The Board has filed proposed amendments to rule G-3, on professional qualifications, regarding the Board's continuing education program.
On January 21, 1998, the Board filed with the SEC proposed amendments regarding its continuing education program.(1) Rule G-3(h) provides for a continuing education program for registered persons of brokers, dealers and municipal securities dealers. The program, which is uniform within the securities industry, consists of two parts--a "Regulatory" Element and a "Firm" Element. The Regulatory Element requires registered persons to participate in interactive computer-based training at specified intervals and encompasses regulatory and compliance issues, sales practice concerns and business ethics.
The Regulatory Element program applies generally to all registered persons and currently does not discern between registration types or categories. The existing program contains content common to registered representatives, supervisory persons as well as other registration categories. The Securities Industry/Regulatory Council on Continuing Education (a council of broker-dealer and self-regulatory organization ("SRO")(2) representatives that oversees and provides ongoing development and operation of the program) has recommended development of a new program component specifically for supervisors. In addition, it is contemplated that in the future, specific programs may be implemented for other registration categories. The proposed amendments will allow for the Board to require new programs as appropriate with customized training for various registration categories, with the supervisor's program being the first such initiative. For purposes of Board rules, the following registration categories shall be deemed to be included in the supervisory category: Series 8 (Municipal Securities Sales Supervisor Examination); Series 27 (Financial and Operations Principal Examination); and Series 53 (Municipal Securities Principal Qualification Examination).
The proposed amendments also address the time-frames at which registered persons must participate in the Regulatory Element computer-based training. Rule G-3(h) currently requires all registered persons to complete the training on three occasions, i.e., their second, fifth and tenth registration anniversaries, and also when they are the subject of significant disciplinary action(s). Once persons are registered for more than ten years, they are graduated from the program and are not required to participate further in the Regulatory Element unless they become subject to significant disciplinary action. The Council has recommended that this requirement be revised to require ongoing participation in the program by registered persons. In accordance with that recommendation, the proposed amendments will require participation in the Regulatory Element throughout a registered person's career, specifically, on the second registration anniversary and every three years thereafter (i.e., the fifth, eighth, eleventh, etc. anniversaries), with no graduation from the program.
The proposed amendments will allow a one-time exemption for persons currently graduated from the program by providing that those persons who have been registered for more than ten years as of the effective date of the rule amendments, and who have not been the subject of a disciplinary action during the past ten years, will continue to be excluded from required ongoing participation in the Regulatory Element. However, persons registered in a supervisory capacity will have to have been registered in a supervisory capacity for more than 10 years in order to be covered by this one-time provision for graduation from participation in the program. Therefore, those supervisors who have graduated from the program requirements based on their initial registration date but who have not completed 10 years as a supervisor, will be required to re-enter the program.
The Firm Element requires that each broker, dealer and municipal securities dealer conduct annually an analysis of their training needs and administer such training, as is appropriate, to their registered persons who have direct contact with customers and the immediate supervisors of such registered persons, on an ongoing basis in topics specifically related to their business such as new products, sales practices, risk disclosure and new regulatory requirements and concerns. The proposed amendments will require brokers, dealers and municipal securities dealers to specifically focus on supervisory needs in conducting their analysis of training needs and, if it is determined that there is a specific need for supervisory training, it must be addressed in the Firm Element training plan.
These amendments, which will be adopted uniformly with rule changes of the other SRO Council members, will significantly enhance the continuing education program by requiring all registered persons to participate in the Regulatory Element on an ongoing basis throughout their securities industry careers. In addition, the Board believes that rule amendments allowing for the implementation of a program specifically geared towards supervisors and the issues that may arise in that role will result in more effective regulatory training of supervisors as well as improved front-line supervision overall of brokers, dealers and municipal securities dealers.
January 21, 1998
Text of Proposed Amendments(3)
Rule G-3. Classification of Principals and Representatives; Numerical Requirements; Testing; Continuing Education Requirements
No broker, dealer or municipal securities dealer or person who is a municipal securities representative, municipal securities principal, municipal securities sales principal or financial and operations principal (as hereafter defined) shall be qualified for purposes of rule G-2 unless such broker, dealer or municipal securities dealer or person meets the requirements of this rule.
(a) - (g) No change.
(h) Continuing Education Requirements
This section (h) prescribes requirements regarding the
continuing education of certain registered persons subsequent to their
qualification and registration with a registered securities association with
respect to a person associated with a member of such association, or the appropriate
regulatory agency as defined in section 3(a)(34) of the Act with respect to a person
associated with any other broker, dealer or municipal securities dealer ("the
appropriate enforcement authority"). The requirements shall consist of a Regulatory
Element and a Firm Element as set forth below.
(i) Regulatory Element
(A) Requirements--No broker, dealer or municipal securities dealer shall permit any registered person to continue to, and no registered person shall continue to, perform duties as a registered person, unless such person has complied with the requirements of section (i) hereof.
(1) Each registered person shall complete the Regulatory Element
on three occasions, afterbeginning with the occurrence of their second , fifth and tenthregistration anniversary date s,and every three years thereafter or as otherwise prescribed by the Board. On each of the threeoccasion s, the Regulatory Element must be completed within 120 days after the person's registration anniversary date. A person's initial registration date shall establish the cycle of anniversary dates for purposes of this section (i). The content of the Regulatory Element shall be prescribeddetermined by the Board for each registration category of persons subject to the rule.
Registered pPersons who have been continuously registered for more than 10 years as of the effective date of this section shall beare exempt from the requirements of this rule relative to participation in the Regulatory Element, provided such persons have not been subject to any disciplinary action within the last 10 years as enumerated in paragraphs (i)(C)(1)-(2) of this section. However, persons delegated supervisory responsibility or authority pursuant to rule G-27 and registered in such supervisory capacity are exempt from participation in the Regulatory Element under this provision only if they have been continuously registered in a supervisory capacity for more than ten years as of the effective date of this rule and provided that such supervisory person has not been subject to any disciplinary action under paragraphs (i)(C)(1)-(2) of this section. In the event of such disciplinary action, a person will be required to satisfy the requirements of the Regulatory Element by participation for the period from the effective date of this section to 10 years after the occurrence of the disciplinary action.
(3) In the event that a registered person who is exempt from participation in the Regulatory Element subsequently becomes the subject of a disciplinary action as enumerated in paragraphs (i)(C)(1)-(2), such person shall be required to satisfy the requirements of the Regulatory Element as if the date the disciplinary action becomes final is the person's initial registration anniversary date.
Persons who have been currently registered for 10 years or less as of the effective date of this section shall initially participate in the Regulatory Element within 120 days after the occurrence of the second, fifth or tenth registration anniversary date, whichever anniversary date first applies, and on the applicable registration anniversary date(s) thereafter. Such persons will have satisfied the requirements of the Regulatory Element after participation on the tenth registration anniversary.
(4) All registered persons who have satisfied the requirements of the Regulatory Element shall be exempt from further participation in the Regulatory Element, subject to re-entry into the program as set forth in paragraph (i)(C) of this section.
(B) No change.
(C) Re-entry into Program--Unless otherwise determined by the appropriate enforcement authority, a registered person will be required to re-enter the Regulatory Element and satisfy all of its requirements in the event such person:
(1) - (3) No change.
Re-entry shall commence with initial participation within 120 days of the registered person becoming subject to the statutory disqualification, in the case of (1)
(i)above, or the completion of the sanction or the disciplinary action becomes final, in the case of (2) (ii)or (3) (iii)above , and on three additional occasions thereafter, at intervals of two, five and 10 years after re-entry, notwithstanding that such person has completed all or part of the program requirements based on length of time as a registered person or completion of 10 years of participation in the program. The date that the disciplinary action becomes final will be deemed the person's initial registration anniversary date for purposes of this section (i).
(D) Any registered person who has terminated association with a broker, dealer or municipal securities dealer and who has, within two years of the date of termination, become reassociated in a registered capacity with a broker, dealer or municipal securities dealer shall participate in the Regulatory Element at such intervals
(two, five and 10 years)that mayapply (second registration anniversary and every three years thereafter) based on the initial registration anniversary date rather than based on the date of reassociation in a registered capacity.
(E) Any former registered person who becomes reassociated in a registered capacity with a broker, dealer or municipal securities dealer more than two years after termination as such will be required to satisfy the program's requirements in their entirety (second registration anniversary and every three years thereafter), based on the most recent registration date.
(F) Definition of registered person--For purposes of this section, the term "registered person" means any person registered with the appropriate enforcement authority as a municipal securities representative, municipal securities principal, municipal securities sales principal or financial and operations principal pursuant to this rule.
(ii) Firm Element
(A) No change.
(B) Standards for the Firm Element
(1) Each broker, dealer and municipal securities dealer must maintain a continuing and current education program for its covered registered persons to enhance their securities knowledge, skill, and professionalism. At a minimum, each broker, dealer and municipal securities dealer shall at least annually evaluate and prioritize its training and supervisory needs and develop a written training plan. The plan must take into consideration the broker, dealer and municipal securities dealer's size, organizational structure, and scope of business activities, as well as regulatory developments and the performance of covered registered persons in the Regulatory Element. If a broker, dealer or municipal securities dealer's analysis determines a need for supervisory training for persons with supervisory responsibility, such training must be included in the broker, dealer or municipal securities dealer's training plan.
(2) - (3) No change.
(C) - (D) No change.
1. SR-MSRB-98-2. Comments filed with the SEC should refer to the file number.
2. In addition to the Board, SROs represented on the Council include the American Stock Exchange, Chicago Board Options Exchange, National Association of Securities Dealers, New York Stock Exchange and Philadelphia Stock Exchange.
3. Underlining indicates new language; strikethrough denotes deletions.
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