[Federal Register Volume 67, Number 83 (Tuesday, April 30, 2002)]
[Notices]
[Pages 21309-21311]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10582]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45808; File No. SR-NASD-2002-50]


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--Direct Participation Programs (Series 39) Examination 
Program

April 24, 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--

[[Page 21310]]

Direct Participation Programs (Series 39) examination program. The 
proposed revisions update the Series 39 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 direct 
participation programs principal. The proposed revisions also change 
the method for scoring the Series 39 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 39 study outline is available at NASD 
Regulation and at the Commission.
    \7\ NASD Regulation has requested confidential treatment for the 
Series 39 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 39 examination is an NASD examination that qualifies an 
individual to function as a limited principal responsible solely for a 
member's activities with respect to equity interests in or the debt of 
direct participation programs. A committee of industry representatives, 
together with NASD Regulation staff, recently undertook a review of the 
Series 39 examination program. As a result of this review, NASD 
Regulation is proposing revisions to the Series 39 examination study 
outline to reflect changes in relevant laws, rules, and regulations 
covered by the examination, including rules concerning anti-money 
laundering as well as Regulations FD \10\ and S-P,\11\ and to reflect 
more accurately the duties and responsibilities of a direct 
participation programs principal.
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    \10\ 17 CFR 243.100-103.
    \11\ 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 change the method for 
scoring the Series 39 examination. Currently, the Series 39 examination 
is graded based on two passing scores. Individuals taking the 
examination must obtain a score of 70% on the substantive section 
relating to compliance with financial responsibility rules and a score 
of 70% on the remaining substantive sections. Those individuals who 
fail either part must retake the Series 39 examination. NASD Regulation 
is proposing to combine both parts and require 70% as the passing 
score.\12\ NASD Regulation also is proposing to reduce the total number 
of multiple-choice questions to 95 from 100. The testing time for the 
Series 39 examination will remain at 2 hours.
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    \12\ NASD Rules 1022(b) and 1022(c) were recently amended to 
require members that are subject to Rule 15c3-1 under the Act to 
have at least one associated person registered as a financial and 
operations principal. 17 CFR 240.15c3-1. See Securities Exchange Act 
Release No. 44332 (May 21, 2001), 66 FR 29196 (May 29, 2001) (Order 
approving SR-NASD-2000-77). In light of these amendments, NASD 
Regulation believes that it is no longer necessary for an individual 
who is qualifying as a direct participation programs principal to 
pass a separately scored substantive section of the examination 
relating to financial responsibility. Accordingly, NASD Regulation 
is proposing to combine the substantive section relating to 
compliance with financial responsibility rules with the other 
substantive sections and to require one passing score for the entire 
examination. Additionally, as discussed below, NASD Regulation is 
proposing to decrease the number of questions in the substantive 
section relating to compliance with financial responsibility rules 
to 17 questions from 24 questions.
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    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: 
Structure and Regulation of Direct Participation Program Offerings, 47 
questions; Sales Supervision, General Supervision of Employees, 
Regulatory Framework of NASD, 31 questions; and Compliance with 
Financial Responsibility Rules, 17 questions.
    NASD Regulation is proposing similar changes to the corresponding 
sections of the Series 39 examination selection specifications and 
question bank.
2. Statutory Basis
    NASD Regulation believes that the proposed revisions are consistent 
with the provisions of Sections 15A(b)(6) \13\ and 15A(g)(3) of the 
Act,\14\ which authorize the NASD to prescribe standards of training, 
experience, and competence for persons associated with NASD members.
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    \13\ 15 U.S.C. 78o-3(b)(6).
    \14\ 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 \15\ and Rule 19b-4(f)(1) \16\ 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 39 examination program on August 1, 2002.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(i).
    \16\ 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.

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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-2002-50 and should be 
submitted by May 21, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-10582 Filed 4-29-02; 8:45 am]
BILLING CODE 8010-01-U