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Notice

Self-Regulatory Organizations; Notice of Filing and Effectiveness of Proposed Rule Change by the National Futures Association Concerning Proficiency Requirements

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Start Preamble September 16, 2002.

Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-7 under the Act,[2] notice is hereby given that on August 28, 2002, the National Futures Association (“NFA”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule changes described in Items I, II, and III below, which Items have been prepared by the NFA. The Commission is publishing this notice to solicit comments on the proposed rule changes from interested persons. NFA also has filed the proposed rule change with the Commodity Futures Trading Commission (“CFTC”).

On August 15, 2002, NFA requested that the CFTC make a determination that review of the proposed rule change is not necessary. The CFTC made such a determination on August 26, 2002.

I. Self-Regulatory Organization's Description of the Proposed Rule Change

Section 15A(k) of the Act [3] makes NFA a national securities association for Start Printed Page 59588the limited purpose of regulating the activities of members who are registered as brokers or dealers in security futures products under section 15(b)(11) of the Act.[4] NFA proposes an interpretive notice regarding proficiency requirements for security futures products will apply to these Members. The proposed interpretive notice regarding proficiency requirements for security futures products describes the conditions under which registrants can substitute training for testing.

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

NFA has prepared statements concerning the purpose of, and basis for, the proposed rule change, burdens on competition, and comments received from members, participants, and others. The text of these statements may be examined at the places specified in Item IV below. These statements are set forth in Sections A, B, and C below.

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

1. Purpose

Section 15A(k)(2)(D) of the Act requires NFA to “have rules that ensure that members and natural persons associated with members meet such standards of training, experience, and competence necessary to effect transactions in security futures products and are tested for their knowledge of securities and security futures products.” [5] NFA is in the process of updating the Series 3 examination to include questions relating to security futures products. NFA is also in the process of updating the Series 30 examination to include questions regarding security futures for persons who are designated security futures principals under NFA Compliance Rule 2-7(b). Until the examinations are finalized, individuals will be allowed to meet the proficiency requirements by taking an appropriate training course before engaging in activities involving security futures products. The proposed interpretive notice describes the conditions under which these individuals can substitute training for testing.

NFA, in partnership with the National Association of Securities Dealers and the Institute for Financial Markets, has developed a Web-based training program that will satisfy the training requirement. The program can be accessed through NFA's Web site, and there is no charge for completing the training program.

The proposed interpretive notice explains that current NFA Members and Associates will be able to satisfy their proficiency requirements for security futures by taking any training program that covers the subject matter included in a content outline that can be found on NFA's web site. New registrants can also qualify through training if they are registered no later than six months after the first retail, exchange-traded contract begins trading.

The proposed interpretive notice explains that in order to qualify as a designated security futures principal, current supervisors may take a portion of the training program devoted to supervisory issues as well as the portions intended for all Associates within six months after the first retail, exchange-traded contract begins trading. After the six-month period, individuals may qualify as a security futures principal by taking the training program in lieu of taking a supervisory proficiency examination, provided those individuals are qualified to act as a branch office manager no later than six months after the first retail, exchange-traded contract begins trading.

As indicated above, the proposed interpretive notice grandfathers in current registrants and those who take the Series 3 and/or Series 30 examination within six months after security futures begin trading, provided they take an appropriate training program before they begin soliciting for security futures transactions or supervising security futures activities. The grandfather provision would expire on December 31, 2006. Registrants who subsequently decide to engage in security futures activities will be required to first take the relevant examination.

The proposed interpretive notice states that NFA Members and Associates are not required to notify NFA that they have completed a training program, but Members must be able to demonstrate to NFA during an audit that those registered individuals who are engaging in security futures activities have completed the necessary training.

2. Statutory Basis

The rule change is authorized by, and consistent with, section 15A(k) of the Act.[6]

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

The rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act and the Commodity Exchange Act.

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

NFA did not publish the rule changes to the membership for comment. NFA did not receive comment letters concerning the rule changes.

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

Pursuant to section 19(b)(7)(B) of the Act,[7] the proposed rule change became effective on August 26, 2002.

Within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of section 19(b)(1) of the Act.[8]

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change conflicts with the Act. Persons making written submissions should file nine copies of the submission with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Comments also may be submitted electronically to the following e-mail address: rule-comments@sec.gov. 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 these filings also will be available for inspection and copying at the principal office of NFA. Electronically submitted comments will be posted on the Commission's Web site (http://www.sec.gov). All submissions Start Printed Page 59589should refer to File No. SR-NFA-2002-04 and should be submitted by October 15, 2002.

Start Signature

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

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

[FR Doc. 02-24090 Filed 9-20-02; 8:45 am]

BILLING CODE 8010-01-P