[Federal Register Volume 67, Number 11 (Wednesday, January 16, 2002)]
[Notices]
[Pages 2256-2258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1103]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45259; File No. SR-NASD-2002-03]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. To Relieve Registered Representatives Serving 
in the Armed Forces From Continuing Education Requirements

January 9, 2002.
    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 January 7, 2002, 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'' or ``SEC'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by NASD Regulation. NASD Regulation filed the proposal pursuant to 
section 19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(1) \4\ thereunder, 
in that the proposed rule change constitutes a stated policy, practice, 
or interpretation with respect to the meaning, administration, or 
enforcement of an existing rule, which renders the proposal effective 
upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1).

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[[Page 2257]]

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation proposes to amend NASD IM-1000-2 to codify the 
staff's interpretive position regarding the relief from NASD Rule 1120, 
Continuing Education Requirements, for securities industry 
professionals who volunteer or are called into active military duty. 
The text of the proposed rule change is below. Proposed new language is 
in italics; proposed deletions are in brackets.

IM-1000-2. Status of Sole Proprietors and Registered Representatives 
Serving in the Armed Forces

    Any Registered [registered] Representative of a member who 
volunteers or is called into the Armed Forces of the United States 
shall be placed, after proper notification to the Executive Office, 
upon inactive status and need not be re-registered by such member upon 
his or her return to active employment with the member.
    Any member (Sole Proprietor) who temporarily closes his or her 
business by reason of volunteering or being called into the Armed 
Forces of the United States, shall be placed, after proper notification 
to the Executive Office, on inactive status until his or her return to 
active participation in the investment banking and securities business.
    A Registered Representative who is placed on inactive status as set 
forth above shall not be included within the definition of 
``Personnel'' for purposes of the dues or assessments as provided in 
Article VI of the By-Laws.
    Any member placed on inactive status as set forth above shall not 
be required to pay dues or assessments during the pendency of such 
inactive status and shall not be required to pay an admission fee upon 
return to active participation in the investment banking and securities 
business.
    A Registered Representative who is placed on inactive status as set 
forth above shall not be required to complete either of the Regulatory 
or Firm Elements of the continuing education requirements set forth in 
Rule 1120 during the pendency of such inactive status.
* * * * *

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 its proposal and 
discussed any comments it received regarding the proposal. 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
    NASD IM-1000-2 (``the Interpretation'') addresses the registration 
status of sole proprietors and registered representatives serving in 
the armed forces. The Interpretation states that securities industry 
professionals who volunteer or are called into active military duty 
(``Active Duty Professionals'') will be placed in a specially 
designated ``inactive'' status once the NASD is notified of their 
military service, but will remain registered for NASD purposes. While 
the Interpretation does not address continuing education obligations 
with respect to Active Duty Professionals, NASD Regulation staff has 
interpreted Rule 1120 to relieve Active Duty Professionals from 
continuing education obligations for the period of time that they are 
on active duty. The proposed rule change codifies the staff's position 
through amendments to the Interpretation. The Securities Industry/
Regulatory Council on Continuing Education (``CE Council'') supports 
the staff's views.\5\
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    \5\ The CE Council, of which all of the self-regulatory 
organizations and 14 industry representatives are members, is 
responsible for the oversight of the continuing education program as 
a whole. The SEC and North American Securities Administrators 
Association also send liaisons to attend CE Council meetings.
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    NASD Regulation has, for the reasons set forth below, relieved 
Active Duty Professionals from continuing education requirements. Rule 
1120(a)(2) provides that ``Unless otherwise determined by the 
Association, any registered persons who have not completed the 
Regulatory Element within the prescribed time frames will have their 
registrations deemed inactive until such time as the requirements of 
the program have been satisfied.'' A registered person may satisfy his 
or her Regulatory Element requirement at a Prometric Center in the 
United States and Canada, or at a VUE Center in Europe and the Pacific 
Rim. Because it is generally not practical for Active Duty 
Professionals to be at a facility that delivers the Regulatory Element, 
NASD Regulation believes that Active Duty Professionals should be 
relieved from fulfilling the Regulatory Element requirements that arise 
during the period of time that they are on active duty.
    With respect to the Firm Element requirements of continuing 
education, Rule 1120(b)(1) provides that only persons who have ``direct 
contact with customers'' in the conduct of securities activities are 
subject to the Firm Element requirements. Active Duty Professionals are 
excluded from the Firm Element requirements because they do not have 
contact with customers. Accordingly, the proposed amendment to the 
Interpretation expressly states that Active Duty Professionals are not 
required to complete either of the Regulatory or Firm Elements of the 
continuing education requirements set forth in Rule 1120 during the 
pendency of such inactive status.
2. Statutory Basis
    NASD Regulation believes that the proposed rule change is 
consistent with the provisions of section 15A(b)(6) of the Act,\6\ 
which requires, among other things, that the Association's rules 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 codifying the staff's interpretative position to relieve Active 
Duty Professionals from the NASD's continuing education requirements 
during the time they are on active duty is consistent with the 
protection of investors and the public interest.
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    \6\ 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, as amended.

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

    The foregoing proposal has become effective pursuant to section 
19(b)(3)(A) of the Act,\7\ and Rule 19b-4(f)(1) \8\

[[Page 2258]]

thereunder, in that it constitutes a stated policy, practice, or 
interpretation with respect to the meeting, administration, or 
enforcement of an existing rule.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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 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 such filing will also be available for 
inspection and copying at the principal office of the NASD. All 
submissions should refer to file number SR-NASD-2002-03 and should be 
submitted by February 6, 2002.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-1103 Filed 1-15-02; 8:45 am]
BILLING CODE 8010-01-M