons by instituting an in-firm program 
acceptable to the Association.
    The following procedures are required:
    (A) Principal/Officer In-Charge. The firm has designated a 
principal to be responsible for the in-firm delivery of the Regulatory 
Element.
    (B) Site Requirements.
    (i) The location of all delivery sites will be under the control of 
the firm.
    (ii) Delivery of Regulatory Element continuing education all take 
place in an environment conducive to training. (Examples: a training 
facility, conference room or other area dedicated to this purpose would 
be appropriate. Inappropriate locations would include a personal office 
or any location that is not or cannot be secured from traffic and 
interruptions.)
    (iii) Where multiple delivery terminals are placed in a room, 
adequate separation between terminals will be maintained.
    (C) Technology Requirements. The communication links and firm 
delivery computer hardware must comply with standards defined by the 
Association or its designated vendor.
    (D) Supervision.
    (i) The firm's Written Supervisory Procedures must contain the 
procedures implemented to comply with the requirements of in-firm 
delivery of the Regulatory Element continuing education.
    (ii) The firm's Written Supervisory Procedures must identify the 
principal designated pursuant to Rule 1120(a)(6)(A) and contain a list 
of individuals authorized by the firm to serve as proctors.
    (iii) Firm locations for delivery of the Regulatory element 
continuing education will be specifically listed in the firm's Written 
Supervisory Procedures.
    (E) Proctors.
    (i) All sessions will be proctored by an authorized person during 
the entire Regulatory Element session. Proctors must be present in the 
session room or must be able to view the person(s) sitting for 
Regulatory Element continuing education through a window or by video 
monitor.
    (ii) The individual responsible for proctoring at each 
administration will sign a certification that required procedures have 
been followed, that no material from Regulatory Element continuing 
education has been reproduced, and that no candidate received any 
assistance to complete the session. Such certification may be part of 
the sign-in log required under Rule 1120(a)6)(F).
    (iii) Individual serving as proctors must be persons registered 
with an SRO and supervised by the designated principal for purposes of 
in-firm delivery of the Regulatory Element continuing education.
    (iv) Proctors will check and verify the identification of all 
individuals taking Regulatory Element continuing education.
    (F) Administration.
    (i) All appointments will be scheduled in advance using the 
procedures and software specified by the Association to communicate 
with the Association's system and designated vendor.
    (ii) The firm/proctor will conduct each session in accordance with 
the administrative appointment scheduling procedures established by the 
Association or its designated vendor.
    (iii) A sign-in log will be maintained at the delivery facility. 
Logs will contain the date of each session, the name and social 
security number of the individual taking the session, that required 
identification was checked, the sign-in time, the sign-out time, and 
the name of the individual proctoring the session. Such logs are 
required to be retained pursuant to SEC Rules 17a-3 and 17a-4.
    (iv) No material will be permitted to be utilized for the session 
nor may any session-related material be removed.

[[Page 66577]]

    (v) Delivery sites will be made available for inspection by the 
SROs.
    (vi) Before commencing in-firm delivery of the Regulatory Element 
continuing education, members are required to file with their 
Designated Examining Authority (``DEA''), a letter of attestation (as 
specified below) signed by a principal executive officer or executive 
representative, attesting to the establishment of required procedures 
addressing principal in-charge, supervision, site, technology, 
proctors, and administrative requirements. Letters filed with NASD 
Regulation, Inc. should be sent to Member Regulation, Continuing 
Education Department, 9509 Key West Avenue, Rockville, MD 20850.

Letter of Attestation for In-Firm Delivery of Regulatory Element 
Continuing Education

[Name of member] has established procedures for delivering Regulatory 
Element continuing education on its premises. I have determined that 
these procedures are reasonably designed to comply with SRO 
requirements pertaining to in-firm delivery of Regulatory Element 
continuing education, including that such procedures have been 
implemented to comply with principal/officer in-charge, supervision, 
site, technology, proctors, and administrative requirements.
Signature
----------------------------------------------------------------------
Printed name
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Title [Must be signed by a Principal Executive Officer (or Executive 
Representative) of the firm]
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Date
    (b) Firm Element No change.
* * * * *

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

    In its filing with the Commission, NASD Regulation 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 text of these statements may be examined at the places 
specified in Item IV below. NASD Regulation 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 Regulatory Element is a 3\1/2\ hour computer-based training 
program that currently can only be administered to registered persons 
at the location of an outside vendor. NASD Rule 1120(a) requires that 
each registered person, who is not exempt from the Rule, complete the 
Regulatory Element on the occurrence of his or her second registration 
anniversary and every three years thereafter. On each occasion, the 
training must be completed within 120 days after the registered 
person's anniversary date. A registered person who has not completed 
the Regulatory Element within the prescribed time period is deemed to 
be inactive until the Regulatory Element has been fulfilled, and may 
not conduct, or be compensated for, activities requiring a securities 
registration.
    The Securities Industry/Regulatory Council on Continuing Education 
(``Council'') is responsible for the oversight of the continuing 
education program for the securities industry. The Council's duties 
include recommending and helping to develop specific content and 
questions for the Regulatory Element, and minimum core curricula for 
the Firm Element. The Council is comprised of 14 representatives from a 
broad cross section of broker/dealers, six self-regulatory 
organizations, including the NASD. The Council, working with 
representatives from the North American Securities Administrators 
Association, and with the knowledge of the Council's SEC liaisons, has 
developed a model under which broker/dealers may deliver the Regulatory 
Element computer-based training on firm premises. The model requires 
that the broker/dealer meet certain conditions for in-firm delivery 
relating to computer hardware and to the security of the training 
delivery environment. The proposed amendments to Rule 1120(a) 
encapsulate the delivery requirements as specified by the Council. 
Firms of any size may take advantage of the in-firm delivery 
procedures.
2. Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of Section 15A(b)(6) of the Act,\3\ 
which requires, among other things, that the Association's rules must 
be designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest. NASD Regulation believes 
that the proposed rule change will facilitate registered persons' 
satisfying their obligations to meet the Regulatory Element of the 
continuing education requirement.
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    \3\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NASD Regulation does not believe that the proposed rule change will 
result in 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

    Written 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 NASD 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, 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, NW, Washington, DC 20549-0609. 
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 this 
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 such 
filing will also be available for inspection and copying at

[[Page 66578]]

the principal office of the NASD. All submissions should refer to file 
number SR-NASD-00-64 and should be submitted by November 27, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-28386 Filed 11-3-00; 8:45 am]
BILLING CODE 8010-01-M