Notice2022-13704
Self-Regulatory Organizations: Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 1900, Registration Requirements, Exchange Rule 1903, Continuing Education Requirements, and Exchange Rule 1904, Electronic Filing Requirements for Uniform Forms
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 28, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 123 (Tuesday, June 28, 2022)</title>
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[Federal Register Volume 87, Number 123 (Tuesday, June 28, 2022)]
[Notices]
[Pages 38438-38445]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-13704]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95140; File No. SR-MIAX-2022-23]
Self-Regulatory Organizations: Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Exchange Rule 1900, Registration
Requirements, Exchange Rule 1903, Continuing Education Requirements,
and Exchange Rule 1904, Electronic Filing Requirements for Uniform
Forms
June 22, 2022.
Pursuant to the provisions of 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 June 10, 2022, Miami International Securities
Exchange, LLC (``MIAX Options'' or the ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change as described in Items I and II below, which Items have been
prepared by the Exchange. 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 a proposal to amend Exchange Rule 1903,
Continuing Education Requirements. The proposed rule change also makes
conforming amendments to Exchange Rule 1900, Registration Requirements.
Among other changes, the proposed rule change requires that the
Regulatory Element of continuing education be completed annually rather
than every three years and provide a path through continuing education
for individuals to maintain their qualification following the
termination of a registration. The Exchange also proposes to amend its
manual signature requirements in Exchange Rule 1904, Electronic Filing
Requirements for Uniform Forms.
The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings/">http://www.miaxoptions.com/rule-filings/</a>, at MIAX Options'
principal office, and at the Commission's Public Reference Room.
[[Page 38439]]
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 Exchange 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 Exchange 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
The Exchange proposes to amend Exchange Rules 1900 and 1903. This
proposed rule change is based on a filing recently submitted by the
Financial Industry Regulatory Authority, Inc. (``FINRA'') \3\ and is
intended to harmonize the Exchange's registration rules with those of
FINRA so as to promote uniform standards across the securities
industry.\4\ The Exchange also proposes to amend its manual signature
requirements in Exchange Rule 1904, Electronic Filing Requirements for
Uniform Forms, to align with changes FINRA has made to similar
rules.\5\ Each change is discussed in detail below.
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\3\ See Securities Exchange Act Release Nos. 92183 (June 15,
2021), 86 FR 33427 (June 24, 2021) (SR-FINRA-2021-15); and 93097
(September 21, 2021), 86 FR 53358 (September 27, 2021) (SR-FINRA-
2021-15).
\4\ See, e.g., Securities Exchange Act Release Nos. 94400 (March
11, 2022), 87 FR 15286 (March 17, 2022) (SR-NASDAQ-2022-021); 92562
(August 4, 2021), 86 FR 143701 (August 10, 2021) (SR-CBOE-2021-043);
94794 (April 26, 2022), 87 FR 25683 (May 2, 2022) (SR-BOX-2022-016);
and 94429 (March 16, 2022), 87 FR 16268 (March 22, 2022) (SR-MEMX-
2022-05).
\5\ See Securities Exchange Act Release No. 91262 (March 5,
2021), 86 FR 13935 (March 11, 2021) (SR-FINRA-2021-003).
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The proposed changes are based on the changes filed with the
Commission in SR-FINRA-2021-003 and SR-FINRA-2021-015.\6\ The Exchange
proposes 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.\7\
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\6\ See supra notes 3 and 5.
\7\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
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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 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 Exchange
Rules 1900 and 1903.\8\
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\8\ See Exchange Rules 1900 and 1903.
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a. Regulatory Element
Exchange Rule 1903(a), Regulatory Element, 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.\9\ The Exchange may extend these time
frames for good cause shown.\10\ 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.\11\ A CE inactive person
is prohibited from performing, or being compensated for, any activities
requiring Exchange 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).\12\
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\9\ See Exchange Rule 1903(a)(1). 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 Exchange Rule 1900, Interpretation and Policy .09,
Waiver of Examinations for Individuals Working for a Financial
Services Industry Affiliate of a Member, (``FSAWP participants'')
are also subject to the Regulatory Element. See also Exchange Rule
1903(a)(5), Definition of Covered Person. 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
Exchange Rule 1903(a)(3), 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.
\10\ See Exchange Rule 1903(a)(2).
\11\ See 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.
\12\ 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.\13\
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.\14\
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\13\ The S101 (General Program for Registered Persons) and the
S201 (Registered Principals and Supervisors). For more information
on both subprograms, see Content Outline for the S101 Regulatory
Element Program, available at <a href="https://www.finra.org/sites/default/files/S101P_Outline.pdf">https://www.finra.org/sites/default/files/S101P_Outline.pdf</a> and Content Outline for the S201 Regulatory
Element Program, available at <a href="https://www.finra.org/sites/default/files/2020-11/s201.pdf">https://www.finra.org/sites/default/files/2020-11/s201.pdf</a>.
\14\ 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
[[Page 38440]]
registration category and presenting the material in an optimal
learning format.
b. Firm Element
Exchange Rule 1903(b), Firm Element, currently requires each firm
to develop and administer an annual Firm Element training program for
covered registered persons.\15\ The rule requires firms to conduct an
annual needs analysis to determine the appropriate training.\16\
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 practices considerations; and (3) applicable
regulatory requirements.\17\
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\15\ ``Covered registered persons'' means any person registered
with the Exchange pursuant to Rule 1900, including any person who is
permissively registered pursuant to Exchange Rule 1900,
Interpretation and Policy .02, and any person who is designated as
eligible for a waiver pursuant to Exchange Rule 1900, Interpretation
and Policy .09. See Exchange Rule 1903(a)(5).
\16\ See Exchange Rule 1903(b)(2), Standards for the Firm
Element.
\17\ 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,\18\
for purposes of satisfying Firm Element training.
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\18\ See Exchange Rules 315(e).
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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-level examination
or if they obtain a waiver of such examination(s) (the ``two-year
qualification period'').\19\ 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 currently on
their regulatory and securities knowledge.
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\19\ See Exchange Rule 1900, Interpretation and Policy .08. 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 Exchange Rule 1011,
Judgment and Sanction, 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 Exchange
Rule 1900, Interpretation and Policy .03, Qualification Examinations
and Waivers of Examinations, or as part of the waiver program under
Exchange Rule 1900, Interpretation and Policy .09.
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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.\20\ In order to
promote uniform standards across the securities industry, the Exchange
now proposes to adopt the same changes to its continuing education
rules.
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\20\ See supra note 3. 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.\21\ Therefore, to provide registered persons with
more timely and relevant training on significant regulatory
developments, the Exchange proposes to amend Exchange Rule 1903(a) to
require registered persons to complete the Regulatory Element annually
by December 31.\22\ The proposed amendment would also require
registered persons to complete the Regulatory Element content for each
representative or principal registration category that they hold, which
would also further the goals of the Regulatory Element.\23\
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\21\ When the CE Program was originally adopted in 1995,
registered persons were required to complete the Regulatory Element
on their second, fifth and tenth 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).
\22\ See proposed changes to Exchange Rules 1903(a)(1) and
(a)(4).
\23\ See proposed changes to Exchange Rules 1900, Interpretation
and Policy .07, and 1903(a)(1).
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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.\24\ 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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\24\ See proposed changes to Exchange Rules 1903(a)(1) and
(a)(4).
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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.\25\ 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.\26\
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\25\ See proposed changes to Exchange Rule 1903(a)(1).
\26\ See proposed changes to Exchange Rule 1903(a)(4).
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Consistent with current requirements, individuals who fail to
complete their Regulatory Element within the
[[Page 38441]]
prescribed period would be automatically designated as CE inactive.\27\
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.\28\
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\27\ See proposed changes to Exchange Rule 1903(a)(2).
\28\ See 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 to amend Exchange Rule 1903(a) 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; \29\ (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; \30\ (3)
individuals who become subject to a significant disciplinary action may
be required to complete assigned continuing education content as
prescribed by the Exchange; \31\ (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; \32\ and (5) the Regulatory Element
requirements apply to individuals who are registered, or in the process
of registering, as a representative or principal.\33\ In addition, the
Exchange proposed making conforming amendments to Exchange Rule 1900,
Interpretation and Policy .07.
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\29\ Id.
\30\ Id.
\31\ See proposed changes to Exchange Rule 1903(a)(3). As
previously noted, Exchange Rule 1903(a)(3) currently provides that
such individuals may be required to retake the Regulatory Element.
See supra note 9.
\32\ See proposed changes to Exchange Rule 1903(a)(4).
\33\ See proposed changes to Exchange Rule 1903(a)(5).
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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 section in
the FINRA Rule Change, supra note 3, individuals with multiple
registrations represent a small 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 1903(b) 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 to amend the rule to extend the Firm Element requirement to
all registered persons, including individuals who maintain solely a
permissive registration consistent with Exchange Rule 1900,
Interpretation and Policy .02, 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 Exchange Rule 1903(b) 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 Exchange Rule 1903(b)(2)(iv).
\36\ See proposed changes to Exchange Rule 1903(b)(1). As noted
earlier, the current requirement only applies to ``covered
registered persons'' and not all registered persons.
\37\ See proposed changes to Exchange Rule 1903(b)(2)(ii).
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c. Maintenance of Qualification After Termination of Registration
The Exchange proposes adopting paragraph (c) under Exchange Rule
1903 and Interpretation and Policies .01 and .02 to Exchange Rule 1903
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 as 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
Exchange Rule 1900, Interpretation and Policy .02. 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
[[Page 38442]]
immediately prior to the termination of that category; \39\
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\39\ See proposed Exchange Rule 1903(c)(1).
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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 Exchange Rule 1903(c)(2). 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 Exchange Rule 1903(c)(3). 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 co-requisite
representative registrations must also complete required annual
continuing education for the co-requisite 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 Exchange Rule 1903(c). 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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<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 Exchange Rules 1903(c)(4) and (c)(5).
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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 Exchange Rules 1903(c)(1) and (c)(6). 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 Exchange Rule 1903, Interpretation and Policy
.01. Such individuals would be required to elect whether to
participate by the implementation 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 is implemented. 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
implementation of the proposed rule change. See proposed Exchange
Rule 1900, Interpretation and Policy .09. However, individuals who
are FSAWP participants immediately prior to the implementation 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 9. 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 implementation 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 implementation of the proposed rule change would be
subject to an annual Regulatory Element requirement. See proposed
changes to Exchange Rule 1903(a)(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 changes to Exchange Rule 1903(a)(2).
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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\ Finally, the Exchange proposes making conforming
amendments to Exchange Rule 1900, including adding references to
proposed Exchange Rule 1903(c) and Interpretation and Policy .08 to
Exchange Rule 1900.
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\46\ See proposed Exchange Rule 1903, Interpretation and Policy
.02.
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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/female-face-family-caregiving.pdf">https://www.nationalpartnership.org/our-work/resources/economic-justice/female-face-family-caregiving.pdf</a>.
\48\ 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-recession-equality/">https://www.washingtonpost.com/graphics/2020/business/coronavirus-recession-equality/</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-unemployement-older-workers">https://www.aarp.org/work/working-at-50-plus/info-2020/pandemic-unemployement-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
[[Page 38443]]
rules.\49\ As it relates to the rule changes themselves, the changes
relating to the Maintaining Qualifications Program (proposed paragraph
(c) of Exchange Rule 1903, and Interpretations and Policies .01 and
.02) and the Financial Services Affiliate Waiver Program (FSAWP)
(Interpretation and Policy .09 to Exchange Rule 1900) will be
implemented July 1, 2022. All other changes related to the FINRA Rule
Change, including the changes relating to the Regulatory Element, Firm
Element and the two-year qualification period, will be implemented
January 1, 2023.\50\
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\49\ See supra note 3. Similar to FINRA, these additional
enhances do not require any changes to Exchange Rules.
\50\ See FINRA Regulatory Notice 21-41 at <a href="https://www.finra.org/rules-guidance/notices/21-41">https://www.finra.org/rules-guidance/notices/21-41</a>.
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Manual Signature
Exchange Rule 1904(c) currently provides that every initial and
transfer electronic Form U4 filing and any amendments to the disclosure
information on Form U4 must be based on a manually signed Form U4
provided to the Member or applicant for membership by the person on
whose behalf the Form U4 is being filed, consistent with FINRA Rule
1010(c). Similarly, Exchange Rule 1904, Interpretation and Policy .03,
currently provides that in the event a Member is not able to obtain an
associated person's manual signature or written acknowledgement of
amended disclosure information on that person's Form U4 prior to filing
on such amendment reflecting the information pursuant to proposed
Exchange Rule 1903(c)(3), the Member must enter ``Representative
Refused to Sign/Acknowledge'' or ``Representative Not Available'' or a
substantially similar entry in the electronic Form U4 field for the
associated person's signature. However, FINRA has since amended their
Rule 1010(c) to permit firms to choose to rely on electronic signatures
to satisfy the signature requirements when filing Form U4.\51\ Several
other exchanges have also updated their rules to reflect FINRA's
updated Rule 1010(c).\52\
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\51\ See supra note 5.
\52\ See e.g., Securities Exchange Act Release Nos. 94400 (March
11, 2022), 87 FR 15286 (March 17, 2022) (SR-NASDAQ-2022-021); 92562
(August 4, 2021), 86 FR 143701 (August 10, 2021) (SR-CBOE-2021-043);
and 94794 (April 26, 2022), 87 FR 25683 (May 2, 2022) (SR-BOX-2022-
016).
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The Exchange proposes to amend Exchange Rule 1904(c) and
Interpretation and Policy .03 to similarly allow firms to rely on
electronic signatures when filing Form U4, consistent with FINRA Rule
1010(c). Specifically, the Exchange proposes to remove the term
``manual'' from ``manual signature'' and the term ``manually'' from
``manually signed.'' The proposed rule change provides Members, and
applicants for membership, with an opportunity to better manage
operational challenges. Particularly, the COVID-19 pandemic amplified
the need to better manage operational challenges like those that arose
during the pandemic and that may continue to arise in the future.
Additionally, the proposed rule change would not require the use of a
particular type of technology to obtain a valid electronic signature
from the associated person. The Exchange believes that some firms may
be unable to obtain the manual signature of applicants for registration
resulting in a significant operational backlog. By permitting these
firms to rely on electronic signatures to satisfy the signature
requirements of Exchange Rule 1904(c) and Interpretation and Policy
.03, the proposed rule change may reduce or eliminate this backlog. For
purposes of the proposed rule change, a valid electronic signature
would be any electronic mark that clearly identifies the signatory and
is otherwise in compliance with the Electronic Signatures in Global and
National Commerce Act (``E-Sign Act'') and the guidance issued by the
Commission relating to the E-Sign Act.\53\
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\53\ See accord Securities Exchange Act Release No. 85282 (March
11, 2019), 84 FR 9573 (March 15, 2019) (Order Approving File No. SR-
FINRA-2018-040) (discussing valid electronic signatures under
existing guidance).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\54\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\55\ 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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\54\ 15 U.S.C. 78f(b).
\55\ 15 U.S.C. 78f(b)(5).
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As noted above, the proposed rule changes seek to align the
Exchange Rules with recent changes to FINRA rules.\56\ The Exchange
believes the proposed rule changes are consistent with the provisions
of Section 6(b)(5) of the Act,\57\ 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,\58\ which authorizes
the Exchange to prescribe standards of training, experience, and
competence for persons associated with the Exchange. The Exchange is
proposing to adopt such changes substantially in the same form proposed
by FINRA with only minor changes necessary to conform to the Exchange's
existing rules, such as removal of cross-references to rules that are
applicable to FINRA members but not Members of the Exchange.\59\ The
Exchange believes the proposal is consistent with the Act for the
reasons described above.
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\56\ See supra note 3.
\57\ 15 U.S.C. 78f(b)(5).
\58\ 15 U.S.C. 78f(c)(3).
\59\ Proposed changes to Interpretation and Policy .08 of
Exchange Rule 1900 is based on and substantially similar to FINRA
Rule 1210.08. The proposed changes to Exchange Rule 1903(a)(1)-(4),
proposed changes to Exchange Rule 1903(b), proposed Exchange Rule
1903(c), and proposed Interpretations and Policies .01-.02 to
Exchange Rule 1903(c) are based on and substantially similar to
FINRA Rules 1240(a)(1)-(4), FINRA Rule 1240(b), FINRA Rule 1240(c)
and Supplementary Materials .01 and .02 to FINRA Rule 1240. The
Exchange does not currently have a provision analogous to FINRA Rule
3110 and thus has omitted language referring to such provision in
its proposed Rules.
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The Exchange believes the proposed changes to the Regulatory
Element will ensure that all Registered Representatives receive timely
and relevant training, which will, in turn, enhance compliance and
investor protection. 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.
As it relates to the proposed changes to Exchange Rule 1904(c), the
Exchange believes the proposed rule change provides firms with the
flexibility to rely on electronic signatures to satisfy the signature
requirements of Exchange Rule 1904(c). Specifically, the Exchange
proposes to amend Exchange Rule 1904(c) and Interpretation and Policy
.03, similar to the amendments made by FINRA, to provide the option of
filing an initial or a transfer Form U4 based on a manually or an
electronically signed copy of the form provided to the Member, or
applicant for membership, by the individual on whose behalf the form is
being filed. Considering the
[[Page 38444]]
technological advancements that provide for enhanced authentication and
security of electronic signatures, the Exchange believes that it is
appropriate to amend Exchange Rule 1904(c) and Interpretation and
Policy .03 to provide such flexibility. The proposed rule change also
addresses the ongoing public health risks stemming from the outbreak of
COVID-19 and the operational challenges that firms continue to face as
a result of pandemic repercussions. By permitting these firms to rely
on electronic signatures to satisfy the signature requirements of
Exchange Rule 1904(c) and Interpretation and Policy .03, the proposed
rule change may reduce or eliminate an operational backlog due to the
difficulty firms may have faced in obtaining the manual signature of
applicants for registration as a result of the impact of the pandemic
on daily work environments. The Exchange believes the proposal is
consistent with the Act for the reasons described above and for the
reasons outlined in the recent filings SR-FINRA-2021-003 and SR-FINRA-
2021-015.\60\
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\60\ See supra notes 3 and 5.
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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. All Members would be subject
to the proposed rule change. The proposed rule change relating to the
Exchange's CE Program, which is materially identical to the FINRA Rule
Change, is designed to result in a more efficient CE Program that
addresses relevant regulatory requirements and provides individuals
with improved tools and resources to understand and comply with such
requirements, enhancing investor protection. Moreover, the proposed
rule change would provide new channels for individuals to maintain
their qualification status for a terminated registration category and,
in so doing, could increase the likelihood that professionals who need
to step away from the industry for a period could return, subject to
satisfying all other requirements relating to the registration process.
As it relates to the proposed amendments to Exchange Rule 1904(c),
the proposed rule change relating to manual signatures is, in all
material respects, substantively identical to a recent rule change
adopted by FINRA. The Exchange believes the proposed change will reduce
a regulatory filing burden for Members by allowing them to rely on Form
U4 copies with an electronic signature. All Members will have the
option to rely on such forms with an electronic signature (or continue
to rely on forms with a manual signature).
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
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 \61\ and Rule 19b-
4(f)(6) thereunder.\62\
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\61\ 15 U.S.C. 78s(b)(3)(A)(iii).
\62\ 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) \63\ 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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\63\ 17 CFR 240.19b-4(f)(6)(iii).
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Waiver of the 30-day operative delay would allow the Exchange to
implement proposed changes in a more timely fashion. First, the
proposed rule changes regarding manual signatures address operational
challenges facing firms due to the ongoing public health risks stemming
from the outbreak of COVID-19 and permit firms to rely on electronic
signatures to satisfy the signature requirements of Exchange Rule
1904(c) and Interpretation and Policy .03, which may reduce or
eliminate an operational backlog, ultimately benefiting the investing
public. Moreover, the proposed rule changes do not impose any
significant burden on competition because they will apply uniformly to
all similarly situated members and associated persons of members. Also,
as stated above, the proposed rule changes are substantively the same
as changes made by FINRA. Second, waiver of the 30-day operative delay
would also allow the Exchange to implement the proposed continuing
education changes noted above thereby reducing the possibility of a
significant regulatory gap between the FINRA and Exchange Rules. This
is consistent with the protection of investors and the public interest
by providing more uniform standards across the securities industry and
helping to avoid confusion for members of the Exchange that are also
FINRA members. Accordingly, the Commission hereby waives the 30-day
operative delay and designates the proposal operative upon filing.\64\
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\64\ 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#b1c3c4ddd49cd2dedcdcd4dfc5c2f1c2d4d29fd6dec7"><span class="__cf_email__" data-cfemail="88fafde4eda5ebe7e5e5ede6fcfbc8fbedeba6efe7fe">[email protected]</span></a>. Please include
File Number SR-MIAX-2022-23 on the subject line.
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-MIAX-2022-23. This file
number should be included on the
[[Page 38445]]
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; 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-MIAX-2022-23 and
should be submitted on or before July 19, 2022. For the Commission, by
the Division of Trading and Markets, pursuant to delegated
authority.\65\
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\65\ 17 CFR 200.30-3(a)(12).
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-13704 Filed 6-27-22; 8:45 am]
BILLING CODE 8011-01-P
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