[Federal Register Volume 67, Number 162 (Wednesday, August 21, 2002)]
[Notices]
[Pages 54248-54249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21324]


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SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-46351; File No. SR-NASD-2002-110)


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. to 
Establish a New Registration Category for Proctors of In-Firm Delivery 
of the Regulatory Element of the Continuing Education Requirements

August 14, 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 August 8, 2002, the National Association of Securities Dealers, Inc. 
(``NASD'') 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 the NASD. 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

    The NASD proposes to establish NASD Rule 1043, a new registration 
category for proctors of in-firm delivery of the Regulatory Element of 
the NASD's continuing education requirements. The text of the proposed 
rule change is below. Proposed new language is in italics; proposed 
deletions are in brackets.
1040. Registration of Assistant Representatives [-Order Processing] and 
Proctors
1041. Registration Requirements for Assistant Representatives
    (a) through (c) No change.
1042. Restrictions for Assistant Representatives
    (a) through (c) No change.

1043. Proctors of In-Firm Delivery of Regulatory Element

    (a) Any person associated with a member seeking to be designated as 
a Proctor under Rule 1120(a)(6)(E) for the purposes of in-firm delivery 
of the Regulatory Element shall be required to be registered pursuant 
to Rule 1120(a)(6)(E)(iii), but shall not be required to pass a 
Qualification Examination.
    (b) Any person associated with a member may be designated as a 
Proctor upon approval of an Application for Registration pursuant to 
Article V, Section 2 of NASD's By-Laws. Any person whose sole 
registration is as a Proctor pursuant to this Rule 1043 shall not be 
qualified to function in any other area requiring registration with 
NASD.
    (c) Nothing in this Rule 1043 shall prohibit a person who is 
registered with NASD in any other capacity from also serving as a 
Proctor without being designated as such under these provisions.
* * * * *

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

    In its filing with the Commission, the NASD 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. The NASD 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 purpose of the proposed rule change is to establish a new 
registration category for proctors of in-firm delivery of the 
Regulatory Element of the NASD's continuing education requirements. The 
Regulatory Element requires all registered persons to participate in a 
prescribed computer-based training session within 120 days of their 
second registration anniversary date and every three years thereafter. 
The Regulatory Element focuses on compliance, regulatory and ethical 
standards.
    NASD Rule 1120(a)(6) permits each member to administer the 
continuing education Regulatory Element program to their registered 
persons through a program delivered on the member's premises, provided 
that the member adheres to certain technology, administrative and 
regulatory standards. Among the requirements for in-firm delivery of 
the Regulatory Element is that the program sessions be proctored by an 
individual registered with a self-regulatory organization (``SRO'') and 
supervised by a designated principal.
    NASD Rule1120(a)(6) was intended to ease the burden on members to 
meet their continuing education requirements. However, the NASD has 
observed that many members have chosen not to avail themselves of the 
in-firm delivery options. Members have informed the NASD that the 
registration requirement for proctors is one reason more members have 
not used in-firm delivery. Members either do not have registered 
persons available to act as proctors or do not want to commit resources 
needed to prepare a proctor for an exam-based registration. The 
Securities Industry/Regulatory Council on Continuing Education 
recommended that the SROs develop a means to allow proctors to be 
registered without taking a qualification examination.\3\ The NASD 
supported that recommendation and believes this proposed rule change is 
an effective solution that makes in-firm delivery a more attractive and 
efficient option for members while maintaining the integrity of the 
program.
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    \3\ The Council includes 14 members representing a cross-section 
of securities firms and six SROs, including the NASD. The Council 
facilitates industry/regulatory coordination of the administration 
and future development of the Continuing Education Program.
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    Importantly, while the proposed rule change would permit proctors 
to be registered without an exam, it would still require the proctors 
to submit an

[[Page 54249]]

application for registration in accordance with NASD By-Laws. As such, 
proctors would be required to file a Form U-4, which provides detailed 
employment and disciplinary history so that the NASD can monitor the 
fitness of individuals to serve in that capacity. Any person whose sole 
registration is as a proctor under the proposed rule change would not 
be permitted to engage in any other activities requiring registration 
with the NASD. The proposal would not prohibit a person who is 
registered with the NASD in any other capacity from also serving as a 
proctor, as is permitted under existing rules.
2. Statutory Basis
    The NASD believes that the proposed rule change is consistent with 
the provisions of section 15A(b)(6) of the Act,\4\ which requires among 
other things, that the NASD'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. The NASD believes that the proposed rule change will 
result in more efficient delivery of the NASD's continuing education 
requirements, while maintaining the integrity of the continuing 
education program.
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    \4\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The NASD 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

    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 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-2002-110 and 
should be submitted by September 11, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-21324 Filed 8-20-02; 8:45 am]
BILLING CODE 8010-01-P