[Federal Register Volume 77, Number 41 (Thursday, March 1, 2012)]
[Notices]
[Pages 12635-12637]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4914]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66465; File No. SR-FINRA-2012-009]
Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Section 4(c) of Schedule A to the FINRA
By-Laws To Increase Qualification Examination Fees and Assess a Service
Charge for Regulatory Element Continuing Education Sessions Taken
Outside the United States
February 24, 2012.
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 23, 2012, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by FINRA. FINRA has
designated the proposed rule change as ``establishing or changing a
due, fee or other charge'' under Section 19(b)(3)(A)(ii) of the Act \3\
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal
effective upon receipt of this filing by 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)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
FINRA is proposing to amend Section 4(c) of Schedule A to the FINRA
By-Laws to (1) increase qualification examination fees, and (2) assess
a service charge for any Regulatory Element sessions taken in a test
center located outside the territorial limits of the United States. 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
As discussed in further detail below, the proposed rule change
amends Section 4(c) of Schedule A to the FINRA By-Laws to (1) increase
qualification examination fees, and (2) assess a service charge for any
Regulatory Element session taken in a test center located outside the
territorial limits of the United States.
Qualification Examination Fees
NASD Rules 1021(a) and 1031(a) require that persons engaged, or to
be engaged, in the investment banking or securities business of a FINRA
member who are to function as principals or representatives register
with FINRA in each category of registration appropriate to their
functions as specified in NASD Rules 1022 and 1032.\5\ Such individuals
must pass an appropriate qualification examination before their
registration can become effective. These mandatory qualification
examinations cover a broad range of subjects regarding financial
markets and products, individual responsibilities, securities industry
rules, and regulatory structure. FINRA develops, maintains, and
delivers all qualification examinations for individuals who are
registered or seeking registration with FINRA. FINRA also administers
and delivers examinations sponsored (i.e., developed) by the Municipal
Securities Rulemaking Board (``MSRB''), the North American Securities
Administrators Association, the National Futures Association, the
Federal Deposit Insurance Corporation, and other self-regulatory
organizations.
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\5\ See also NASD Rules 1041 and 1050 and FINRA Rule 1230(b)(6)
regarding the qualification and registration requirements for Order
Processing Assistant Representatives, Research Analysts and
Operations Professionals, respectively.
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FINRA currently administers examinations via computer through the
PROCTOR[supreg] system \6\ at testing centers operated by vendors under
contract with FINRA. FINRA charges an examination fee to candidates for
FINRA-sponsored and co-sponsored examinations to cover the development,
maintenance, and delivery of these examinations. For qualification
examinations sponsored by a FINRA client and administered by FINRA,
FINRA charges a delivery fee that represents either a portion of or the
entire examination fee for the examination.\7\
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\6\ PROCTOR is a computer system that is specifically designed
for the administration and delivery of computer-based testing and
training.
\7\ The delivery fee represents a portion of the entire
examination fee when a FINRA client has established an additional
fee for an examination that it sponsors. For example, the fee to
take the Series 51 (Municipal Fund Securities Limited Principal)
examination is currently $145. Of this amount, $85 is the FINRA
administration and delivery fee, and $60 is the development fee
determined by the FINRA client, the MSRB. See MSRB Rule A-16.
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FINRA regularly conducts a comprehensive review of the examination
fee structure, including an analysis of the costs associated with
developing, administering, and delivering examinations. Based on the
results of its review, FINRA may propose changes to better align the
examination fee structure with the costs associated with the programs.
In this regard, the most recent review revealed that certain
operational costs have increased and, based on current information,
will continue to increase over the next few years. In particular, these
costs consist of (1) fees that vendors charge FINRA for delivering
qualification examinations, and (2) PROCTOR maintenance and enhancement
expenses. FINRA believes that the proposed rule change will help
[[Page 12636]]
to better align the examination program fees with these costs.
Therefore, FINRA is proposing to amend Section 4(c) of Schedule A
to the FINRA By-Laws to increase the fees for the qualification
examinations set forth in Section 4(c), except for the Series 99
Operations Professional examination, which was implemented in late
2011.\8\ The proposed fee changes are as follows:
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\8\ See Securities Exchange Act Release No. 64687 (June 16,
2011), 76 FR 36586 (June 22, 2011) (Order Approving Proposed Rule
Change; File No. SR-FINRA-2011-013); Securities Exchange Act Release
No. 65221 (August 30, 2011), 76 FR 55441 (September 7, 2011) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change; File
No. SR-FINRA-2011-042).
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Series 4................................ Registered Options Principal... From $90 to $100.
Series 6................................ Investment Company Products/ From $85 to $95.
Variable Contracts
Representative.
Series 7................................ General Securities From $265 to $290.
Representative.
Series 9................................ General Securities Sales From $70 to $75.
Supervisor--Options Module.
Series 10............................... General Securities Sales From $110 to $120.
Supervisor--General Module.
Series 11............................... Assistant Representative--Order From $70 to $75.
Processing.
Series 14............................... Compliance Official............ From $320 to $335.
Series 16............................... Supervisory Analyst............ From $210 to $230.
Series 17............................... Limited Registered From $70 to $75.
Representative.
Series 22............................... Direct Participation Programs From $85 to $95.
Representative.
Series 23............................... General Securities Principal From $85 to $95.
Sales Supervisor Module.
Series 24............................... General Securities Principal... From $105 to $115.
Series 26............................... Investment Company Products/ From $85 to $95.
Variable Contracts Principal.
Series 27............................... Financial and Operations From $105 to $115.
Principal.
Series 28............................... Introducing Broker-Dealer From $85 to $95.
Financial and Operations
Principal.
Series 37............................... Canada Module of S7 (Options From $160 to $175.
Required).
Series 38............................... Canada Module of S7 (No Options From $160 to $175.
Required).
Series 39............................... Direct Participation Programs From $80 to $90.
Principal.
Series 42............................... Registered Options From $65 to $70.
Representative.
Series 51............................... Municipal Fund Securities From $85 to $95.
Limited Principal.
Series 52............................... Municipal Securities From $95 to $120. \9\
Representative.
Series 53............................... Municipal Securities Principal. From $95 to $105.
Series 55............................... Limited Representative--Equity From $95 to $105.
Trader.
Series 62............................... Corporate Securities Limited From $80 to $90.
Representative.
Series 72............................... Government Securities From $95 to $105.
Representative.
Series 79............................... Investment Banking From $265 to $290.
Qualification Examination.
Series 82............................... Limited Representative--Private From $80 to $90.
Securities Offering.
Series 86............................... Research Analyst--Analysis..... From $160 to $175.
Series 87............................... Research Analyst--Regulatory... From $115 to $125.
Series 99............................... Operations Professional........ $125 (No change).
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Service Charge for Foreign Test Center Regulatory Element Sessions
FINRA assesses a service charge of $15 for any qualification
examination that is taken in a foreign test center (i.e., a test center
located outside of the territorial limits of the United States) to help
offset the higher fees that vendors charge FINRA for delivering
qualification examinations in such locations. Vendors also charge FINRA
higher fees for the delivery of Regulatory Element sessions in foreign
test centers; however, all individuals are currently assessed the same
amount for a Regulatory Element session regardless of where they take
the session. Therefore, FINRA is proposing to assess a $15 service
charge for any Regulatory Element session taken in a foreign test
center to more closely align the fee with the cost of such sessions.
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\9\ The $25 fee increase for the Series 52 examination has two
components: (1) $15 of the fee increase is attributable to the
MSRB's increase in the length of the examination in January 2011,
see Securities Exchange Act Release No. 63310 (November 12, 2010),
75 FR 70760 (November 18, 2010) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change; File No. SR-MSRB-2010-12);
and (2) $10 of the fee increase is attributable to the increase in
the costs associated with administering and delivering the
examination.
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Implementation
FINRA has filed the proposed rule change for immediate
effectiveness. FINRA is proposing that the implementation date of the
proposed rule change will be April 2, 2012. Specifically, the proposed
examination fees would become effective for examination requests made
in the CRD system on or after April 2, 2012. In addition, the proposed
foreign test center Regulatory Element session service charge would
become effective for Regulatory Element sessions completed on or after
April 2, 2012.
2. Statutory Basis
FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(5) of the Act,\10\ which requires, among
other things, that FINRA rules provide for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility or system that FINRA operates or
controls.
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\10\ 15 U.S.C. 78o-3(b)(5).
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FINRA believes that the proposal constitutes an equitable
allocation of fees as the qualification examination fees will be
assessed only on those individuals who take qualification examinations
and the service charge for foreign test center Regulatory Element
sessions will be assessed only on those individuals who take such a
session. In addition, all candidates who register for a particular
qualification examination will be charged the same amount, and all
individuals who take a Regulatory Element session in a foreign test
center will be assessed the $15 service charge.
FINRA further believes that the proposed qualification examination
changes are reasonable because they will more closely align the overall
examination program fees with the overall costs associated with the
programs. In this regard, FINRA notes that the last time that it
increased fees for any of the qualification examinations set forth in
Schedule A to the FINRA By-Laws was January 2009.\11\ Since that time,
vendor fees and the costs associated with the enhancement and
[[Page 12637]]
maintenance of the PROCTOR system have increased and, based on current
information, will continue to increase over the next few years.
Specifically, FINRA has recently completed a significant technological
upgrade of the PROCTOR system and is working on considerable
enhancements to the software used to deliver examinations at testing
centers, which is scheduled for operational release in 2013. These
increased costs, coupled with the significant decrease in the number of
examinations taken during the past three years,\12\ has caused a
divergence in the fees and costs associated with the examination
programs.
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\11\ See Securities Exchange Act Release No. 59076 (December 10,
2008), 73 FR 76431 (December 16, 2008) (Order Approving Proposed
Rule Change; File No. SR-FINRA-2008-053).
\12\ In 2009, the number of examinations administered and
delivered by FINRA decreased by approximately 27 percent. Although
examination volumes have increased modestly since that time, they
have not returned to 2008 levels.
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To better align the fees and costs associated with the examination
programs, FINRA is proposing a modest increase in examination fees. In
this regard, FINRA notes that no examination fee will increase by more
than $25 and the majority of examination fees will increase by only
$10. Furthermore, to help control the overall costs of the
qualification examination and Regulatory Element programs and thereby
minimize fee increases, FINRA earlier this year instituted a fee for
individuals who cancel or reschedule a qualification examination or
Regulatory Element session three to 10 business days prior to the
appointment date.\13\ This cancellation/rescheduling fee has helped to
limit the amount of the proposed examination fee increases by allowing
FINRA to (1) receive a lower examination delivery rate from one of its
vendors, and (2) apply the revenue from the fee to help offset the
expenses of the qualification examination programs.
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\13\ See Securities Exchange Act Release No. 64961 (July 26,
2011), 76 FR 45883 (August 1, 2011) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change; File No. SR-FINRA-2011-026).
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With respect to the proposed service charge for foreign test center
Regulatory Element sessions, FINRA believes that the service charge is
reasonable because it helps to offset the higher delivery costs
associated with such sessions. Specifically, vendors charge FINRA
higher fees for delivering Regulatory Element sessions in a foreign
test center than they do for delivering such sessions in a U.S. test
center.
Accordingly, FINRA believes that the proposed qualification
examination fee changes and the service charge for foreign test center
Regulatory Element sessions are equitably allocated and reasonable.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \14\ and paragraph (f)(2) of Rule 19b-4
thereunder.\15\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
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. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(2).
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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 proposed rule
change 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 email to [email protected]. Please include
File Number SR-FINRA-21012-009 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 Number SR-FINRA-2012-009. This
file number should be included on the subject line if email 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 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 Web site
viewing and printing in the Commission's Public Reference Room 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 offices of the Exchange. 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 Number SR-FINRA-2012-009, and should be submitted on or before
March 22, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4914 Filed 2-29-12; 8:45 am]
BILLING CODE 8011-01-P