regulatory organizations; proposed rule changes: American Stock Exchange, Inc.,

[Federal Register: March 12, 1998 (Volume 63, Number 48)]

[Notices]

[Page 12118-12119]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr12mr98-107]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39711; File No. SR-AMEX-98-08]

Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change by the American Stock Exchange, Inc. Relating to the Continuing Education Requirements of Registered Persons

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934,\1\ notice is hereby given that on February 6, 1998, the American Stock Exchange, Inc. (``Amex'' or ``Exchange'') filedwith the Securities and Exchange Commission (``Commission'') the 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 and to grant accelerated approval of the proposed rule change.\2\

\1\ 15 U.S.C. Sec. 78s(b)(1).

\2\ The Commission has already published for comment rule proposals by four other self-regulatory organizations which are virtually identical to this Amex filing. See Securities Exchange Act Release No. 39574 (January 23, 1998), 63 FR 4510 (January 29, 1998) (SR-NASD-98-03); 39575 (January 23, 1998), 63 FR 4507 (January 29, 1998) (SR-CBOE-97-68); 39576 (January 23, 1998), 63 FR 4509 (January 29, 1998) (SR-MSRB-98-02); and 39577 (January 23, 1998), 63 FR 4513 (January 29, 1998) (SR-NYSE-97-33). The Commission received 5 comment letters, which are discussed in the order approving the other proposals. See Securities Exchange Act Release No. 39712 (March 3, 1998).

1. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

   The Amex proposes to amend Exchange Rules 341A to strengthen the Continuing Education Requirements for registered persons.

2. 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 statutory basis for, the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The Exchange has prepared summaries, set forth in Sections A, B, and C below of the most significant aspects of much statements.

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

      1. Purpose

      The purpose of the proposed rule change is to revise Rule 341A. Exchange Rule 341A provides for a continuing education program for registered persons of Exchange members and member organizations. The program, which is uniform within the 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 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'') \3\ 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 to Rule 341A will allow for the Exchange to require specific new programs as appropriate with customized training for various registration categories, with the supervisor's program, being the first such initiative. For purposes of Exchange rules, the following registration categories shall be deemed to be included in the supervisory category: Series 4 (Registered Options Principal Examination); Series 8 (General Securities Sales Supervisor Examination); Series 27 (Financial and Operational Principal Examination); and the Series 53 (Municipal Securities Principal Qualification Examination).

      \3\ SROs represented on the Council include the Amex, Chicago Board Options Exchange (``CBOE''), Municipal Securities Rulemaking Board (``MSRB''), National Association of Securities Dealers (``NASD''), New York Stock Exchange (``NYSE''), and Philadelphia Stock Exchange.

      The proposed amendments also address time-frames at which registered persons must participate in the Regulatory Element computer- based training. Rule 341A 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 currently 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 the requirement be revised to require ongoing participation in the program by registered persons. In accordance with that recommendation, the proposed amendments to Rule 341A 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.

      Proposed amended Rule 341A 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

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      completed 10 years as a supervisor, will be required to re-enter the program to participate in the supervisory program.

      The Firm Element requires that each member and member organization 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 to Rule 341A will require members and member organizations to additionally focus on supervisory training needs in conducting their analysis of training needs and, if it is determined that there is a specific need for supervisory training, address such training needs in the Firm Element training plan. 2. Statutory Basis

      The proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, with Section 6(c)(3) of the Act.\4\ Under that Section, it is the Exchange's responsibility to prescribe standards of training, experience and competence for persons associated with Exchange members and member organizations. Pursuant to this statutory obligation, the Exchange has proposed this rule change in order to enhance the established continuing education program for registered persons.

      \4\ 15 U.S.C. Sec. 78f(c)(3).

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

      The Exchange believes that the proposal does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

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

      No written comments were solicited or received with respect to the proposed rule change.

3. 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filedwith 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 inspection and copying at the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Amex. All submissions should refer to the file number SR-Amex-98-08 and should be submitted by April 2, 1998.

4. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change

   The Commission finds that the Exchange's proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\5\ which requires, among other things, that the rules of an exchange be designed to promote just and equitable principles of trade, 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. The Commission further believes that the proposed rule change is consistent with the provisions of Section 6(c)(3)(B) of the Act,\6\ which makes it the responsibility of an exchange to prescribe standards of training, experience, and competence for persons associated with SRO members.

   \5\ 15 U.S.C. Sec. 78f(b)(5).

   \6\ 15 U.S.C. Secs. 78f(c)(3)(B).

   The Commission also believes that the proposed rule change is consistent with the purposes underlying Section 15(b)(7) of the Act, which generally prohibits a registered person from effecting any transaction in, or inducing the purchase or sale of, any security unless such registered person meets the standards of training, competence and other qualifications as the Commission finds necessary or appropriate in the public interest or for the protection of investors. The Commission believes that the Exchange's proposed rule change is an appropriate means of maintaining and reinforcing the initial qualification standards required of a registered person and will significantly enhance the continuing education program by requiring all registered persons to participate in the Regulatory Element throughout their securities industry careers.\7\

   \7\ These amendments proposed by the Amex regarding continuing education are also being uniformly adopted by some of the other SRO Council members. The analogous proposals of the CBOE, MSRB, NASD and NYSE were approved by the Commission on March 3, 1998. See Securities Exchange Act Release No.

   The Commission therefore finds good cause for approving the proposed rule change (SR-Amex-98-08) prior to the thirtieth day after the date of publication of notice of filing thereof in the Federal Register.

   It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\8\ that the proposed rule change (File No. SR-Amex-98-08) be, and hereby is, approved. The rule change shall become effective on July 1, 1998.

   \8\ 15 U.S.C. 78s(b)(2).

   For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\9\

   \9\ 17 CFR 200.3-30(a)(12).

   Jonathan G. Katz, Secretary.

   [FR Doc. 98-6343Filed3-11-98; 8:45 am]

   BILLING CODE 8010-01-M