Notice2022-12643
Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change of Amendments to the Exchange's Rules Regarding Continuing Education Requirements
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 13, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 113 (Monday, June 13, 2022)</title>
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[Federal Register Volume 87, Number 113 (Monday, June 13, 2022)]
[Notices]
[Pages 35812-35818]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12643]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95064; File No. SR-NYSEAMER-2022-20]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change of
Amendments to the Exchange's Rules Regarding Continuing Education
Requirements
June 7, 2022.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on May 25, 2022, NYSE American LLC (``NYSE American'' 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\ 15 U.S.C. 78a.
\3\ 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 proposes amendments to the Exchange's rules regarding
continuing education requirements (Rules 341A and 2.21E) applicable to
member organizations,\4\ Equity Trading Permit (``ETP'') Holders and
ATP Holders (collectively, ``members''). The proposed rule change also
makes conforming amendments to the Exchange's rules regarding
registration requirements (Rule 2.1210).\5\ Among other changes, the
proposed rule change requires that the Regulatory Element of continuing
education be completed annually rather than every three years and
provides a path through continuing education for individuals to
maintain their qualification following the termination of a
registration. The proposed rule change is available on the Exchange's
website at <a href="http://www.nyse.com">www.nyse.com</a>, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
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\4\ References to ``member organization'' as used in Exchange
rules include American Trading Permit (``ATP'') Holders, which are
registered brokers or dealers approved to effect transactions on the
Exchange's options marketplace. Under the Exchange's rules, an ATP
Holder has the status as a ``member'' of the Exchange as that term
is defined in Section 3 of the Act. See Rule 900.2NY(4) & (5).
\5\ The Exchange also proposes to amend Rule 2.1220(a)(2)(A)(i)
to make a conforming change to the current rule. The proposed text
will conform Rule 2.1220(a)(2)(A)(i) with that of the rules of the
Exchange's affiliate, NYSE Arca, Inc. See NYSE Arca Rule
2.1220(a)(2)(A)(i).
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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 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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its continuing education
requirements in Rules 341A \6\ and 2.21E \7\ and amend related
registration requirements provided under various Commentaries to Rule
2.1210. This proposed rule change is based on a filing recently
submitted by the Financial Industry Regulatory Authority, Inc.
(``FINRA''), and is intended to harmonize the Exchange's continuing
education rules with those of FINRA so as to promote uniform standards
across the securities industry.\8\ The proposed rule change is
discussed in detail below.
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\6\ Rule 341A applies to members and member organizations.
\7\ Rule 2.21E applies to ETP Holders.
\8\ See Securities Exchange Act Release No. 93097 (September 21,
2021), 86 FR 53358 (September 27, 2021) (SR-FINRA-2021-015) (``FINRA
Rule Change'').
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The proposed changes are based on the changes approved by the
Commission in the approval order for SR-FINRA-2021-015.\9\ The Exchange
is proposing to adopt such changes substantially in the same form as
proposed by FINRA, with only minor changes necessary to conform to the
Exchange's existing rules such as to remove cross-references and rules
that are applicable to FINRA members but not to Exchange members.
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\9\ Id.
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Continuing Education Rules
(i) Background
The continuing education program for registered persons of broker-
dealers (``CE Program'') currently requires registered persons to
complete continuing education consisting of a
[[Page 35813]]
Regulatory Element and a Firm Element. The Regulatory Element, which is
administered by FINRA on behalf of the Exchange, focuses on regulatory
requirements and industry standards, while the Firm Element is provided
by each firm and focuses on securities products, services and
strategies the firm offers, firm policies and industry trends. The CE
Program is codified under the rules of the self-regulatory
organizations (``SROs''). The CE Program for registered persons of
Exchange members is codified under Rules 341A and 2.21E.\10\
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\10\ See also Commentary .06 to Rule 2.1210 (All Registered
Persons Must Satisfy the Regulatory Element of Continuing
Education).
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a. Regulatory Element
Rule 341A(a) (Regulatory Element) and Rule 2.21E(d)(1) (Regulatory
Element) each currently requires a registered person to complete the
applicable Regulatory Element initially within 120 days after the
person's second registration anniversary date and, thereafter, within
120 days after every third registration anniversary date.\11\ The
Exchange may extend these time frames for good cause shown.\12\
Registered persons who have not completed the Regulatory Element within
the prescribed time frames will have their Exchange registrations
deemed inactive and will be designated as ``CE inactive'' in the CRD
system until the requirements of the Regulatory Element have been
satisfied.\13\ A CE inactive person is prohibited from performing, or
being compensated for, any activities requiring FINRA registration,
including supervision. Moreover, if registered persons remain CE
inactive for two consecutive years, they must requalify by retaking
required examinations (or obtain a waiver of the applicable
qualification examinations).\14\
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\11\ See Rule 341A(a) and Rule 341A, Commentary .03 and Rule
2.21E(d)(1) and Rule 2.21E, Commentary .04. An individual's
registration anniversary date is generally the date they initially
registered with the Exchange in the Central Registration Depository
(``CRD[supreg]'') system. However, an individual's registration
anniversary date would be reset if the individual has been out of
the industry for two or more years and is required to requalify by
examination, or obtain an examination waiver, in order to
reregister. An individual's registration anniversary date would also
be reset if the individual obtains a conditional examination waiver
that requires them to complete the Regulatory Element by a specified
date. Non-registered individuals who are participating in the waiver
program under Commentary .08 to Rule 2.1210 (Waiver of Examinations
for Individuals Working for a Financial Services Industry Affiliate
of a Member Organization or ETP Holder) (``FSAWP participants'') are
also subject to the Regulatory Element. The Regulatory Element for
FSAWP participants correlates to their most recent registration(s),
and it must be completed based on the same cycle had they remained
registered. FSAWP participants are eligible for a single, fixed
seven-year waiver period from the date of their initial designation,
subject to specified conditions. Registered persons who become
subject to a significant disciplinary action, as specified in Rules
341A(a)(3) (Disciplinary Actions) and Rule 2.21E(d)(1)(C)
(Disciplinary Actions), may be required to retake the Regulatory
Element within 120 days of the effective date of the disciplinary
action, if they remain registered. Further, their cycle for
participation in the Regulatory Element may be adjusted to reflect
the effective date of the disciplinary action rather than their
registration anniversary date.
\12\ See Rule 341A(a)(2) (Failure to Complete) and Rule
2.21E(d)(1)(B) (Failure to Complete).
\13\ Id. Individuals must complete the entire Regulatory Element
session to be considered to have ``completed'' the Regulatory
Element; partial completion is the same as non-completion. With this
proposed rule change, the Exchange proposes to adopt additional rule
text found in the FINRA rules with respect to termination of
registrations that become inactive. To maintain consistency with
FINRA rules, the Exchange proposes to amend current Rule 341A(a)(2)
by adopting the following rule text within the current rule: ``A
registration that remains inactive for a period of two consecutive
years will be administratively terminated by the Exchange. A person
whose registration(s) is so terminated or who otherwise fails to
complete required Regulatory Element for two consecutive years may
reactivate the registration(s) only by reapplying for registration
and meeting the qualification requirements of the applicable
provisions of Rules 2.1210 and 2.1220. The two-year period under
this Section (a)(2) is calculated from the date a person's
registration(s) is deemed inactive.'' Additionally, the Exchange
proposes to amend current Rule 2.21E(d)(1)(B) by adopting the
following text within the current rule: ``A registration that
remains inactive for a period of two consecutive years will be
administratively terminated by the Exchange. A person whose
registration(s) is so terminated or who otherwise fails to complete
required Regulatory Element for two consecutive years may reactivate
the registration(s) only by reapplying for registration and meeting
the qualification requirements of the applicable provisions of Rules
2.1210 and 2.1220. The two-year period under this paragraph
(d)(1)(B) is calculated from the date a person's registration(s) is
deemed inactive.''
\14\ This CE inactive two-year period is calculated from the
date such persons become CE inactive, and it continues to run
regardless of whether they terminate their registrations before the
end of the two-year period. Therefore, if registered persons
terminate their registrations while in a CE inactive status, they
must satisfy all outstanding Regulatory Element prior to the end of
the CE inactive two-year period in order to reregister with a member
without having to requalify by examination or having to obtain an
examination waiver.
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The Regulatory Element consists of a subprogram for registered
persons generally, and a subprogram for principals and supervisors.\15\
While some of the current Regulatory Element content is unique to
particular registration categories, most of the content has broad
application to both representatives and principals.\16\
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\15\ The S101 (General Program for Registered Persons) and the
S201 (Registered Principals and Supervisors).
\16\ The current content is presented in a single format leading
individuals through a case that provides a story depicting
situations that they may encounter in the course of their work.
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The Regulatory Element was originally designed at a time when most
individuals had to complete the Regulatory Element at a test center,
and its design was shaped by the limitations of the test center-based
delivery model. In 2015, FINRA transitioned the delivery of the
Regulatory Element to an online platform (``CE Online''), which allows
individuals to complete the content online at a location of their
choosing, including their private residence. This online delivery
provides FINRA with much greater flexibility in updating content in a
timelier fashion, developing content tailored to each registration
category and presenting the material in an optimal learning format.
b. Firm Element
Rule 341A(b) (Firm Element) and Rule 2.21E(d)(2) (Firm Element)
each currently requires each firm to develop and administer an annual
Firm Element training program for covered registered persons.\17\ The
rule requires firms to conduct an annual needs analysis to determine
the appropriate training.\18\ Currently, at a minimum, the Firm Element
must cover training in ethics and professional responsibility as well
as 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.\19\
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\17\ The rules define ``covered registered persons'' as any
registered person who has direct contact with customers in the
conduct of a member's securities sales and trading activities, and
the immediate supervisors of any such persons. See Rule 341A(b)(1)
(Persons Subject to the Firm Element) and Rule 2.21E(d)(2)(A)
(Persons Subject to the Firm Element).
\18\ See Rule 341A(b)(2) (Standards) and Rule 2.21E(d)(2)(B)
(Standards).
\19\ Id.
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A firm, consistent with its needs analysis, may determine to apply
toward the Firm Element other required training. The current rule does
not expressly recognize other required training, such as training
relating to the anti-money laundering (``AML'') compliance program and
training relating to the annual compliance meeting, for purposes of
satisfying Firm Element training.
c. Termination of a Registration
Currently, individuals whose registrations as representatives or
principals have been terminated for two or more years may reregister as
representatives or principals only if they requalify by retaking and
passing the applicable representative- or principal-
[[Page 35814]]
level examination or if they obtain a waiver of such examination(s)
(the ``two-year qualification period'').\20\ The two-year qualification
period was adopted prior to the creation of the CE Program and was
intended to ensure that individuals who reregister are relatively
current on their regulatory and securities knowledge.
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\20\ See Commentary .07 to Rule 2.1210 (Lapse of Registration
and Expiration of SIE). The two-year qualification period is
calculated from the date individuals terminate their registration
and the date the Exchange receives a new application for
registration. The two-year qualification period does not apply to
individuals who terminate a limited registration category that is a
subset of a broader registration category for which they remain
qualified. For instance, it would not apply to an individual who
maintains his registration as a General Securities Representative
but who terminates his registration as an Investment Company and
Variable Contracts Products Representative. Such individuals have
the option of reregistering in the more limited registration
category without having to requalify by examination or obtain an
examination waiver so long as they continue to remain qualified for
the broader registration category. Further, the two-year
qualification period only applies to the representative- and
principal-level examinations; it does not extend to the Securities
Industry Essentials (``SIE'') examination. The SIE examination is
valid for four years, but having a valid SIE examination alone does
not qualify an individual for registration as a representative or
principal. Individuals whose registrations as representatives or
principals have been revoked pursuant to Rule 8310 (Sanctions for
Violation of the Rules) may only requalify by retaking the
applicable representative- or principal-level examination in order
to reregister as representatives or principals, in addition to
satisfying the eligibility conditions for association with a firm.
Waivers are granted either on a case-by-case basis under Commentary
.02 to Rule 2.1210 (Qualification Examinations and Waivers of
Examinations) or as part of the waiver program under Commentary .08
to Rule 2.1210.
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(ii) Proposed Rule Change
After extensive work with the Securities Industry/Regulatory
Council on Continuing Education (``CE Council'') and discussions with
stakeholders, including industry participants and the North American
Securities Administrators Association (``NASAA''), FINRA adopted the
following changes to the CE Program under its rules.\21\ In order to
promote uniform standards across the securities industry, the Exchange
now proposes to adopt substantially similar changes to its continuing
education rules.
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\21\ See supra note 8. FINRA's changes are based on the CE
Council's September 2019 recommendations to enhance the CE Program.
See Recommended Enhancements for the Securities Industry Continuing
Education Program, available at <a href="http://cecouncil.org/media/266634/council-recommendations-final-.pdf">http://cecouncil.org/media/266634/council-recommendations-final-.pdf</a>. The CE Council is composed of
securities industry representatives and representatives of SROs. The
CE Council was formed in 1995 upon a recommendation from the
Securities Industry Task Force on Continuing Education and was
tasked with facilitating the development of uniform continuing
education requirements for registered persons of broker-dealers.
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a. Transition to Annual Regulatory Element for Each Registration
Category
As noted above, currently, the Regulatory Element generally must be
completed every three years, and the content is broad in nature. Based
on changes in technology and learning theory, the Regulatory Element
content can be updated and delivered in a timelier fashion and tailored
to each registration category, which would further the goals of the
Regulatory Element.\22\ Therefore, to provide registered persons with
more timely and relevant training on significant regulatory
developments, the Exchange proposes amending Rule 341A(a) and Rule
2.21E(d)(1) to require registered persons to complete the Regulatory
Element annually by December 31.\23\ The proposed amendment would also
require registered persons to complete Regulatory Element content for
each representative or principal registration category that they hold,
which would also further the goals of the Regulatory Element.\24\ Under
the proposed rule change, firms would have the flexibility to require
their registered persons to complete the Regulatory Element sooner than
December 31, which would allow firms to coordinate the timing of the
Regulatory Element with other training requirements, including the Firm
Element.\25\ For example, a firm could require its registered persons
to complete both their Regulatory Element and Firm Element by October 1
of each year.
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\22\ When the CE Program was originally adopted in 1995,
registered persons were required to complete the Regulatory Element
on their second, fifth and 10th registration anniversary dates. See
Securities Exchange Act Release No. 35341 (February 8, 1995), 60 FR
8426 (February 14, 1995) (Order Approving File Nos. SR-AMEX-94-59;
SR-CBOE-94-49; SR-CHX-94-27; SR-MSRB-94-17; SR-NASD-94-72; SR-NYSE-
94-43; SR-PSE-94-35; and SR-PHLX-94-52). The change to the current
three-year cycle was made in 1998 to provide registered persons more
timely and effective training, consistent with the overall purpose
of the Regulatory Element. See Securities Exchange Act Release No.
39712 (March 3, 1998), 63 FR 11939 (March 11, 1998) (Order Approving
File Nos. SR-CBOE-97-68; SR-MSRB-98-02; SR-NASD-98-03; and SR-NYSE-
97-33).
\23\ See proposed Rules 341A(a) and 341A, Commentary .03 and
Rules 2.21E(d)(1) and 2.21E, Commentary .04.
\24\ See proposed Rules 2.1210, Commentary .06, 341A(a) and
2.21E(d)(1).
\25\ See proposed Rules 341A(a) and 341A, Commentary .03 and
Rules 2.21E(d)(1) and 2.21E, Commentary .04.
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Individuals who would be registering as a representative or
principal for the first time on or after the implementation date of the
proposed rule change would be required to complete their initial
Regulatory Element for that registration category in the next calendar
year following their registration.\26\ In addition, subject to
specified conditions, individuals who would be reregistering as a
representative or principal on or after the implementation date of the
proposed rule change would also be required to complete their initial
Regulatory Element for that registration category in the next calendar
year following their reregistration.\27\
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\26\ See proposed Rule 341A(a) and Rule 2.21E(d)(1).
\27\ See proposed Rule 341A, Commentary .03 and Rule 2.21E,
Commentary .04.
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Consistent with current requirements, individuals who fail to
complete their Regulatory Element within the prescribed period would be
automatically designated as CE inactive.\28\ However, the proposed rule
change preserves the Exchange's ability to extend the time by which a
registered person must complete the Regulatory Element for good cause
shown.\29\
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\28\ See proposed Rule 341A(a)(2) and Rule 2.21E(d)(1)(B).
\29\ Id. The proposed rule change clarifies that the request for
an extension of time must be in writing and include supporting
documentation, which is consistent with current practice.
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The Exchange also proposes amending Rule 341A(a) and Rule
2.21E(d)(1) to clarify 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; \30\ (2) the two-year CE inactive period is calculated
from the date individuals become CE inactive, and it continues to run
regardless of whether individuals terminate their registrations; \31\
(3) individuals who become subject to a significant disciplinary action
may be required to complete assigned continuing education content as
prescribed by the Exchange; \32\ (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
[[Page 35815]]
category, whichever is applicable; \33\ and (5) the Regulatory Element
requirements apply to individuals who are registered, or in the process
of registering, as a representative or principal. In addition, the
Exchange proposes making conforming amendments to Commentary .07 to
Rule 2.1210.
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\30\ See proposed Rule 341A(a)(2) and Rule 2.21E(d)(1)(B).
\31\ See proposed Rule 341A(a)(2) and Rule 2.21E(d)(1)(B).
\32\ See proposed Rule 341A(a)(3) and Rule 2.21E(d)(1)(C). As
previously noted, Rule 345A(a)(3) and Rule 2.21E(d)(1)(C) each
currently provides that such individuals may be required to retake
the Regulatory Element. See supra note 11.
\33\ See proposed Rule 341A, Commentary .03 and Rule 2.21E,
Commentary .04.
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Under the proposed rule change, the amount of content that
registered persons would be required to complete in a three-year,
annual cycle for a particular registration category is expected to be
comparable to what most registered persons are currently completing
every three years. In some years, there may be more required content
for some registration categories depending on the volume of rule
changes and regulatory issues. In addition, an individual who holds
multiple registrations may be required to complete additional content
compared to an individual who holds a single registration because, as
noted above, individuals would be required to complete content specific
to each registration category that they hold.\34\ However, individuals
with multiple registrations would not be subject to duplicative
regulatory content in any given year. The more common registration
combinations would likely share much of their relevant regulatory
content each year. For example, individuals registered as General
Securities Representatives and General Securities Principals would
receive the same content as individuals solely registered as General
Securities Representatives, supplemented with a likely smaller amount
of supervisory-specific content on the same topics. The less common
registration combinations may result in less topic overlap and more
content overall.
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\34\ As discussed in the economic impact assessment in the FINRA
Rule Change, individuals with multiple registrations represent a
smaller percentage of the population of registered persons.
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b. Recognition of Other Training Requirements for Firm Element and
Extension of Firm Element to All Registered Persons
To better align the Exchange's rulebook with FINRA's rulebook, and,
in addition, to better align the Firm Element requirement with other
required training, the Exchange proposes amending Rule 341A(b) and Rule
2.21E(d)(2) to expressly allow firms to consider training relating to
the AML compliance program and the annual compliance meeting toward
satisfying an individual's annual Firm Element requirement.\35\ The
Exchange also proposes amending the rule to extend the Firm Element
requirement to all registered persons, including individuals who
maintain solely a permissive registration consistent with Commentary
.01 to Rule 2.1210 (Permissive Registrations), thereby further aligning
the Firm Element requirement with other broadly-based training
requirements.\36\ In conjunction with this proposed change, the
Exchange proposes modifying the current minimum training criteria under
Rule 341A(b) and Rule 2.21E(d)(2) to instead provide that the training
must cover topics related to the role, activities or responsibilities
of the registered person and to professional responsibility.\37\
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\35\ See proposed Rule 341A(b)(2)(iv) and Rule
2.21E(d)(2)(B)(iv).
\36\ See proposed Rule 341A(b)(1) and Rule 2.21E(d)(2)(A). As
noted earlier, the current requirement only applies to ``covered
registered persons'' and not all registered persons.
\37\ See proposed Rule 341A(b)(2)(ii) and Rule
2.21E(d)(2)(B)(ii).
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c. Maintenance of Qualification After Termination of Registration
The Exchange proposes adopting paragraph (c) under Rule 341A and
Commentary .06 and .07 under Rule 341A and paragraph (3) under 2.21E(d)
and Commentary .06 and .07 under Rule 2.21E to provide eligible
individuals who terminate any of their representative or principal
registrations the option of maintaining their qualification for any of
the terminated registrations by completing continuing education.\38\
The proposed rule change would not eliminate the two-year qualification
period. Rather, it would provide such individuals an alternative means
of staying current on their regulatory and securities knowledge
following the termination of a registration(s). Eligible individuals
who elect not to participate in the proposed continuing education
program would continue to be subject to the current two-year
qualification period. The proposed rule change is generally aligned
with other professional continuing education programs that allow
individuals to maintain their qualification to work in their respective
fields during a period of absence from their careers (including an
absence of more than two years) by satisfying continuing education
requirements for their credential.
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\38\ The proposed option would also be available to individuals
who terminate any permissive registrations as provided under
Commentary .01 to Rule 2.1210. However, the proposed option would
not be available to individuals who terminate a limited registration
category that is a subset of a broader registration category for
which they remain qualified. As previously noted, such individuals
currently have the option of reregistering in the more limited
registration category without having to requalify by examination or
obtain an examination waiver so long as they continue to remain
qualified for the broader registration category. In addition, the
proposed option would not be available to individuals who are
maintaining an eliminated registration category, such as the
category for Corporate Securities Representative, or individuals who
have solely passed the Securities Industry Essentials examination,
which does not, in and of itself, confer registration.
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The proposed rule change would impose the following conditions and
limitations:
<bullet> individuals would be required to be registered in the
terminated registration category for at least one year immediately
prior to the termination of that category; \39\
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\39\ See proposed Rule 341A(c)(1) and Rule 2.21E(d)(3)(A).
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<bullet> individuals could elect to participate when they terminate
a registration or within two years from the termination of a
registration; \40\
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\40\ See proposed Rule 341A(c)(2) and Rule 2.21E(d)(3)(B).
Individuals who elect to participate at the later date would be
required to complete, within two years from the termination of their
registration, any continuing education that becomes due between the
time of their Form U5 (Uniform Termination Notice for Securities
Industry Registration) submission and the date that they commence
their participation. In addition, FINRA would enhance its systems to
notify individuals of their eligibility to participate, enable them
to affirmatively opt in, and notify them of their annual continuing
education requirement if they opt in.
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<bullet> individuals would be required to complete annually all
prescribed continuing education; \41\
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\41\ See proposed Rule 341A(c)(3) and Rule 2.21E(d)(3)(C).
However, upon a participant's request and for good cause shown, the
Exchange would have the ability to grant an extension of time for
the participant to complete the prescribed continuing education. A
participant who is also a registered person must directly request an
extension of the prescribed continuing education from the Exchange.
The continuing education content for participants would consist of a
combination of Regulatory Element content and content selected by
FINRA and the CE Council from the Firm Element content catalog. The
content would correspond to the registration category for which
individuals wish to maintain their qualifications. Participants who
are maintaining their qualification status for a principal
registration category that includes one or more corequisite
representative registrations must also complete required annual
continuing education for the corequisite registrations in order to
maintain their qualification status for the principal registration
category. The proposed rule change clarifies that the prescribed
continuing education must be completed by December 31 of the
calendar year, which is consistent with the timing for the proposed
annual Regulatory Element.
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<bullet> individuals would have a maximum of five years in which to
reregister; \42\
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\42\ See proposed Rule 341A(c) and Rule 2.21E(d)(3). In
addition, individuals applying for reregistration must satisfy all
other requirements relating to the registration process (e.g.,
submit a Form U4 (Uniform Application for Securities Industry
Registration or Transfer) and undergo a background check).
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[[Page 35816]]
<bullet> individuals who have been CE inactive for two consecutive
years, or who become CE inactive for two consecutive years during their
participation, would not be eligible to participate or continue; \43\
and
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\43\ See proposed Rules 341A(c)(4) and (c)(5) and Rules
2.21E(d)(3)(C) and (d)(3)(D).
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<bullet> individuals who are subject to a statutory
disqualification, or who become subject to a statutory disqualification
following the termination of their registration or during their
participation, would not be eligible to participate or continue.\44\
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\44\ See proposed Rules 341A(c)(1) and (c)(6) and Rules
2.21E(d)(3)(A) and (d)(3)F). Further, any content completed by
participants would be retroactively nullified upon disclosure of the
statutory disqualification. The following example illustrates the
application of the proposed rule change to individuals who become
subject to a statutory disqualification while participating in the
proposed continuing education program. Individual A participates in
the proposed continuing education program for four years and
completes the prescribed content for each of those years. During
year five of his participation, he becomes subject to a statutory
disqualification resulting from a foreign regulatory action. In that
same year, the Exchange receives a Form U4 submitted by a member on
behalf of Individual A requesting registration with the Exchange.
The Form U4 discloses the statutory disqualification event. The
Exchange would then retroactively nullify any content that
Individual A completed while participating in the proposed
continuing education program. Therefore, in this example, in order
to become registered with the Exchange, he would be required to
requalify by examination. This would be in addition to satisfying
the eligibility conditions for association with an Exchange member
firm. See Exchange Act Sections 3(a)(39) and 15(b)(4).
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The proposed rule change also includes a look-back provision that
would, subject to specified conditions, extend the proposed option to
individuals who have been registered as a representative or principal
within two years immediately prior to the implementation date of the
proposed rule change and individuals who have been FSAWP participants
immediately prior to the implementation date of the proposed rule
change.\45\
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\45\ See proposed Commentary .06 to Rule 341A and Commentary .06
to Rule 2.21E. Such individuals would be required to elect whether
to participate by the effective date of the proposed rule change. If
such individuals elect to participate, they would be required to
complete their initial annual content by the end of the calendar
year in which the proposed rule change becomes effective. In
addition, if such individuals elect to participate, their initial
participation period would be adjusted based on the date that their
registration was terminated. The current waiver program for FSAWP
participants would not be available to new participants upon the
date the proposed rule change becomes effective. See proposed
Commentary .08 to Rule 2.1210. However, individuals who are FSAWP
participants immediately prior to the effective date of the proposed
rule change could elect to continue in that waiver program until the
program has been retired. As noted above, FSAWP participants may
participate for up to seven years in that waiver program, subject to
specified conditions. See supra note 11. As discussed above, the
proposed rule change provides a five-year participation period for
participants in the proposed continuing education program. So as not
to disadvantage FSAWP participants, the Exchange has determined to
preserve that waiver program for individuals who are participating
in the FSAWP immediately prior to the effective date of the proposed
rule change. Because the proposed rule change transitions the
Regulatory Element to an annual cycle, FSAWP participants who remain
in that waiver program following the effective date of the proposed
rule change would be subject to an annual Regulatory Element
requirement. See proposed Rule 341A(a) and Rule 2.21E(d)(1).
Finally, the proposed rule change preserves the Exchange's ability
to extend the time by which FSAWP participants must complete the
Regulatory Element for good cause shown. See proposed Rule
341A(a)(2) and Rule 2.21E(d)(1)(B).
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In addition, the proposed rule change includes a re-eligibility
provision that would allow individuals to regain eligibility to
participate each time they reregister with a firm for a period of at
least one year and subsequently terminate their registration, provided
that they satisfy the other participation conditions and
limitations.\46\ Additionally, the Exchange proposes making conforming
amendments to Rule 2.1210, including adding references to proposed Rule
341A(c) and Rule 2.21E(d)(3) under Commentary .07 to Rule 2.1210.
Further, the Exchange proposes certain additional amendments to its
rules to further align the Exchange's rules with those of FINRA,
including making changes to certain rules to correct typographical and
grammatical errors. More specifically, the Exchange proposes to amend
current Rules 314A(a)(2) and 2.21E(d)(1)(B) to clarify that the
provisions under such rules apply to a ``registered person'' by
inserting the word ``registered'' in front of ``person.'' The Exchange
also proposes to adopt Section (a)(5) under Rule 341A which describes
the manner in which members designate a contact person to the Exchange
for receiving notifications regarding the Regulatory Element. Finally,
the Exchange proposes to amend current Rule 2.1220(a)(2)(A)(i) to
conform the rule to that of its affiliate, NYSE Arca.
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\46\ See proposed Commentary .07 to Rule 341A and Commentary .07
to Rule 2.21E.
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The proposed rule change will have several important benefits. It
will provide individuals with flexibility to address life and career
events and necessary absences from registered functions without having
to requalify each time. It will also incentivize them to stay current
on their respective securities industry knowledge following the
termination of any of their registrations. The continuing education
under the proposed option will be as rigorous as the continuing
education of registered persons, which promotes investor protection.
Further, the proposed rule change will enhance diversity and inclusion
in the securities industry by attracting and retaining a broader and
diverse group of professionals.
Significantly, the proposed rule change will be of particular value
to women, who continue to be the primary caregivers for children and
aging family members and, as a result, are likely to be absent from the
industry for longer periods.\47\ In addition, the proposed rule change
will provide longer-term relief for women, individuals with low incomes
and other populations, including older workers, who are at a higher
risk of a job loss during certain economic downturns and who are likely
to remain unemployed for longer periods.\48\
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\47\ See The Female Face of Family Caregiving (November 2018),
available at <a href="https://www.nationalpartnership.org/our-work/resources/economic-justice/femaleface-family-caregiving.pdf">https://www.nationalpartnership.org/our-work/resources/economic-justice/femaleface-family-caregiving.pdf</a>.
\48\ See The COVID-19 Recession is the Most Unequal in Modern
U.S. History (September 30, 2020), available at <a href="https://www.washingtonpost.com/graphics/2020/business/coronavirus-recessionequality/">https://www.washingtonpost.com/graphics/2020/business/coronavirus-recessionequality/</a> and Unemployment's Toll on Older Workers Is Worst
in Half a Century (October 21, 2020), available at <a href="https://www.aarp.org/work/working-at-50-plus/info-2020/pandemic-unemployment-older-workers">https://www.aarp.org/work/working-at-50-plus/info-2020/pandemic-unemployment-older-workers</a>.
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d. CE Program Implementation
As stated in the FINRA Rule Change, FINRA and the CE Council also
plan to enhance the CE Program in other ways, and these additional
enhancements do not require any changes to the FINRA rules.\49\ As it
relates to the rule changes themselves, the FINRA changes relating to
the Maintaining Qualifications Program and the Financial Services
Affiliate Waiver Program (FSAWP) became effective on March 15,
2022.\50\ The Exchange's proposed changes to the Maintaining
Qualifications Program (paragraph (c) of Rule 341A along with
Commentary .06 and .07 to Rule 341A and paragraph (3) of Rule 2.21E(d)
along with Commentary .06 and .07 to Rule 2.21E) and to the FSAWP
(Commentary .08 to Rule 2.1210) will become effective on the date this
proposed rule change is filed. All other changes related to the FINRA
Rule Change and to the Exchange's rules relating to the Regulatory
Element, Firm Element and the two-year qualification period, will
[[Page 35817]]
have an implementation date of January 1, 2023.\51\
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\49\ See supra note 8. As described in more detail in the FINRA
Rule Change, FINRA will work with the CE Council to develop and
incorporate additional resources in connection with the Regulatory
and Firm Elements. Similar to FINRA, these additional enhancements
do not require any changes to the Exchange rules.
\50\ See FINRA Regulatory Notice 21-41 at <a href="https://www.finra.org/rulesguidance/notices/21-41">https://www.finra.org/rulesguidance/notices/21-41</a>.
\51\ Id.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\52\ in general, and
furthers the objectives of Section 6(b)(5),\53\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in 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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\52\ 15 U.S.C. 78f(b).
\53\ 15 U.S.C. 78f(b)(5).
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As noted above, the proposed rule change seeks to align the
Exchange Rules with the recent change to FINRA rules which has been
approved by the Commission.\54\ Additionally, the proposed rule change
seeks to conform current Rule 2.1220(a)(2)(A)(i) with that of its
affiliate, NYSE Arca. The Exchange believes the proposed rule change is
consistent with the provisions of Section 6(b)(5) of the Act,\55\ 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,\56\
which authorizes the Exchange to prescribe standards of training,
experience and competence for persons associated with the Exchange.
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\54\ See supra note 8.
\55\ 15 U.S.C. 78f(b)(5).
\56\ 15 U.S.C. 78f(c)(3).
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The Exchange believes that the proposed change to the Regulatory
Element and Firm Element will ensure that all registered persons
receive timely and relevant training, which will, in turn, enhance
compliance and investor protection. Further, the Exchange believes that
establishing a path for individuals to maintain their qualification
following the termination of a registration will reduce unnecessary
impediments to requalification and promote greater diversity and
inclusion in the securities industry without diminishing investor
protection.
The Exchange believes the proposal is consistent with the Act for
the reasons described above and for the reasons outlined in the
approval order for SR-FINRA-2021-015.\57\
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\57\ See supra note 8.
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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 the recent
rule change adopted by FINRA, will reduce the regulatory burden placed
on market participants engaged in trading activities across different
markets. The Exchange believes that the harmonization of the CE program
requirements across the various markets will reduce burdens on
competition by removing impediments to participation in the national
market system and promoting competition among participants across the
multiple national securities exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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 \58\ and Rule 19b-
4(f)(6) thereunder.\59\
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\58\ 15 U.S.C. 78s(b)(3)(A)(iii).
\59\ 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) \60\ 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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\60\ 17 CFR 240.19b-4(f)(6)(iii).
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Waiver of the 30-day operative delay would allow the Exchange to
more quickly align certain of its proposed changes with changes that
FINRA implemented on March 15, 2022, thereby reducing the possibility
of a significant regulatory gap between the FINRA and Exchange rules,
providing more uniform standards across the securities industry, and
helping to avoid confusion for registered persons of the Exchange that
are also FINRA members. In addition, the waiver would allow the
Exchange to immediately conform one of its rules to that of NYSE Arca,
further providing more uniform standards across the securities
industry. For these reasons, 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.\61\
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\61\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#1062657c753d737f7d7d757e6463506375733e777f66"><span class="__cf_email__" data-cfemail="0a787f666f27696567676f647e794a796f69246d657c">[email protected]</span></a>. Please include
File Number SR-NYSEAMER-2022-20 on the subject line.
[[Page 35818]]
Paper Comments
<bullet> 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-NYSEAMER-2022-20. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 the Exchange. 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-NYSEAMER-2022-20 and should be submitted
on or before July 5, 2022.
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\62\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\62\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-12643 Filed 6-10-22; 8:45 am]
BILLING CODE 8011-01-P
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