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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 by the New York Stock Exchange, Inc. To Adopt Amendments to Exchange Rule 342 (“Offices-Approval, Supervision and Control”) August 28, 2002.

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Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] notice is hereby given that on July 12, 2002, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The NYSE filed an amendment to the proposed rule change on August 16, 2002.[3] The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.

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

The proposal consists of the adoption of proposed amendments to NYSE Rule 342 (“Offices—Approval, Supervision and Control”). The proposed amendments would recognize the National Association of Securities Dealers' General Securities Principal Examination (“Series 24 Examination”) as an acceptable qualification alternative to the General Securities Sales Supervisor Qualification Examination (“Series 9/10 Examination”) for supervisory persons whose duties do not include the supervision of options or municipal securities sales activity. In addition, the amendments update and clarify certain provisions of the Rule.

The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets.

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Rule 342. Offices—Approval, Supervision and Control

(a) through (d)—NO CHANGE—Inclusion of (d) below is for reference purposes only.

(d) Qualified persons acceptable to the Exchange shall be in charge of:

(1) Any office of a member or member organization,

(2) Any regional or other group of offices,

(3) Any sales department or activity.

(e) through Supplementary Material .12—NO CHANGE.

.13 Acceptability of supervisors. (a) Generally.—Any member, allied member or employee who is a candidate for acceptability under (d) (1), (2), or (3) above must [should] have a creditable three year record as a registered representative or equivalent experience, and [is expected to] must pass [either the Allied Member Examination or the Branch Office Manager Examination to qualify under (d)(1) or (2), or] the General Securities Sales Supervisor Qualification Examination (Series 9/10) or another [an] examination acceptable to the Exchange which demonstrates competency relevant to assigned responsibilities [to supervise a specific sales department or activity to qualify under (d)(3)]. The General Securities Principal Examination (Series 24), if taken and passed after July 1, 2001, is an acceptable alternative for persons whose duties do not include the supervision of options or municipal securities sales activity. The examination requirement may be waived at the discretion of the Exchange. [Special examinations may be arranged for persons whose principal work is in unusual fields.]

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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 Start Printed Page 56864statements 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

Recognition of the Series 24 Examination

The Exchange proposes to amend NYSE Rule 342 (“Offices—Approval, Supervision and Control”) to recognize the National Association of Securities Dealers' (“NASD”) General Securities Principal Examination (“Series 24 Examination”) as an acceptable qualification alternative to the General Securities Sales Supervisor Qualification Examination (“Series 9/10 Examination”) for supervisory persons whose duties do not include the supervision of options or municipal securities sales activity. The proposed amendment is an Exchange initiative to eliminate, when possible, duplicative examination qualification requirements. As of July 2, 2001, NASD has enhanced the Series 24 Examination by including test questions sufficient to provide appropriate coverage of NYSE rules.

Background and Detail

NYSE Rule 342 prescribes the Exchange's general supervisory requirements for members and member organizations. Among these requirements are qualification standards for personnel delegated supervisory responsibility. NYSE Rule 342.13 (“Acceptability of Supervisors”) requires that a person delegated certain supervisory responsibilities [4] should “have a creditable record as a registered representative or equivalent experience, and is expected to pass either the Allied Member Examination or the Branch Office Manager Examination * * *.” The “Branch Manager Examination” is now known as the General Securities Sales Supervisor Qualification Examination or the Series 9/10 Examination. Currently, one must pass the Series 9/10 Examination, or its historical equivalent (e.g., the Series 8 Examination) in order to qualify as a branch office manager. On-site qualified branch office managers are required in branch offices with four or more registered persons.

The proposed amendments would eliminate the reference to the “Branch Office Manager Examination” and specify the Series 9/10 Examination as the referenced qualification requirement. In addition, the Series 24 Examination would be referenced and, if taken and passed after July 1, 2001, would be recognized as an alternative to the Series 9/10 Examination for persons whose duties do not include the supervision of options or municipal securities sales activity.

Though not included in the proposed rule amendments, a person with a Series 24 registration who is delegated responsibility to supervise options sales activity could qualify to do so by passing the Options Principal Examination (“Series 4 Examination”) or, alternately, the Series 9 Examination. If delegated responsibilities include supervision of municipal securities sales activity, such person could qualify by passing the Municipal Securities Principal Examination (“Series 53 Examination”) or the Series 10 Examination. The Exchange is currently working with the NASD to develop a comprehensive examination that will incorporate the elements of both the Series 24 and the Series 9/10 Examinations and would qualify persons as an NYSE Securities Sales Supervisor or an NASD Securities Principal.

Additional Amendments to Rule 342.13

The proposed rule amendments to NYSE Rule 342.13 would also accomplish the following:

  • Clarify that, absent a waiver by the Exchange, the qualification requirement to supervise “any sales department or activity”[5] is the Series 9/10 Examination, the Series 24 Examination, or another examination acceptable to the Exchange which demonstrates competency relevant to assigned responsibilities.
  • Codify that supervisor candidates must have a creditable “three year” record as a registered representative or equivalent experience. The addition of the “three year” requirement codifies the current written Interpretation of the Rule.
  • Eliminate reference to the “Allied Member Examination.” This examination is no longer given to Allied Member candidates, since qualification examination requirements are now determined on a case-by-case basis according to the functions and responsibilities of the prospective Allied Member.
  • Eliminate reference to “special examinations” that “may be arranged for persons whose principal work is in unusual fields.” The Rule's prior reference to an “examination acceptable to the Exchange which demonstrates competency relevant to assigned responsibilities” renders the “special examinations” reference redundant.
  • Clarify the prerequisites outlined in the first sentence of NYSE Rule 342.13 by replacing the word “should” and the phrase “is expected to” with the less ambiguous word, “must.”

2. Statutory Basis

The NYSE believes 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 the requirements of section 6(c)(3)(B) of the Act.[6] 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.

In addition, the Exchange, under section 6(c)(3)(B),[7] may bar a natural person from becoming a member or person associated with a member if such natural person does not meet such prescribed standards of training, experience, and competence as are prescribed by the rules of the Exchange.

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

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

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

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: Start Printed Page 56865

(A) By order approve such proposed rule change, or

(B) Institute proceedings to determine whether the proposed rule change should be 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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. All submissions should refer to file number SR-NYSE-2002-24 and should be submitted by 21 days from September 26, 2002.

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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

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Footnotes

3.  See letter from Mary Yeager, Assistant Secretary, NYSE, to Nancy Sanow, Assistant Director, Division of Market Regulation, SEC, dated August 15, 2002, and attachments (“Amendment No. 1”).

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4.  Reference is made to 342(d)(1), persons in charge of “any office of a member or member organization” and 342(d)(2), persons in charge of “any regional or other group of offices.”

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5.  Incorporated into 342.13 by reference to 342(d)(3).

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[FR Doc. 02-22605 Filed 9-4-02; 8:45 am]

BILLING CODE 8010-01-P