[Federal Register Volume 87, Number 63 (Friday, April 1, 2022)]
[Notices]
[Pages 19146-19152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06851]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94528; File No. SR-CboeBZX-2022-022]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Rules Relating to the Continuing Education for Registered Persons
and Move Those Rules From Interpretation and Policy .02 of Rule 2.5 to
Proposed Rule 2.16 and To Amend Related Registration Requirements
Provided Under Various Interpretations and Policies of Rule 2.5
March 28, 2022.
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 March 15, 2022, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the ``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its rules relating to the Continuing
Education for Registered Persons and move those rules from
Interpretation and Policy .02 of Rule 2.5 to proposed Rule 2.16 and to
amend related registration requirements provided under various
Interpretations and Policies of Rule 2.5. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
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
(i) Existing CE Program Background
The continuing education program for registered persons of broker-
dealers (``CE Program'') generally requires registered persons to
complete continuing education consisting of a Regulatory Element. The
Regulatory Element is delivered through a web-based delivery method
called ``CE Online,'' which is administered through the Financial
Industry Regulatory Authority, Inc. (``FINRA'') online continuing
education system, and focuses on regulatory requirements and industry
standards. The CE Program for registered persons is currently codified
under Interpretation and Policy .02 of Exchange Rule 2.5. The Exchange
now proposes to expand the CE Program to adopt rules pertaining to a
Firm Element component of continuing education. The Firm Element would
be provided by each firm and focus on securities products, services and
strategies the firm offers, firm policies and industry trends. In
addition, the Exchange proposes other changes to amend, move,
reorganize and enhance its rules regarding its CE Program, as described
below.
The Commission recently approved a proposal submitted by FINRA
relating to its CE Program.\5\ The Exchange
[[Page 19147]]
understands that other exchanges have or will propose similar
amendments based on FINRA's rule changes. Therefore, the Exchange
proposes to amend and enhance its own CE Program as provided under
proposed Rule 2.16 and its related registration requirements as
provided under various Interpretations and Policies of Rule 2.5 in
response to FINRA's amended CE Program and to facilitate compliance
with the Exchange's CE Program requirements by members of multiple
exchanges. The Exchange proposes to implement the proposed rule changes
to align with FINRA's CE Program implementation dates.\6\ Specifically,
the proposed implementation dates are as follows: Changes relating to
proposed Rule 2.16(c) (Continuing Education Program for Persons
Maintaining Their Qualification Following the Termination of a
Registration Category) will become effective March 15, 2022; changes to
recognize waiver of examination programs for individuals working for a
financial services industry affiliate of a member that are administered
by the Exchange's affiliates, Cboe Exchange, Inc. (``Cboe'') and Cboe
C2 Exchange, Inc. (``C2''), and by FINRA (referred to as the ``FSA
waiver programs'' or ``FSAWPs'') will become effective March 15, 2022;
and all other changes, including changes reflected in proposed Rules
2.16(a) (Regulatory Element) \7\ and 2.16(b) (Firm Element) will become
effective January 1, 2023.
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\5\ See Securities and Exchange Act No. 93097 (September 21,
2021) 86 FR 53358 (September 27, 2021) (SR-FINRA-2021-015) (Order
Approving a Proposed Rule Change To Amend FINRA Rules 1210
(Registration Requirements) and 1240 (Continuing Education
Requirements)).
\6\ See FINRA Regulatory Notice 21-41 (November 17, 2021).
\7\ An individual's initial annual Regulatory Element due date
will be December 31, 2023.
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a. Regulatory Element
Interpretation and Policy .02(a) of Rule 2.5 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.\8\ The Exchange may extend these time
frames for good cause shown.\9\ Unless otherwise determined, any
registered persons who have not completed the Regulatory Element of the
program within the prescribed time frames will have their
registration(s) deemed inactive and will be designated as ``CE
inactive'' in the CRD system until the requirements of the Regulatory
Element have been satisfied.\10\ A CE inactive person is prohibited
from performing, or being compensated for, any activities requiring
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).\11\
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\8\ See Rule 2.5.02(a). An individual's registration anniversary
date is generally the date they initially registered 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 proposed Rule
2.5.07 (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
proposed Rule 2.16(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 proposed Rule 2.16(a)(2) (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.
\9\ See Rule 2.5.02(b).
\10\ Supra note 8. 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.
\11\ See Rule 2.5.02(b). 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 currently consists of a subprogram for
registered persons generally, and a subprogram for principals and
supervisors.\12\ 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.\13\ 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, the delivery of the Regulatory Element was
transitioned to an online platform, referred to above as CE Online,
which allows individuals to complete the content online at a location
of their choosing, including their private residence. This online
delivery provides for much greater flexibility in updating content in a
timelier fashion, developing content tailored to each registration
category and presenting the material in an optimal learning format.
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\12\ The S101 (General Program for Registered Persons) and the
S201 (Registered Principals and Supervisors).
\13\ 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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b. Firm Element
As noted above, Exchange Rules do not currently provide for a Firm
Element of the CE Program. However, as discussed in more detail further
below, the Exchange is now proposing to introduce a Firm Element, which
would be modeled after FINRA Rule 1240 and Cboe Rule 3.33(c).
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'').\14\ The two-year qualification period was
intended to ensure that individuals who
[[Page 19148]]
reregister are relatively current on their regulatory and securities
knowledge.
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\14\ See Rule 2.5.02(d). 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. 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 8.11 (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 on a case-by-case basis under Rule 2.5.01(b).
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(ii) Proposed Rule Change
After extensive work with the Securities Industry/Regulatory
Council on Continuing Education (``CE Council''), FINRA, other Self-
Regulatory Organizations and industry participants, the Exchange
proposes the following changes to the Exchange's CE Program under Rule
2.5 and proposed Rule 2.16 to align with FINRA Rule 1240 and Cboe Rule
3.33.
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.\15\ Therefore, to provide registered persons with
more timely and relevant training on significant regulatory
developments, the Exchange proposes adopting Rule 2.16(a) to require
registered persons to complete the Regulatory Element annually by
December 31.\16\ The proposed amendment would also require registered
persons to complete Regulatory Element content for each representative
or principal registration category that they hold, which would also
further the goals of the Regulatory Element.\17\
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\15\ When other self-regulatory organizations' CE Programs were
originally adopted in 1995, registered persons were required to
complete the Regulatory Element on their second, fifth and 10th
registration anniversary dates. See Securities Exchange Act Release
No. 35341 (February 8, 1995), 60 FR 8426 (February 14, 1995) (Order
Approving File Nos. SR-AMEX-94-59; SR-CBOE-94-49; SR-CHX-94-27; SR-
MSRB-94-17; SR-NASD-94-72; SR-NYSE-94-43; SR-PSE-94-35; and SR-PHLX-
94-52). The change to the current three-year cycle in the other
self-regulatory organizations' CE Programs 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).
\16\ See proposed Rules 2.16(a)(1) and (a)(4).
\17\ See proposed Rules 2.5.04 and 2.16(a)(1).
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Under the proposed rule change, Members would have the flexibility
to require their registered persons to complete the Regulatory Element
sooner than December 31, which would allow Members to coordinate the
timing of the Regulatory Element with other training requirements,
including the Firm Element.\18\ For example, a Member could require its
registered persons to complete both their Regulatory Element and Firm
Element by October 1 of each year.
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\18\ See proposed Rules 2.16(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.\19\ 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.\20\
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\19\ See proposed Rule 2.16(a)(1).
\20\ See proposed Rule 2.16(a)(4).
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Consistent with current requirements, individuals who fail to
complete their Regulatory Element within the prescribed period would be
automatically designated as CE inactive.\21\ 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.\22\
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\21\ See proposed Rule 2.16(a)(2).
\22\ Id. The proposed rule change provides 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 adopting Rule 2.16(a) to provide 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; \23\ (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; \24\ (3) individuals who become subject
to a significant disciplinary action may be required to complete
assigned continuing education content as prescribed by the Exchange;
\25\ (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; \26\ and (5) the Regulatory Element requirements apply to
individuals who are registered, or in the process of registering, as a
representative or principal.\27\
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\23\ Id.
\24\ Id.
\25\ Id.
\26\ See proposed Rule 3.33(a)(4).
\27\ See proposed Rule 3.33(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. 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.
b. Adoption of Firm Element, Recognition of Other Training Requirements
for Firm Element, and Application of Firm Element to Covered Registered
Persons
The Exchange proposes to adopt proposed Rule 2.16(b) to include a
Firm Element component for its CE Program that aligns with Cboe Rule
3.33(b) and FINRA Rule 1240(b). The proposed rule would require Members
to maintain a continuing and current education program for its
registered persons to enhance their securities knowledge, skills and
professionalism. At a minimum, each Member would be required to at
least annually evaluate and prioritize its training needs and develop a
written training plan. The
[[Page 19149]]
plan must take into consideration the Member's size, organizational
structure, and scope of business activities, as well as regulatory
developments and the performance of registered persons in the
Regulatory Element. If a Member's analysis determines a need for
supervisory training for persons with supervisory responsibilities such
training must be included in the Member's training plan. The proposed
rule would also require that programs used to implement a Member's
training plan must be appropriate for the business of the Member and,
at a minimum, must cover training topics related to the role,
activities or responsibilities of the registered person and to
professional responsibility. In addition, the proposed rule would
provide that each Member must administer its continuing education Firm
Element program in accordance with its annual evaluation and written
plan and must maintain records documenting the content of the programs
and completion of the programs by registered persons.
To align the Firm Element requirement with other required training,
proposed Rule 2.16(b) would also expressly allow Members to consider
training relating to the AML compliance program and the annual
compliance meeting toward satisfying an individual's annual Firm
Element requirement.\28\ The Exchange also proposes to apply the Firm
Element requirement to ``covered registered persons,'' which would
include any person registered with a Member, including person who is
permissively registered as a representative or principle pursuant to
proposed Rule 2.5.08, as discussed below, thereby aligning the
description of ``covered registered persons'' in the Firm Element
requirement with the description of ``covered persons'' in the
Regulatory Element requirement.\29\
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\28\ See proposed Rule 2.16(b)(2)(D).
\29\ The group of persons who may be considered a ``covered
registered person'' under the Firm Element provisions in proposed
Rule 2.16(b)(1) is a subset of the group of persons who may be
considered a ``covered person'' under the Regulatory Element
provisions in proposed Rule 2.15(a)(5).
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c. Maintenance of Qualification After Termination of Registration
The Exchange proposes to adopt Rules 2.16(c), 2.16.01, and 2.16.02
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. The proposed rule change would not
eliminate the two-year qualification period. Rather, it would provide
such individuals an alternative means of staying current on their
regulatory and securities knowledge following the termination of a
registration(s). Eligible individuals who elect not to participate in
the proposed continuing education program would continue to be subject
to the current two-year qualification period. The proposed rule change
is generally aligned with other professional continuing education
programs that allow individuals to maintain their qualification to work
in their respective fields during a period of absence from their
careers (including an absence of more than two years) by satisfying
continuing education requirements for their credential.
The proposed rule change would impose the following conditions and
limitations:
Individuals would be required to be registered in the
terminated registration category for at least one year immediately
prior to the termination of that category; \30\
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\30\ See proposed Rule 2.16(c)(1).
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individuals could elect to participate when they terminate
a registration or within two years from the termination of a
registration; \31\
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\31\ See proposed Rule 2.16(c)(2).
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individuals would be required to complete annually all
prescribed continuing education; \32\
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\32\ See proposed Rule 2.16(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.
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individuals would have a maximum of five years in which to
reregister; \33\
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\33\ See proposed Rule 2.16(c).
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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; \34\
and
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\34\ See proposed Rule 2.16(c)(4) and (c)(5).
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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.\35\
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\35\ See proposed Rules 2.16(c)(1) and (c)(6). Individuals who
are subject to a statutory disqualification would not be eligible to
enter the proposed continuing education program. Individuals who
become subject to a statutory disqualification while participating
in the proposed continuing education program would not be eligible
to continue in the program. Further, any content completed by such
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 a Member. See also
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 for
maintaining qualifications following a registration category
termination to (i) individuals who have been registered as a
representative or principal within two years immediately prior to the
March 15, 2022 implementation date of the proposed rule change; and
(ii) individuals who have been FSWAP participants immediately prior to
the March 15, 2022 implementation date of the proposed rule change.\36\
With respect to the FSAWP, the Exchange itself does not have an FSW
waiver program. However, the Exchange proposes to recognize waivers
granted to individuals who are designated as participants in, and
satisfying the conditions of, the FSW waiver program(s) of Cboe, C2
and/or FINRA, and also to make the look-back provision for the new
maintaining qualifications requirements available to individuals who
are participants in the FSA waiver programs of Cboe, C2 and/or FINRA
immediately preceding March 15, 2022. The Exchange understands that,
effective March 15, 2022, Cboe, C2 and FINRA do not plan to accept any
new initial designations for individuals under their respective FSA
waiver programs. Thus, what will remain of those programs will only be
applicable to pre-existing participants. The Exchange also understands
that,
[[Page 19150]]
ultimately, the FSA waiver programs will expire in favor of the
maintenance of qualification requirements under the Cboe, C2 and FINRA
Rules, for which the Exchange's maintenance of qualification
requirements under proposed are modeled.\37\
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\36\ See proposed Rule 2.16.01. Such individuals would be
required to elect whether to participate by the March 15, 2022
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 2022 (i.e., 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.
\37\ See proposed Rules 2.5.07 and 2.16.01.
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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 Member for a period of at
least one year and subsequently terminate their registration, provided
that they satisfy the other participation conditions and
limitations.\38\ 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.
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\38\ See proposed Rule 2.16.02.
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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.\39\ 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.\40\
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\39\ See The Female Face of Family Caregiving (November 2018),
available at https://www.nationalpartnership.org/our-work/resources/economic-justice/femaleface-family-caregiving.pdf.
\40\ See The COVID-19 Recession is the Most Unequal in Modern
U.S. History (September 30, 2020), available at https://www.washingtonpost.com/graphics/2020/business/coronavirus-recessionequality/ and Unemployment's Toll on Older Workers Is Worst
in Half a Century (October 21, 2020), available at https://www.aarp.org/work/working-at-50-plus/info-2020/pandemic-unemployment-older-workers/.
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d. Other Changes to Exchange Rule 2.5
The Exchange proposes to adopt Rules 2.5.05 through 2.5.07 to
conform to Cboe Rules 3.30.07 through 3.30.09, respectively, and to
adopt Rule 2.5.08 to conform to Cboe Rule 3.30.02. Further, based on
the Exchange's proposal to move the subject matter of current Rule
2.5.02 to proposed Rule 2.16, the Exchange also proposes to renumber
various Interpretations and Policies under Rule 2.5 accordingly. The
Exchange proposes to adopt Rule 2.5.05 to provide that all registered
representatives and principals must satisfy the regulatory element of
continuing education. Specifically, proposed Rule 2.5.05 provides that
all registered representatives and principals, including those
individuals who solely maintain permissive registrations pursuant to
proposed Rule 2.5.08 shall satisfy the Regulatory Element of continuing
education for each representative or principal registration category
that they hold as specified in Rule 2.5.01(i). If a person registered
with a Member has a continuing education deficiency with respect to
that registration as provided under proposed Rule 2.16, such person
shall not be permitted to be registered in another registration
category under Rule 2.5.01(i) with that Member or to be registered in
any registration category under Rule 2.5.01(i), with another Member,
until the person has satisfied the deficiency.
The Exchange also proposes to adopt Rule 2.5.06 to address lapses
of registrations and expirations of the SIE. Specifically, proposed
Rule 2.5.06 would provide that any person who was last registered in a
representative registration category two or more years immediately
preceding the date of receipt by the Exchange of a new application for
registration in that registration category shall be required to pass a
representative qualification examination appropriate to that
registration category as specified in Rule 2.5.01(i), unless the person
has maintained his or her qualification status for that registration
category in accordance with proposed Rule 2.16(c) or as otherwise
permitted by the Exchange. In addition, any person who last passed the
SIE or who was last registered as a representative, whichever occurred
last, four or more years immediately preceding the date of receipt by
the Exchange of a new application for registration as a representative
shall be required to pass the SIE in addition to a representative
qualification examination appropriate to his or her category of
registration as specified in Rule 2.5.01(i). Any person who was last
registered in a principal registration category two or more years
immediately preceding the date of receipt by the Exchange of a new
application for registration in that registration category shall be
required to pass a principal qualification examination appropriate to
that registration category as specified in Rule 2.5.01(i), unless the
person has maintained his or her qualification status for the
registration category in accordance with proposed Rule 2.16(c) or as
otherwise permitted by the Exchange. Any person whose registration has
been revoked and any person who has a continuing education deficiency
for a period of two years as provided under Rule 2.5.01(i) shall be
required to pass a representative or principal qualification
examination appropriate to his or her category of registration as
specified in Rule 2.5.01(i), to be eligible for registration with the
Exchange. Finally, for purposes of Rule 2.5.06, an application shall
not be considered to have been received by the Exchange if that
application does not result in a registration.
The Exchange proposes to adopt Rule 2.5.07 which, as discussed
above, would recognize a waiver for participants in the financial
services industry affiliate waiver program(s) of Cboe, C2 and/or FINRA.
Specifically, Rule 2.5.07 would provide that upon request by a Member,
the Exchange shall waive the applicable qualification examination(s)
for an individual designated as a participant in, and satisfying the
conditions of, the FSA waiver program(s) of Cboe under its Rule
3.30.09, C2 under its Chapter 3, Section B, and/or FINRA under its Rule
2110.09.
By way of background, very generally, these FSA waiver programs
provide that a member of Cboe, C2 or FINRA, respectively, may request
that the exchange/FINRA waive the applicable qualification
examination(s) for an individual designated with it as working for a
financial services industry affiliate of a member if the following
conditions are met:
Prior to the individual's initial designation, the
individual was registered as a representative or principal with Cboe,
C2 or FINRA, as applicable, for a total of five years within the most
recent 10 year period, including for the most recent year with the
member that initially designated the individual;
The waiver request is made within seven years of the
individual's initial designation;
The initial designation and any subsequent designation(s)
were made concurrently with the filing of the individual's related Form
U5;
The individual continuously worked for the financial
services
[[Page 19151]]
industry affiliate(s) of a member since the individual's last Form U5
filing;
The individual has complied with the Regulatory Element of
continuing education as specified in the Cboe, C2 or FINRA Rules, as
applicable; and
The individual does not have any pending or adverse
regulatory matters, or terminations, that are reportable on the Form
U4, and has not otherwise been subject to a statutory disqualification
as defined in Section 3(a)(39) of the Exchange Act while the individual
was designated as eligible for a waiver.
As used in Rule 2.5.07, a ``financial services industry affiliate''
is a legal entity that controls, is controlled by or is under common
control with a member and is regulated by the SEC, CFTC, state
securities authorities, federal or state banking authorities, state
insurance authorities, or substantially equivalent foreign regulatory
authorities.
Last, the Exchange proposes to adopt Rule 2.5.08, which would
provide for permissive registrations. Specifically, proposed Rule
2.5.08 would provide that a Member may make application for or maintain
the registration as a representative or principal of any associated
person of a Member and any individual engaged in the securities
business of a foreign securities affiliate or subsidiary of the Member.
Individuals maintaining such permissive registrations shall be
considered registered persons and subject to all Exchange rules, to the
extent relevant to their activities. Consistent with the requirements
of the Exchange's supervision rules, Members shall have adequate
supervisory systems and procedures reasonably designed to ensure that
individuals with permissive registrations do not act outside the scope
of their assigned functions. With respect to an individual who solely
maintains a permissive registration(s), the individual's direct
supervisor shall not be required to be a registered person. However,
for purposes of compliance with the Exchange's supervision rules, a
Member shall assign a registered supervisor who shall be responsible
for periodically contacting such individual's direct supervisor to
verify that the individual is not acting outside the scope of his or
her assigned functions. If such individual is permissively registered
as a representative, the registered supervisor shall be registered as a
representative or principal. If the individual is permissively
registered as a principal, the registered supervisor shall be
registered as a principal. Moreover, the registered supervisor of an
individual who solely maintains a permissive registration(s) shall not
be required to be registered in the same representative or principal
registration category as the permissively-registered individual.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\41\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \42\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \43\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\41\ 15 U.S.C. 78f(b).
\42\ 15 U.S.C. 78f(b)(5).
\43\ Id.
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The Exchange believes that the proposal to move to an annual
Regulatory Element training with content tailored to an individual's
representative or principal registration categories is designed to
protect investors and is in the public interest. As noted in the order
approving the similar changes to the FINRA CE Program,\44\ the
Commission found that ``the rule is reasonably designed to minimize the
potential adverse impact on firms and their registered persons.
Furthermore, increasing the timeliness of registered persons' training,
as well as the relevance of the training's content by tailoring it to
each registration category that they hold, would enhance their
education and compliance with their regulatory obligations.''
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\44\ Supra note 5.
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The Exchange believes that the proposed changes to the Regulatory
Element and the proposal to adopt the Firm Element portions of its CE
Program will ensure that all registered persons receive timely and
relevant training, which will, in turn, enhance compliance and investor
protection. Further, the Exchange believes that establishing a path for
individuals to maintain their qualification following the termination
of a registration will reduce unnecessary impediments to
requalification and promote greater diversity and inclusion in the
securities industry without diminishing investor protection.
The Exchange also believes that the proposed rule change will bring
consistency and uniformity with Cboe's and FINRA's recently amended CE
Program rules, which will, in turn, assist Members and their associated
persons in complying with these rules and improve regulatory
efficiency. The proposed rule changes conform certain of the Exchange's
continuing education and registration rules to align them with rules of
Cboe, which will, in turn, prevent unnecessary regulatory burdens and
to promote efficient administration of the rules. Finally, the proposed
amendment also makes minor updates and corrections to the Exchange's
rules which improve readability.
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 changes which are, in all material respects, based
upon and substantially similar to, recent rule changes adopted by FINRA
and Cboe, will reduce the regulatory burden placed on market
participants engaged in trading activities across different markets.
The Exchange believes that the harmonization of the CE Program
requirements across the various markets will reduce burdens on
competition by removing impediments to participation in the national
market system and promoting competition among participants across the
multiple national securities exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
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 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
[[Page 19152]]
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 \45\ and Rule 19b-4(f)(6) thereunder.\46\
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\45\ 15 U.S.C. 78s(b)(3)(A)(iii).
\46\ 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) \47\ 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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\47\ 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 to its Continuing Education Rules by March
15, 2022 to coincide with one of FINRA's announced implementation
dates, thereby eliminating the possibility of a significant regulatory
gap between the FINRA and the Exchange rules, providing more uniform
standards across the securities industry, and helping to avoid
confusion for Members of the Exchange 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.\48\
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\48\ 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
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2022-022 on the subject line.
Paper Comments
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-CboeBZX-2022-022. 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 (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are cautioned that we do not redact or
edit personal identifying information from comment submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-CboeBZX-2022-
022 and should be submitted on or before April 22, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\49\
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\49\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06851 Filed 3-31-22; 8:45 am]
BILLING CODE 8011-01-P