[Federal Register Volume 65, Number 243 (Monday, December 18, 2000)]
[Notices]
[Pages 79143-79144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32092]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43701; File No. SR-NASD-00-64]


Self-Regulatory Organizations; Order Granting Approval of 
Proposed Rule Change by the National Association of Securities Dealers, 
Inc. To Allow In-Firm Delivery of the Regulatory Element of the 
Continuing Education Requirements

December 11, 2000.

I. Introduction

    On October 25, 2000, the National Association of Securities 
Dealers, Inc. (``NASD'' or ``Association''), through its wholly owned 
subsidiary, NASD Regulation, Inc. (``NASD Regulation''), filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC''), 
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 that 
would permit the in-firm delivery of the Regulatory Element of the 
Continuing Education Requirements. Notice of the proposed rule change 
appeared in the Federal Register on November 6, 2000.\3\ The Commission 
received one comment on the proposed rule change.\4\ This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 43492 (October 27, 
2000), 65 FR 66576.
    \4\ See  November 22, 2000 letter from Tamara K. Reed, Associate 
Counsel, Investment Company Institute (``ICI'') to Jonathan G. Katz, 
Secretary, SEC (``ICI Letter'').
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II. Description of the Proposal

    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 
vender.
    The Regulatory Element is a 3\1/2\ hour computer-based training 
program. 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 representatives from a 
broad cross section of broker/dealers, and six self-regulatory 
organizations, including the NASD. The Council, working with 
representatives from the North American Securities Administrators 
Association 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.

III. Summary of Comments

    The ICI expressed its support for the proposal, stating that the 
proposed changes may facilitate the ability of ICI's members to comply 
with the Regulatory Element requirements.\5\ Additionally, the ICI 
believes the proposed amendment will reduce the time and any related 
travel costs that registered representatives spend to take the 
Regulatory Element.\6\ Finally, the ICI believes that the conditions 
proposed in the amendment regarding in-firm delivery adequately balance 
the interest of NASD Regulation in protecting the integrity of the 
Regulatory Element with the interest of member firms in not being 
unduly burdened when exercising this option.\7\ For these reasons, the 
ICI expressed its support of the proposed amendments to NASD Rule 1120.
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    \5\ See ICI Letter at p. 1.
    \6\ Id.
    \7\ See ICI Letter at p. 2.
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IV. Discussion

    The Commission has reviewed carefully the proposed rule change, and 
finds that it is consistent with the Act and the rules and regulations 
promulgated thereunder.\8\ Specifically, the Commission finds that 
approval of the proposed rule change is consistent with Section 
15A(b)(6) \9\ of the Act.
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    \8\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition and capital 
formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78o-3(b)(6).
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    Section 15A(b)(6) \10\ requires that the rules of a registered 
national securities association be designed to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and in general, protect investors and the public interest. The 
Commission believes that the proposal should facilitate compliance with 
the Regulatory Element of the Continuing Education Requirements by 
making the program easily accessible to registered persons via in-firm 
delivery, as opposed to requiring that it be administered at the 
location of an outside vendor, and by allowing firms of any size to 
partake of the in-firm delivery procedures. The Commission is satisfied 
that the proposal provides reasonable safeguards to uphold the 
integrity of the program, as well as delineating proper conditions for 
in-firm delivery relating to computer hardware, consistent with the 
requirements specified by the Council. Finally, the Commission believes 
the proposal establishes reasonable requirements with regard to the 
security of the training delivery environment, as specified by the 
Council.
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    \10\ Id.
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V. Conclusion

    For the above reasons, the Commission finds that the proposed rule 
change is consistent with the provisions of the Act, in general, and 
with Section 15A(b)(6),\11\ in particular.
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    \11\ Id.
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    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the

[[Page 79144]]

proposed rule change (SR-NASD-00-64), be and hereby is approved.
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    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-32092 Filed 12-15-00; 8:45 am]
BILLING CODE 8010-01-M