[Federal Register Volume 88, Number 11 (Wednesday, January 18, 2023)]
[Notices]
[Pages 2977-2980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-00777]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96639; File No. SR-LTSE-2022-06]


Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Related to Continuing Education Requirements

January 11, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 30, 2022, Long-Term Stock Exchange, Inc. (``LTSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II, below, which Items have been prepared by the self-regulatory 
organization. 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 Exchange is filing with the Commission a proposed rule change 
to adopt new LTSE Rule 2.153 and amend LTSE Rules 2.154 and 2.160. The 
proposed rule changes are based on changes made by the Financial 
Industry Regulatory Authority, Inc. (``FINRA'') to its Continuing 
Education Program \3\ (the ``CE Program'' or the ``CE Transformation 
Initiative'').
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    \3\ See Securities Exchange Act Rel. No. 93097 (September 21, 
2021), 86 FR 53358 (September 27, 2021) (Order Approving File No. 
SR-FINRA-2021-015 regarding the CE Transformation Initiative) (the 
``Approval Order'').
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    The text of the proposed rule change is available at the Exchange's 
website at https://longtermstockexchange.com/, at

[[Page 2978]]

the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
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 self-regulatory organization 
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 on the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The proposed rule change incorporates the elements of the FINRA CE 
Transformation Initiative that are scheduled to take effect on January 
1, 2023.\4\ Specifically, those changes (i) require registered persons 
to complete CE Regulatory Element \5\ annually for each representative 
or principal registration category that they hold; and (ii) expressly 
allow firms to consider other required training toward satisfying an 
individual's annual CE Firm Element and extend the Firm Element 
requirement to all registered persons.
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    \4\ See Securities Exchange Act Rel. No. 94515 (March 24, 2022), 
87 FR 18419 (March 30, 2022) (Order approving SR-LTSE-2022-02 
whereby LTSE adopted those elements of the FINRA CE Transformation 
Initiative that were implemented on March 15, 2022).
    \5\ The terms CE Regulatory Element and CE Firm Element shall 
have the same meaning as in FINRA Rule 1240.
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    The Exchange sets forth certain continuing education requirements 
for persons associated with a Member which are based on certain FINRA 
rules.\6\ The proposed rule change seeks to amend certain LTSE rules to 
more closely mirror the corresponding FINRA rules, as amended as part 
of the CE Transformation Initiative. The proposed rule change does not 
make any substantive changes to LTSE rules other than those to 
incorporate changes previously made by FINRA.
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    \6\ See supra note 4.
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    First, the proposed rule change would (i) adopt as new LTSE Rule 
2.153, the exact provisions previously provided in LTSE Rule 2.160(m) 
regarding associated persons of a Member that are not required to 
register with the Exchange. The Exchange believes that relocating these 
provisions into a standalone rule would more closely align the 
structure of LTSE's Rule Book with FINRA's, which has the standalone 
FINRA Rule 1230 (Associated Persons Exempt from Registration).
    Second, the proposed rule change would amend LTSE Rule 2.154 to 
incorporate all of FINRA Rule 1240, not just the provisions that became 
effective on March 15, 2022.\7\ Additionally, as part of the broader 
incorporation, LTSE has added language to note that references to FINRA 
Rules 1210 and 1220 are to be construed to reference the applicable 
corresponding provisions of LTSE Rule 2.160. The proposed rule language 
also clarifies that such references to FINRA Rules 1210 and 1210 will 
not result in expansion of or changes to LTSE's registration categories 
as currently provided for in Rule 2.160. The proposed rule change also 
would eliminate the sentence in LTSE Rule 2.154 that states 
``References to FINRA Rule 1240(a)(2) shall refer to the LTSE Rule 
2.160(p)(1) (Regulatory Element)'' because it is no longer applicable.
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    \7\ Id.
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    Third, the proposed rule change would delete paragraphs (m) and (p) 
from LTSE Rule 2.160. As discussed above, paragraph (m) is being 
replaced by new LTSE Rule 2.153, and paragraph (p) is being replaced by 
proposed LTSE Rule 2.154.\8\
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    \8\ See FINRA Rules 1210 and 1240. In FINRA Regulatory Notice 
21-41 (November 17, 2021), FINRA announced the amendment of Rules 
1210 and 1240, noting implementation dates, March 15, 2022 (with 
respect to paragraph (c) of Rule 1240 and Supplementary Material .09 
to Rule 1210); January 1, 2023 (all other rule changes).
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    Fourth, the proposed rule change would add paragraph (o) back to 
LTSE Rule 2.160. The removal of this paragraph in the Exchange's prior 
filing related to the CE Transformation Initiative \9\ was in error. 
Reinstating paragraph (o) (Lapse of Registration and Expiration of SIE) 
to LTSE Rule 2.160 aligns the Exchange's rules to FINRA Rule 1210 
Supplementary Material .08 (Lapse of Registration and Expiration of 
SIE), which covers substantially similar matters. The reinstated Rule 
2.160 is also being proposed to include cross references to proposed 
LTSE Rule 2.154 as discussed above, in keeping with FINRA Rule 1210 
Supplementary Material .08's references to FINRA Rule 1240. The 
Exchange believes these cross reference updates to account for 
references to FINRA Rule 1240 further aligns the Exchange's rules with 
the relevant FINRA rules.
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    \9\ See supra note 4.
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    Fifth, the proposed rule change updates internal LTSE rule 
references to reflect changes in LTSE's rules pursuant to the proposed 
rule change. Specifically, references to Rule 2.160(p) in paragraphs 
(e) and (g) of Rule 2.160 and Rule 9.218(a) are being updated as 
references to the proposed Rule 2.154.
    FINRA's CE Transformation Initiative is being implemented in 
phases. The first phase was implemented on March 15, 2022 and provides 
eligible individuals who terminate any of their representative or 
principal registration categories the option of maintaining their 
qualification for any terminated registration categories by completing 
annual continuing education through a new program, the Maintaining 
Qualifications Program (``MQP''). The first phase also provides that, 
as of March 15, 2022, LTSE will not accept any new initial designations 
for individuals under its Financial Services Affiliate Waiver Program 
(``FSAWP'').\10\
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    \10\ Id.
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    The second phase, which is being addressed the proposed rule 
change, would (i) require registered persons to complete continuing 
education Regulatory Element annually for each representative or 
principal registration category that they hold; and (ii) expressly 
allow firms to consider other required training toward satisfying an 
individual's annual continuing education Firm Element and extend the 
Firm Element requirement to all registered persons. The proposed rule 
change, consistent with this phase of FINRA's CE Transformation 
Initiative, will be implemented January 1, 2023. These changes, as 
further discussed below, are part of a larger initiative in which LTSE 
is aligning the structure of its registration, continuing education and 
supervision rules with those of FINRA.\11\
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    \11\ Id.
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(i) Transition to an Annual Regulatory Element for Each Registration 
Category
    FINRA amended FINRA Rule 1240 under the CE Transformation 
Initiative to require registered persons to complete the Regulatory 
Element training of the CE Program annually by December 31. Firms, 
however, would have the flexibility to require their registered persons 
to complete the Regulatory Element training sooner than December 31, 
which would allow firms to coordinate the timing of the Regulatory 
Element with other training requirements, including the Firm 
Element.\12\ FINRA Rule 1240 preserves FINRA's ability to extend the 
time by

[[Page 2979]]

which a registered person must complete the Regulatory Element for good 
cause shown if requested in writing and with supporting 
documentation.\13\ Consistent with prior requirements, individuals who 
fail to complete their Regulatory Element within the prescribed period 
would be automatically designated as ``CE inactive'' \14\ in FINRA's 
Central Registration Depository (``CRD'') system \15\ until the 
requirements of the Regulatory Element have been satisfied.\16\
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    \12\ See supra note 3, at 53358.
    \13\ See FINRA Rule 1240(a)(2).
    \14\ Id.
    \15\ See https://www.finra.org/registration-exams-ce/classic-crd. As stated on its website, FINRA integrated the registration 
filing functionality that supports the CRD Program into FINRA 
Gateway, available at https://www.finra.org/filing-reporting/finra-gateway. The standalone CRD features were retired August 21, 2021.
    \16\ See supra note 3, at 53359.
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    As amended under the CE Transformation Initiative, FINRA Rule 1240 
also tailors the content of the Regulatory Element to each registration 
category. Thus, registered persons would be required to complete 
content specifically designed for each representative or principal 
registration category that they hold.\17\ FINRA Rule 1240 includes five 
additional elements such that: (1) Individuals who are designated as CE 
inactive would be required to complete all of their pending and 
upcoming annual Regulatory Element, including any annual Regulatory 
Element that becomes due during their CE inactive period, to return to 
active status; \18\ (2) the two-year CE inactive period would be 
calculated from the date individuals become CE inactive, and would 
continue to run regardless of whether individuals terminate their 
registrations; \19\ (3) individuals who become subject to a significant 
disciplinary action may be required to complete assigned continuing 
education content as prescribed by FINRA; \20\ (4) individuals who have 
not completed any Regulatory Element content for a registration 
category in the calendar year(s) prior to reregistering would not be 
approved for registration for that category until they complete that 
Regulatory Element content, pass an examination for that registration 
category, or obtain an unconditional examination waiver for that 
registration category, whichever is applicable; \21\ and (5) the 
Regulatory Element requirements would apply to individuals who are 
registered, or are in the process of registering as a representative or 
principal.\22\
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    \17\ See FINRA Rules 1240(a)(1) and (a)(4).
    \18\ See supra note 3 at 53359.
    \19\ Id.
    \20\ Id.
    \21\ Id.
    \22\ Id.
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(ii) Recognition of Other Training Requirements for Firm Element and 
Extension of Firm Element to All Registered Persons
    FINRA Rule 1240(b) requires a firm to develop and administer an 
annual Firm Element training program for its covered registered 
persons.\23\ The Firm Element must, at a minimum, include training in 
ethics and professional responsibility, as well as training in the 
following items concerning securities products, services, and 
strategies offered by the member: (1) General investment features and 
associated risk factors; (2) suitability and sales practice 
considerations; and (3) applicable regulatory requirements.\24\ Firms 
are required to conduct an annual needs analysis to, at minimum, 
determine the appropriate Firm Element training for covered registered 
persons at the firm based on the specific business of the member, and 
then provide the Firm Element training annually.\25\
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    \23\ See FINRA Rule 1240(b).
    \24\ Id.
    \25\ Id.
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    As amended under the CE Transformation Initiative, FINRA Rule 
1240(b) allows for recognition of the successful completion of existing 
firm training programs relating to the anti-money laundering compliance 
program and the annual compliance meeting toward satisfying an 
individual's annual Firm Element requirement.\26\ FINRA also amended 
the rule to extend the Firm Element requirement to all registered 
persons, including individuals who maintain solely a permissive 
registration consistent with FINRA Rule 1210.02, thereby further 
aligning the Firm Element requirement with other broadly-based training 
requirements.\27\ FINRA also updated the minimum training criteria 
under FINRA Rule 1240(b) to provide that Firm Element training must 
cover topics related to the role, activities, or responsibilities of 
the registered person, as well as professional responsibility.\28\
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    \26\ See FINRA Rule 1240(b)(2)(D).
    \27\ See FINRA Rule 1240(b)(1).
    \28\ See FINRA Rule 1240(b)(2)(B).
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    To align with the changes discussed in subsections (i) and (ii) 
above, proposed new LTSE Rule 2.154 states that LTSE Members and 
associated persons of a Member shall comply with FINRA Rule 1240, as if 
such Rule were part of the Exchange's rules.
2. Statutory Basis
    LTSE believes that its proposal is consistent with Section 6(b) of 
the Act \29\ in general, and furthers the objectives of Section 6(b)(5) 
of the Act,\30\ in particular, in that it is designed to prevent 
fraudulent and manipulative practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general to 
protect investors and the public interest.
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    \29\ 15 U.S.C. 78f.
    \30\ 15 U.S.C. 78f(b)(6).
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    As noted above, the proposed rule change seeks to align the 
Exchange's Rules with certain changes to FINRA rules which have been 
approved by the Commission.\31\ The Exchange believes the proposed rule 
change is consistent with the provisions of Section 6(b)(5) of the 
Act,\32\ which requires, among other things, that Exchange 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 6(c)(3) of the 
Act,\33\ which authorizes the Exchange to prescribe standards of 
training, experience and competence for persons associated with the 
Exchange. The proposed changes are based on the changes approved by the 
Commission in the Approval Order,\34\ and the Exchange is proposing to 
adopt such changes substantially in the same form proposed by FINRA 
with respect to the continuing education program. The Exchange believes 
the proposal is consistent with the Act for the reasons described above 
and for those reasons cited in the Approval Order.\35\
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    \31\ See Approval Order, supra note 3.
    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78f(c)(3).
    \34\ See Approval Order, supra note 3.
    \35\ Id.
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    The Exchange believes that enhancements to FINRA's CE program, 
including the shift to an annual Regulatory Element should lead to 
consistent, updated training, enhance a firm's regulatory compliance 
and reduce a firm's overall regulatory risk because of the increased 
timeliness and relevance of the more tailored content provided through 
an annual training, thus facilitating overall investor protection.

[[Page 2980]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change, which harmonizes its rules with rule changes 
adopted by FINRA, will reduce the regulatory burden placed on market 
participants engaged in trading activities across different markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not: (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\36\
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    \36\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that this proposed 
rule change may become operative immediately upon filing. In addition, 
Rule 19b-4(f)(6)(iii) \37\ requires a self-regulatory organization to 
give the Commission written notice of its intent to file a proposed 
rule change under that subsection at least five business days prior to 
the date of filing, or such shorter time as designated by the 
Commission. The Exchange has provided such notice.
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    \37\ 17 CFR 240.19b-4(f)(6)(iii).
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    Waiver of the 30-day operative delay will allow the Exchange to 
implement the proposed changes to its continuing education and 
registration rules without delay, thereby eliminating the material 
differences between FINRA and Exchange continuing education rules, 
providing more uniform standards across the securities industry, and 
helping to avoid ongoing confusion for Exchange Members that are also 
FINRA members. For this reason, the Commission believes that waiver of 
the 30-day operative delay for this proposal is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.\38\
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    \38\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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 change should be approved or 
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. 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-LTSE-2022-06 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-LTSE-2022-06. 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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of LTSE and on its internet website 
at https://longtermstockexchange.com/.
    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-LTSE-2022-06 
and should be submitted on or before February 8, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
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    \39\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-00777 Filed 1-17-23; 8:45 am]
BILLING CODE 8011-01-P