[Federal Register Volume 74, Number 45 (Tuesday, March 10, 2009)]
[Notices]
[Pages 10317-10319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-4961]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59484; File No. SR-FINRA-2009-006]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to a
New Limited Representative Registration Category for Investment Banking
Professionals
March 2, 2009.
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 February 17, 2009, Financial Industry Regulatory Authority, Inc.
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc.
(``NASD'')) filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), and amended on February 27, 2009,\3\ the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by FINRA. The Commission is publishing this notice
to solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 to SR-FINRA-2009-006 replaced and superseded
the original rule filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
FINRA is proposing to establish NASD Rule 1032(i), a new limited
representative registration category for investment banking
professionals. The proposed rule change also sets forth the
registration requirements for principals who supervise investment
banking activities.
The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, FINRA 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. FINRA 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
Section 15A(g)(3) of the Act \4\ requires FINRA to prescribe
standards of training, experience, and competence for persons
associated with FINRA members. In accordance with that provision, FINRA
has developed examinations, and administers examinations developed by
other self-regulatory organizations, that are designed to establish
that persons associated with FINRA members have attained specified
levels of competence and knowledge.
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\4\ 15 U.S.C. 78o-3(g)(3).
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NASD Rule 1031 requires that each person associated with a member
who functions as a representative must be registered in a category
appropriate to the function that person performs. The rule defines a
``representative'' as, among others, a person associated with a member
who is ``engaged in the investment banking or securities business for
the member including the functions of supervision, solicitation or
conduct of business in securities or who [is] engaged in the training
of persons associated with a member for any of these functions.''
Pursuant to NASD Rule 1032, a person who functions as a registered
representative must pass the General Securities Representative (Series
7) examination or certain equivalent examinations, unless such person's
activities are so limited as to qualify him or her for a limited
representative category for which a more dedicated examination is
prescribed.
The proposed rule change would create a new limited representative
category--Limited Representative--Investment Banking--for persons whose
activities are limited to investment banking, including those who work
on the equity and debt capital markets and syndicate desks. More
specifically, the proposed registration category would encompass those
associated persons whose activities primarily involve: (1) Advising on
or facilitating debt or equity securities offerings through a private
placement or a public offering, including but not limited to
origination, underwriting, marketing, structuring, syndication, and
pricing of such securities and managing the allocation and
stabilization activities of such offerings, or (2) advising on or
facilitating mergers and acquisitions, tender offers, financial
restructurings, asset sales, divestitures or other corporate
reorganizations or business combination transactions, including but not
limited to rendering a fairness, solvency or similar opinion. The
proposed registration category would not cover individuals whose
investment banking work is limited to public (municipal) finance
offerings or direct participation program offerings as defined in NASD
Rule 1022(e)(2). The proposed registration category further would not
cover individuals whose investment banking work is limited to effecting
private securities offerings as defined in NASD Rule 1032(h)(1)(A).
FINRA is in the process of developing an accompanying qualification
examination that will provide a more targeted assessment of the job
functions performed by the individuals that would fall within the
proposed
[[Page 10318]]
registration category.\5\ The exam would be taken in lieu of the Series
7 exam (or equivalent exams) by the individuals who perform solely
those job functions. Any person whose activities go beyond those
proposed for the Limited Representative-Investment Banking registration
category would be required to separately qualify and register in the
appropriate category or categories of registration attendant to such
activities.
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\5\ The examination itself, including the content outline and
test specifications, and fees associated with it will be the subject
of separate proposed rule changes after Commission approval of this
proposed rule change to establish the new registration category.
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Those who already hold the Series 7 registration, as well as those
who have passed the United Kingdom (Series 17) or Canada (Series 37/38)
Modules of the Series 7 examination or hold a Limited Representative-
Corporate Securities (Series 62) registration, would be
``grandfathered'' and not required to take the new qualification exam.
Such individuals would be provided a period of six months during which
they may ``opt in'' to the Limited Representative-Investment Banking
registration, provided that at the time the proposed rule change is
implemented, such individuals are engaged in investment banking
activities covered by the proposed rule change.\6\ Those individuals
who choose to opt in would still retain their Series 7 registered
representative registration in addition to the investment banking
registration. After the six-month opt-in period, any individual holding
a Series 7 registration that wishes to engage in the specified
investment banking activities would be required to pass the Limited
Representative-Investment Banking exam.
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\6\ No associated persons of a member will be eligible for the
opt in unless the member's current Form BD indicates that the member
engages in investment banking activities.
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To ease the transition and to allow firms time to create
qualification examination preparation programs, FINRA would permit new
Limited Representative-Investment Banking candidates who are in the
process of qualifying in the new registration category when the rule
becomes effective to take either the Series 7 or Limited
Representative-Investment Banking exam. This accommodation would remain
in effect for six months after the implementation date of the proposed
rule change.
FINRA understands that some member firms have created training
programs in which certain new employees are exposed to the firm's
various business lines by rotating among departments, including
investment banking, where the employee's activities might fall within
the proposed definition of a Limited Representative-Investment Banking.
Depending on the activities performed by the employee during the
training program, the firm may or may not require the employee to pass
the Series 7 examination and become a registered representative. In
recognition of such training programs, the proposed rule change would
not require an employee placed in such programs to register as a
Limited Representative-Investment Banking for a period of up to six
months from the time the employee first engages in activities that
otherwise would trigger registration as a Limited Representative-
Investment Banking. This exception would be available for up to two
years after the employee commences the training program. Firms that
wish to avail themselves of this exception would be required to
maintain documents evidencing the details of the training program and
identifying the program participants who engage in activities that
otherwise would require registration as a Limited Representative-
Investment Banking and the date on which such participants commenced
such activities.
Individuals who wish to act as a general principal for activities
set forth in the proposed rule change would be required to obtain the
proposed Limited Representative-Investment Banking registration--either
by opting in or passing the exam--and also pass the General Securities
Principal exam. Such individuals would be limited to acting as a
general principal for the investment banking activities covered by the
proposed rule change. Individuals who wish to function in the capacity
of general principal for broader securities-related activities would be
required to take another appropriate qualification examination, such as
the Series 7 or Series 62, in addition to the General Securities
Principal exam. Those individuals currently functioning as a general
principal supervising investment banking activities as described in the
proposed rule change would be granted the same six-month grace period
during which they could opt in to the Limited Representative-Investment
Banking registration.
FINRA believes the creation of a proposed Limited Representative-
Investment Banking registration and accompanying exam would provide for
a more targeted assessment of the competency of investment banking
personnel to perform their unique job functions and, as a result,
translate into better quality service for investors. FINRA further
believes that the proposed requirement for principals who supervise
investment banking activities to register and qualify as a Limited
Representative-Investment Banking will enhance investor protection and
member compliance with applicable FINRA rules and the federal
securities laws. Finally, FINRA believes that the proposed rule change
would enable members to allocate their training resources more
efficiently.
The implementation date will be 90 days after the effectiveness of
a future proposed rule change to establish the corresponding
qualification examination.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6),\7\ which requires, among other things,
that FINRA rules must 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 and Section 15A(g)(3) of the Act,\8\ which authorizes
FINRA to prescribe standards of training, experience, and competence
for persons associated with FINRA members.
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\7\ 15 U.S.C. 78o-3(b)(6).
\8\ 15 U.S.C. 78o-3(g)(3).
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B. Self-Regulatory Organization's Statement on Burden on Competition
FINRA 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.
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 self-regulatory organization 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.
[[Page 10319]]
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. Comments may be submitted by any of the
following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File No. SR-FINRA 2009-006 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File No. SR-FINRA-2009-006. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 changes 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of FINRA. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File No. SR-FINRA-2009-006 and should be
submitted on or before March 31, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
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\9\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-4961 Filed 3-9-09; 8:45 am]
BILLING CODE 8011-01-P