Notice2023-00777
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Continuing Education Requirements
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Published
January 18, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 11 (Wednesday, January 18, 2023)</title>
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[Federal Register Volume 88, Number 11 (Wednesday, January 18, 2023)]
[Notices]
[Pages 2977-2980]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-00777]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96639; File No. SR-LTSE-2022-06]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Related to Continuing Education Requirements
January 11, 2023.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 30, 2022, Long-Term Stock Exchange, Inc. (``LTSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I
and II, below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposed rule change
to adopt new LTSE Rule 2.153 and amend LTSE Rules 2.154 and 2.160. The
proposed rule changes are based on changes made by the Financial
Industry Regulatory Authority, Inc. (``FINRA'') to its Continuing
Education Program \3\ (the ``CE Program'' or the ``CE Transformation
Initiative'').
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\3\ See Securities Exchange Act Rel. No. 93097 (September 21,
2021), 86 FR 53358 (September 27, 2021) (Order Approving File No.
SR-FINRA-2021-015 regarding the CE Transformation Initiative) (the
``Approval Order'').
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The text of the proposed rule change is available at the Exchange's
website at <a href="https://longtermstockexchange.com/">https://longtermstockexchange.com/</a>, at
[[Page 2978]]
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The proposed rule change incorporates the elements of the FINRA CE
Transformation Initiative that are scheduled to take effect on January
1, 2023.\4\ Specifically, those changes (i) require registered persons
to complete CE Regulatory Element \5\ annually for each representative
or principal registration category that they hold; and (ii) expressly
allow firms to consider other required training toward satisfying an
individual's annual CE Firm Element and extend the Firm Element
requirement to all registered persons.
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\4\ See Securities Exchange Act Rel. No. 94515 (March 24, 2022),
87 FR 18419 (March 30, 2022) (Order approving SR-LTSE-2022-02
whereby LTSE adopted those elements of the FINRA CE Transformation
Initiative that were implemented on March 15, 2022).
\5\ The terms CE Regulatory Element and CE Firm Element shall
have the same meaning as in FINRA Rule 1240.
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The Exchange sets forth certain continuing education requirements
for persons associated with a Member which are based on certain FINRA
rules.\6\ The proposed rule change seeks to amend certain LTSE rules to
more closely mirror the corresponding FINRA rules, as amended as part
of the CE Transformation Initiative. The proposed rule change does not
make any substantive changes to LTSE rules other than those to
incorporate changes previously made by FINRA.
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\6\ See supra note 4.
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First, the proposed rule change would (i) adopt as new LTSE Rule
2.153, the exact provisions previously provided in LTSE Rule 2.160(m)
regarding associated persons of a Member that are not required to
register with the Exchange. The Exchange believes that relocating these
provisions into a standalone rule would more closely align the
structure of LTSE's Rule Book with FINRA's, which has the standalone
FINRA Rule 1230 (Associated Persons Exempt from Registration).
Second, the proposed rule change would amend LTSE Rule 2.154 to
incorporate all of FINRA Rule 1240, not just the provisions that became
effective on March 15, 2022.\7\ Additionally, as part of the broader
incorporation, LTSE has added language to note that references to FINRA
Rules 1210 and 1220 are to be construed to reference the applicable
corresponding provisions of LTSE Rule 2.160. The proposed rule language
also clarifies that such references to FINRA Rules 1210 and 1210 will
not result in expansion of or changes to LTSE's registration categories
as currently provided for in Rule 2.160. The proposed rule change also
would eliminate the sentence in LTSE Rule 2.154 that states
``References to FINRA Rule 1240(a)(2) shall refer to the LTSE Rule
2.160(p)(1) (Regulatory Element)'' because it is no longer applicable.
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\7\ Id.
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Third, the proposed rule change would delete paragraphs (m) and (p)
from LTSE Rule 2.160. As discussed above, paragraph (m) is being
replaced by new LTSE Rule 2.153, and paragraph (p) is being replaced by
proposed LTSE Rule 2.154.\8\
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\8\ See FINRA Rules 1210 and 1240. In FINRA Regulatory Notice
21-41 (November 17, 2021), FINRA announced the amendment of Rules
1210 and 1240, noting implementation dates, March 15, 2022 (with
respect to paragraph (c) of Rule 1240 and Supplementary Material .09
to Rule 1210); January 1, 2023 (all other rule changes).
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Fourth, the proposed rule change would add paragraph (o) back to
LTSE Rule 2.160. The removal of this paragraph in the Exchange's prior
filing related to the CE Transformation Initiative \9\ was in error.
Reinstating paragraph (o) (Lapse of Registration and Expiration of SIE)
to LTSE Rule 2.160 aligns the Exchange's rules to FINRA Rule 1210
Supplementary Material .08 (Lapse of Registration and Expiration of
SIE), which covers substantially similar matters. The reinstated Rule
2.160 is also being proposed to include cross references to proposed
LTSE Rule 2.154 as discussed above, in keeping with FINRA Rule 1210
Supplementary Material .08's references to FINRA Rule 1240. The
Exchange believes these cross reference updates to account for
references to FINRA Rule 1240 further aligns the Exchange's rules with
the relevant FINRA rules.
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\9\ See supra note 4.
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Fifth, the proposed rule change updates internal LTSE rule
references to reflect changes in LTSE's rules pursuant to the proposed
rule change. Specifically, references to Rule 2.160(p) in paragraphs
(e) and (g) of Rule 2.160 and Rule 9.218(a) are being updated as
references to the proposed Rule 2.154.
FINRA's CE Transformation Initiative is being implemented in
phases. The first phase was implemented on March 15, 2022 and provides
eligible individuals who terminate any of their representative or
principal registration categories the option of maintaining their
qualification for any terminated registration categories by completing
annual continuing education through a new program, the Maintaining
Qualifications Program (``MQP''). The first phase also provides that,
as of March 15, 2022, LTSE will not accept any new initial designations
for individuals under its Financial Services Affiliate Waiver Program
(``FSAWP'').\10\
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\10\ Id.
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The second phase, which is being addressed the proposed rule
change, would (i) require registered persons to complete continuing
education Regulatory Element annually for each representative or
principal registration category that they hold; and (ii) expressly
allow firms to consider other required training toward satisfying an
individual's annual continuing education Firm Element and extend the
Firm Element requirement to all registered persons. The proposed rule
change, consistent with this phase of FINRA's CE Transformation
Initiative, will be implemented January 1, 2023. These changes, as
further discussed below, are part of a larger initiative in which LTSE
is aligning the structure of its registration, continuing education and
supervision rules with those of FINRA.\11\
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\11\ Id.
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(i) Transition to an Annual Regulatory Element for Each Registration
Category
FINRA amended FINRA Rule 1240 under the CE Transformation
Initiative to require registered persons to complete the Regulatory
Element training of the CE Program annually by December 31. Firms,
however, would have the flexibility to require their registered persons
to complete the Regulatory Element training sooner than December 31,
which would allow firms to coordinate the timing of the Regulatory
Element with other training requirements, including the Firm
Element.\12\ FINRA Rule 1240 preserves FINRA's ability to extend the
time by
[[Page 2979]]
which a registered person must complete the Regulatory Element for good
cause shown if requested in writing and with supporting
documentation.\13\ Consistent with prior requirements, individuals who
fail to complete their Regulatory Element within the prescribed period
would be automatically designated as ``CE inactive'' \14\ in FINRA's
Central Registration Depository (``CRD'') system \15\ until the
requirements of the Regulatory Element have been satisfied.\16\
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\12\ See supra note 3, at 53358.
\13\ See FINRA Rule 1240(a)(2).
\14\ Id.
\15\ See <a href="https://www.finra.org/registration-exams-ce/classic-crd">https://www.finra.org/registration-exams-ce/classic-crd</a>. As stated on its website, FINRA integrated the registration
filing functionality that supports the CRD Program into FINRA
Gateway, available at <a href="https://www.finra.org/filing-reporting/finra-gateway">https://www.finra.org/filing-reporting/finra-gateway</a>. The standalone CRD features were retired August 21, 2021.
\16\ See supra note 3, at 53359.
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As amended under the CE Transformation Initiative, FINRA Rule 1240
also tailors the content of the Regulatory Element to each registration
category. Thus, registered persons would be required to complete
content specifically designed for each representative or principal
registration category that they hold.\17\ FINRA Rule 1240 includes five
additional elements such that: (1) Individuals who are designated as CE
inactive would be required to complete all of their pending and
upcoming annual Regulatory Element, including any annual Regulatory
Element that becomes due during their CE inactive period, to return to
active status; \18\ (2) the two-year CE inactive period would be
calculated from the date individuals become CE inactive, and would
continue to run regardless of whether individuals terminate their
registrations; \19\ (3) individuals who become subject to a significant
disciplinary action may be required to complete assigned continuing
education content as prescribed by FINRA; \20\ (4) individuals who have
not completed any Regulatory Element content for a registration
category in the calendar year(s) prior to reregistering would not be
approved for registration for that category until they complete that
Regulatory Element content, pass an examination for that registration
category, or obtain an unconditional examination waiver for that
registration category, whichever is applicable; \21\ and (5) the
Regulatory Element requirements would apply to individuals who are
registered, or are in the process of registering as a representative or
principal.\22\
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\17\ See FINRA Rules 1240(a)(1) and (a)(4).
\18\ See supra note 3 at 53359.
\19\ Id.
\20\ Id.
\21\ Id.
\22\ Id.
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(ii) Recognition of Other Training Requirements for Firm Element and
Extension of Firm Element to All Registered Persons
FINRA Rule 1240(b) requires a firm to develop and administer an
annual Firm Element training program for its covered registered
persons.\23\ The Firm Element must, at a minimum, include training in
ethics and professional responsibility, as well as training in the
following items concerning securities products, services, and
strategies offered by the member: (1) General investment features and
associated risk factors; (2) suitability and sales practice
considerations; and (3) applicable regulatory requirements.\24\ Firms
are required to conduct an annual needs analysis to, at minimum,
determine the appropriate Firm Element training for covered registered
persons at the firm based on the specific business of the member, and
then provide the Firm Element training annually.\25\
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\23\ See FINRA Rule 1240(b).
\24\ Id.
\25\ Id.
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As amended under the CE Transformation Initiative, FINRA Rule
1240(b) allows for recognition of the successful completion of existing
firm training programs relating to the anti-money laundering compliance
program and the annual compliance meeting toward satisfying an
individual's annual Firm Element requirement.\26\ FINRA also amended
the rule to extend the Firm Element requirement to all registered
persons, including individuals who maintain solely a permissive
registration consistent with FINRA Rule 1210.02, thereby further
aligning the Firm Element requirement with other broadly-based training
requirements.\27\ FINRA also updated the minimum training criteria
under FINRA Rule 1240(b) to provide that Firm Element training must
cover topics related to the role, activities, or responsibilities of
the registered person, as well as professional responsibility.\28\
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\26\ See FINRA Rule 1240(b)(2)(D).
\27\ See FINRA Rule 1240(b)(1).
\28\ See FINRA Rule 1240(b)(2)(B).
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To align with the changes discussed in subsections (i) and (ii)
above, proposed new LTSE Rule 2.154 states that LTSE Members and
associated persons of a Member shall comply with FINRA Rule 1240, as if
such Rule were part of the Exchange's rules.
2. Statutory Basis
LTSE believes that its proposal is consistent with Section 6(b) of
the Act \29\ in general, and furthers the objectives of Section 6(b)(5)
of the Act,\30\ in particular, in that it is designed to prevent
fraudulent and manipulative practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general to
protect investors and the public interest.
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\29\ 15 U.S.C. 78f.
\30\ 15 U.S.C. 78f(b)(6).
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As noted above, the proposed rule change seeks to align the
Exchange's Rules with certain changes to FINRA rules which have been
approved by the Commission.\31\ The Exchange believes the proposed rule
change is consistent with the provisions of Section 6(b)(5) of the
Act,\32\ which requires, among other things, that Exchange Rules must
be designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, and, in general, to
protect investors and the public interest, and Section 6(c)(3) of the
Act,\33\ which authorizes the Exchange to prescribe standards of
training, experience and competence for persons associated with the
Exchange. The proposed changes are based on the changes approved by the
Commission in the Approval Order,\34\ and the Exchange is proposing to
adopt such changes substantially in the same form proposed by FINRA
with respect to the continuing education program. The Exchange believes
the proposal is consistent with the Act for the reasons described above
and for those reasons cited in the Approval Order.\35\
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\31\ See Approval Order, supra note 3.
\32\ 15 U.S.C. 78f(b)(5).
\33\ 15 U.S.C. 78f(c)(3).
\34\ See Approval Order, supra note 3.
\35\ Id.
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The Exchange believes that enhancements to FINRA's CE program,
including the shift to an annual Regulatory Element should lead to
consistent, updated training, enhance a firm's regulatory compliance
and reduce a firm's overall regulatory risk because of the increased
timeliness and relevance of the more tailored content provided through
an annual training, thus facilitating overall investor protection.
[[Page 2980]]
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change, which harmonizes its rules with rule changes
adopted by FINRA, will reduce the regulatory burden placed on market
participants engaged in trading activities across different markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\36\
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\36\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has asked the
Commission to waive the 30-day operative delay so that this proposed
rule change may become operative immediately upon filing. In addition,
Rule 19b-4(f)(6)(iii) \37\ requires a self-regulatory organization to
give the Commission written notice of its intent to file a proposed
rule change under that subsection at least five business days prior to
the date of filing, or such shorter time as designated by the
Commission. The Exchange has provided such notice.
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\37\ 17 CFR 240.19b-4(f)(6)(iii).
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Waiver of the 30-day operative delay will allow the Exchange to
implement the proposed changes to its continuing education and
registration rules without delay, thereby eliminating the material
differences between FINRA and Exchange continuing education rules,
providing more uniform standards across the securities industry, and
helping to avoid ongoing confusion for Exchange Members that are also
FINRA members. For this reason, the Commission believes that waiver of
the 30-day operative delay for this proposal is consistent with the
protection of investors and the public interest. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposal operative upon filing.\38\
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\38\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#6311160f064e000c0e0e060d1710231006004d040c15"><span class="__cf_email__" data-cfemail="592b2c353c743a3634343c372d2a192a3c3a773e362f">[email protected]</span></a>. Please include
File Number SR-LTSE-2022-06 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Vanessa Countryman,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File Number SR-LTSE-2022-06. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<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 LTSE and on its internet website
at <a href="https://longtermstockexchange.com/">https://longtermstockexchange.com/</a>.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-LTSE-2022-06
and should be submitted on or before February 8, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-00777 Filed 1-17-23; 8:45 am]
BILLING CODE 8011-01-P
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