[Federal Register Volume 67, Number 80 (Thursday, April 25, 2002)]
[Notices]
[Pages 20564-20565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10155]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45778; File No. SR-NASD-2002-47]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. Relating to Revisions to the Limited 
Principal--Introducing Broker/Dealer Financial and Operations (Series 
28) Examination Program

April 18, 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 April 10, 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 has designated this proposed rule 
change as one constituting a stated policy, practice, or interpretation 
with respect to the meaning, administration, or enforcement of an 
existing rule of the self-regulatory organization under section 
19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(f)(1) \4\ thereunder, 
which renders the proposal effective upon filing with the 
Commission.\5\ 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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
    \5\ See Letter to Alden S. Adkins, Senior Vice President and 
General Counsel, NASD Regulation, from Belinda Blaine, Associate 
Director, Division of Market Regulation, SEC, dated July 24, 2000.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    NASD Regulation is proposing revisions to the Limited Principal--
Introducing Broker/Dealer Financial and Operations (Series 28) 
examination program. The proposed revisions update the Series 28 
examination study outline,\6\ selection specifications,\7\ and question 
bank \8\ to reflect changes to the laws, rules, and regulations covered 
by the examination and to reflect more accurately the duties and 
responsibilities of a Series 28 principal. Additionally, the proposed 
revisions change the format of the Series 28 examination. The proposed 
revisions do not result in any textual changes to the By-Laws, 
Schedules to the By-Laws, or Rules of NASD Regulation or the NASD.
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    \6\ The text of the Series 28 study outline is available at NASD 
Regulation and at the Commission.
    \7\ NASD Regulation has requested confidential treatment for the 
Series 28 examination, and thus the specifications are omitted from 
this filing. The specifications have been filed separately with the 
Commission pursuant to Rule 24b-2 under the Act. 17 CFR 240.24b-2.
    \8\ Based upon instruction from the Commission staff, NASD 
Regulation is not filing the question bank for Commission review. 
See Letter to Alden S. Adkins, Senior Vice President and General 
Counsel, NASD Regulation, from Belinda Blaine, Associate Director, 
Division of Market Regulation, SEC, dated July 24, 2000.
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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
    Pursuant to section 15A(g)(3) of the Act,\9\ which requires the 
NASD to prescribe standards of training, experience, and competence for 
persons associated with NASD members, the NASD has developed 
examinations, and administers examinations developed by other self-
regulatory organizations, that are designed to establish that persons 
associated with NASD members have attained specified levels of 
competence and knowledge. NASD Regulation periodically reviews the 
content of the examinations to determine whether revisions are 
necessary or appropriate in view of changes pertaining to the subject 
matter covered by the examinations.
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    \9\ 15 U.S.C. 78o-3(g)(3).
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    The Series 28 examination is an NASD examination that qualifies an 
individual to function as a limited principal responsible for matters 
involving an introducing member's financial and operational management. 
A Series 28 principal may serve as an introducing member's chief 
financial officer.
    A committee of industry representatives, together with NASD 
Regulation staff, recently undertook a review of the Series 28 
examination program. As a result of this review, NASD Regulation is 
proposing revisions to the Series 28 examination study outline to 
reflect changes in relevant laws, rules, and regulations covered by the 
examination, including rules concerning anti-money laundering and 
Regulation S-P,\10\ and to reflect more accurately the duties and 
responsibilities of a Series 28 principal.
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    \10\ 17 CFR 248.1-18; 17 CFR 248.30; and 17 CFR 248, Appendix A.
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    Additionally, NASD Regulation is proposing to reformat the 
examination. Currently, the Series 28 examination is a two-part test 
graded on a 100 point system. The first part includes 75 multiple-
choice questions (each worth one point) and the second part, which is 
worth 25 points, requires individuals to perform computations based on 
financial information in a member's trial balance. Individuals taking 
the examination may be given partial credit for answers to 
computational questions in the second part. NASD Regulation is 
proposing to change the format of the Series 28 examination to make it 
a one-part examination with a total of 85 multiple-choice questions 
(each worth one point), and will not give partial credit for any 
answers.
    To adequately test the material covered in the revised examination, 
NASD Regulation is proposing to reorganize the substantive sections of 
the outline and to allocate questions to each section as follows: 
Keeping and Preservation of Records and Broker/Dealer Financial 
Reporting Requirements, 15 questions; Net Capital Requirements, 36 
questions; Customer Protection, 10 questions; and Other Relevant 
Regulations and Interpretations, 24 questions.
    NASD Regulation is proposing similar changes to the corresponding 
sections of the Series 28 examination selection specifications and 
question bank. NASD Regulation is proposing to change the testing time 
for the Series 28 examination to 2 hours from 3 hours. The passing 
score for the examination will continue to be 70%.

2. Statutory Basis

    NASD Regulation believes that the proposed revisions are consistent 
with the provisions of sections 15A(b)(6) \11\ and 15A(g)(3) of the 
Act,\12\ which authorize the NASD to prescribe standards of training, 
experience, and

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competence for persons associated with NASD members.
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    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78o-3(g)(3).
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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 proposed rule change has become effective pursuant to section 
19(b)(3)(A)(i) of the Act \13\ and Rule 19b-4(f)(1) \14\ thereunder, in 
that the foregoing proposed rule change constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization. NASD Regulation proposes to implement the 
revised Series 28 examination program on August 1, 2002.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(i).
    \14\ 17 CFR 240.19b-4(f)(1).
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    At any time within 60 days of this filing, the Commission may 
summarily abrogate this proposal 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-2002-47 and should be 
submitted by May 16, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-10155 Filed 4-24-02; 8:45 am]
BILLING CODE 8010-01-P