[Federal Register Volume 83, Number 42 (Friday, March 2, 2018)]
[Notices]
[Pages 9039-9042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04209]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82772; File No. SR-FINRA-2018-010]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Revise the Securities Trader (Series 57) 
Examination

February 26, 2018.
    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 12, 2018, 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 ``constituting a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule'' under Section 
19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing revisions to the content outline and selection 
specifications for the Securities Trader (Series 57) examination as 
part of the restructuring of the representative-level examination 
program.\5\ In addition, FINRA is proposing to make changes to the 
format of the content outline. FINRA is not proposing any textual 
changes to the By-Laws, Schedules to the By-Laws or Rules of FINRA.
---------------------------------------------------------------------------

    \5\ FINRA also is proposing corresponding revisions to the 
Series 57 question bank. Based on instruction from SEC staff, FINRA 
is submitting this filing for immediate effectiveness pursuant to 
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(1) thereunder, and 
is not filing the question bank. 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. The question bank is available for SEC 
review.
---------------------------------------------------------------------------

    The revised Series 57 content outline is attached.\6\ The revised 
Series 57 selection specifications have been submitted to the 
Commission under separate cover with a request for confidential 
treatment pursuant to SEA Rule 24b-2.\7\
---------------------------------------------------------------------------

    \6\ The Commission notes that the content outline is attached to 
the filing, not to this Notice.
    \7\ 17 CFR 240.24b-2.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.[sic]

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 \8\ authorizes FINRA to prescribe 
standards of training, experience, and competence for persons 
associated with FINRA members. In accordance with that provision, FINRA 
has developed

[[Page 9040]]

examinations that are designed to establish that persons associated 
with FINRA members have attained specified levels of competence and 
knowledge, consistent with applicable registration requirements under 
FINRA rules. FINRA 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78o-3(g)(3).
---------------------------------------------------------------------------

    The SEC recently approved a proposed rule change to restructure the 
FINRA representative-level qualification examination program.\9\ The 
rule change, which will become effective on October 1, 2018,\10\ 
restructures the examination program into a new format whereby all new 
representative-level applicants will be required to take a general 
knowledge examination (the Securities Industry Essentials or 
SIETM) and a tailored, specialized knowledge examination (a 
revised representative-level qualification examination) for their 
particular registered role.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 81098 (July 7, 
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007).
    \10\ See Regulatory Notice 17-30 (SEC Approves Consolidated 
FINRA Registration Rules, Restructured Representative-Level 
Qualification Examinations and Changes to Continuing Education 
Requirements) (October 2017).
---------------------------------------------------------------------------

    The restructured program eliminates duplicative testing of general 
securities knowledge on the current representative-level qualification 
examinations by moving such content into the SIE examination.\11\ The 
SIE examination will test fundamental securities-related knowledge, 
including knowledge of basic products, the structure and function of 
the securities industry, the regulatory agencies and their functions 
and regulated and prohibited practices, whereas the revised 
representative-level qualification examinations will test knowledge 
relevant to day-to-day activities, responsibilities and job functions 
of representatives.\12\
---------------------------------------------------------------------------

    \11\ Each of the current representative-level examinations 
covers general securities knowledge, with the exception of the 
Research Analyst (Series 86 and 87) examinations.
    \12\ FINRA filed the SIE content outline with the SEC for 
immediate effectiveness. See Securities Exchange Act Release No. 
82578 (January 24, 2018), 83 FR 4375 (January 30, 2018) (Notice of 
Filing and Immediate Effectiveness of File No. SR-FINRA-2018-002). 
In addition to the proposed rule change relating to the revised 
Series 57 examination, FINRA is filing with the Commission for 
immediate effectiveness the content outlines for the other revised 
representative-level qualification examinations.
---------------------------------------------------------------------------

    As part of the restructuring process and in consultation with a 
committee of industry representatives, FINRA undertook a review of the 
Securities Trader (Series 57) examination to remove the general 
securities knowledge currently covered on the examination and to create 
a tailored examination to test knowledge relevant to the day-to-day 
activities, responsibilities and job functions of a Securities Trader. 
In addition, FINRA is proposing to make changes to the format of the 
Series 57 content outline.
    Beginning on October 1, 2018, new applicants seeking to register as 
Securities Traders must pass the SIE examination and the revised 
Securities Trader (Series 57) examination.
Current Content Outline
    The current Series 57 content outline is divided into four major 
job functions that are performed by a Securities Trader. The following 
are the four major job functions, denoted Function 1 through 4, with 
the associated number of questions:
    Function 1: Market Overview and Products, 22 questions;
    Function 2: Engaging in Professional Conduct and Adhering to 
Regulatory Requirements, 12 questions;
    Function 3: Trading Activities, 79 questions; and
    Function 4: Maintaining Books and Records and Trade Reporting, 12 
questions.
    Each function also includes specific tasks describing activities 
associated with performing that function. There are three tasks (1.1-
1.3) associated with Function 1; two tasks (2.1-2.2) associated with 
Function 2; three tasks (3.1-3.3) associated with Function 3; and two 
tasks (4.1-4.2) associated with Function 4. For example, one such task 
(Task 4.2) relates to creating, retaining, and reporting required 
records of orders and transactions. Further, the content outline lists 
the knowledge required to perform each function and associated tasks 
(e.g., in connection with Task 4.2, large trader ID and related 
reporting and monitoring requirements and order execution and routing 
information). In addition, where applicable, the content outline lists 
the laws, rules and regulations a candidate is expected to know to 
perform each function and associated tasks. These include applicable 
federal securities laws, as well as FINRA and other self-regulatory 
organization rules and regulations. The content outline also includes a 
preface (e.g., table of contents, details regarding the purpose of the 
examination and eligibility requirements), sample questions and 
reference materials.
Revised Content Outline
    As noted above, FINRA is proposing to move the general securities 
knowledge currently covered on the Series 57 examination to the SIE 
examination. For example, FINRA Rule 3220 (Influencing or Rewarding 
Employees of Others) (the Gifts Rule) will now be tested on the SIE 
examination, rather than on the Series 57 examination. As a result, the 
revised Series 57 examination will test knowledge specific to the day-
to-day activities, responsibilities and job functions of a Securities 
Trader.
    Further, FINRA is proposing to make changes to the major job 
functions that are performed by a Securities Trader. The following are 
the revised job functions, denoted Function 1 and Function 2, with the 
associated number of questions:
    Function 1: Trading Activities, 41 questions; and
    Function 2: Maintaining Books and Records, Trade Reporting and 
Clearance and Settlement, 9 questions.
    FINRA also is proposing to adjust the number of questions assigned 
to each major job function to ensure that the overall examination 
better reflects the key tasks performed by a Securities Trader. The 
questions on the revised Series 57 examination will place emphasis on 
tasks such as trading activities, trade reporting and related books and 
records.
    Further, FINRA is proposing to make changes to the specific tasks 
associated with performing each function. There are three tasks (1.1-
1.3) associated with Function 1 \13\ and three tasks (2.1-2.3) 
associated with Function 2.\14\ For example, one such task (Task 2.1) 
is reporting trades to the designated reporting facility.\15\ The 
content outline also lists the knowledge required to perform each 
revised function and associated tasks (e.g., distinctions among 
reporting facilities). In addition, where applicable, the content 
outline lists the laws, rules and regulations a candidate is expected 
to know to perform each revised function and associated tasks (e.g., 
SEA Rule 13h-1).
---------------------------------------------------------------------------

    \13\ See Exhibit 3a, Outline Pages 3-9. The outline is attached 
as Exhibit 3a to the 19b-4 form.
    \14\ See Exhibit 3a, Outline Pages 10-12.
    \15\ See Exhibit 3a, Outline Page 10.
---------------------------------------------------------------------------

    FINRA is proposing similar changes to the Series 57 selection 
specifications and question bank.
    Finally, FINRA is proposing to make changes to the format of the 
content outline, including to the preface, sample questions and 
reference materials.\16\ Among other changes, FINRA is proposing to: 
(1) Reduce the preface to one page of introductory information;

[[Page 9041]]

(2) streamline details regarding the purpose of the examination; (3) 
move the application procedures to FINRA's website; and (4) explain 
that the passing score is established using a standard setting 
procedure, and that a statistical adjustment process known as equating 
is used in scoring the examination.\17\
---------------------------------------------------------------------------

    \16\ FINRA is proposing similar changes to the content outlines 
for other representative-level examinations.
    \17\ See Exhibit 3a, Outline Page 2.
---------------------------------------------------------------------------

    As a result of the proposed changes, the number of scored questions 
on the Series 57 examination will be reduced from 125 questions to 50 
questions.\18\ Further, the test time, which is the amount of time 
candidates will have to complete the examination, will be reduced from 
three hours and 45 minutes to one hour and 45 minutes. Currently, a 
score of 70 percent is required to pass the examination. FINRA will 
publish the passing score of the revised Series 57 examination on its 
website, at www.finra.org, prior to its first administration.
---------------------------------------------------------------------------

    \18\ Consistent with FINRA's practice of including ``pretest'' 
questions on examinations, the Series 57 examination includes five 
additional, unidentified pretest questions that do not contribute 
towards the candidate's score. The pretest questions are designed to 
ensure that new examination questions meet acceptable testing 
standards prior to use for scoring purposes. Therefore, the Series 
57 examination actually consists of 55 questions, 50 of which are 
scored. The five pretest questions are randomly distributed 
throughout the examination.
---------------------------------------------------------------------------

Availability of Content Outline
    The current Series 57 content outline is available on FINRA's 
website. The revised Series 57 content outline will replace the current 
content outline on FINRA's website, and it will be made available on 
the website on the date of this filing.
    FINRA is filing the proposed rule change for immediate 
effectiveness. The implementation date will be October 1, 2018, to 
coincide with the implementation of the restructured representative-
level examination program. FINRA will also announce the implementation 
date of the proposed rule change in a Regulatory Notice.
2. Statutory Basis
    FINRA believes that the proposed revisions to the Series 57 
examination program are consistent with the provisions of Section 
15A(b)(6) of the Act,\19\ 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,\20\ which authorizes FINRA to prescribe 
standards of training, experience, and competence for persons 
associated with FINRA members. The proposed rule change will improve 
the examination program, without compromising the qualification 
standards, by removing the general knowledge content currently covered 
on the Series 57 examination, since that content will be covered in the 
co-requisite SIE examination.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78o-3(b)(6).
    \20\ 15 U.S.C. 78o-3(g)(3).
---------------------------------------------------------------------------

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. The updated examination aligns 
with the functions and associated tasks currently performed by a 
Securities Trader and tests knowledge of the most current laws, rules, 
regulations and skills relevant to those functions and associated 
tasks. As such, the proposed revisions would make the examination more 
effective. FINRA also provided a detailed economic impact assessment 
regarding the introduction of the SIE examination and the restructuring 
of the representative-level examinations as part of the proposed rule 
change to restructure the FINRA representative-level qualification 
examination program.\21\
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release No. 80371 (April 4, 
2017), 82 FR 17336 (April 10, 2017) (Notice of Filing of File No. 
SR-FINRA-2017-007).
---------------------------------------------------------------------------

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 \22\ and paragraph (f)(1) of Rule 19-4 
thereunder.\23\ 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(1).
---------------------------------------------------------------------------

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-2018-010 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2018-010. 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 website (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 website viewing and printing 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. Persons submitting comments are cautioned that 
we do not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
FINRA-2018-010 and should be submitted on or before March 23, 2018.


[[Page 9042]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-04209 Filed 3-1-18; 8:45 am]
 BILLING CODE 8011-01-P