[Federal Register Volume 84, Number 62 (Monday, April 1, 2019)]
[Notices]
[Pages 12311-12316]
[FR Doc No: 2019-06180]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85413; File No. SR-FINRA-2019-006]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Capital Acquisition Broker (``CAB'')
Rules Governing Qualification, Registration and Continuing Education of
Associated Persons of CABs

March 26, 2019.
    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 March 12, 2019, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by FINRA. FINRA has designated
the proposed rule change as constituting a ``non-controversial'' rule
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which
renders the proposal effective upon receipt of this filing by the
Commission. 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\ 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

    FINRA is proposing to amend the Capital Acquisition Broker
(``CAB'') Rules governing qualification, registration and continuing
education of associated persons of CABs (CAB Rules 119-125) to reflect
new consolidated FINRA qualification and registration rules and changes
to its continuing education requirements which took effect on October
1, 2018 (collectively, the ``Consolidated Rules''). Specifically, the
proposed rule change would amend CAB Rules 119 (Foreign Members and
Associates), 121 (Registration Requirements), 123 (Categories of
Registration), 124 (Persons Exempt from Registration) and 125
(Continuing Education Requirements) to cross-reference the new FINRA
rules governing these areas, and would delete CAB Rule 122
(Qualification Examinations) since this area is covered by other
Consolidated Rules.
    The text of the proposed rule change is available on FINRA's
website at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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
A. Background
FINRA Capital Acquisition Broker Rules
    On August 18, 2016, the SEC approved \4\ a separate set of FINRA
rules for firms that meet the definition of a ``capital acquisition
broker'' and that elect to be governed under this rule set. CABs are
member firms that engage in a limited range of activities, essentially
advising companies and private equity funds on capital raising and
corporate restructuring, and acting as placement agents for sales of
unregistered securities to institutional investors under limited
conditions. Member firms that elect to be governed under the CAB rule
set are not permitted, among other things, to carry or maintain
customer accounts, handle customers' funds or securities, accept
customers' trading orders, or engage in proprietary trading or market-
making.
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    \4\ See Securities Exchange Act Release No. 78617 (August 18,
2016), 81 FR 57948 (August 24, 2016) (Order Approving File No. SR-
FINRA-2015-054).
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    The CAB Rules became effective on April 14, 2017.\5\ In order to
provide new CAB applicants with lead time to apply for FINRA membership
and obtain the necessary qualifications and registrations, CAB Rules
101-125 became effective on January 3, 2017.\6\
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    \5\ See Regulatory Notice 16-37 (October 2016).
    \6\ On September 29, 2017 the SEC approved CAB Rule 203
(Engaging in Distribution and Solicitation Activities with
Government Entities) and CAB Rule 458 (Books and Records
Requirements for Government Distribution and Solicitation
Activities), which applied established ``pay-to-play'' and related
recordkeeping rules to the activities of CABs. See Securities
Exchange Act Release No. 81781 (September 29, 2017), 82 FR 46559
(October 5, 2017) (Order Approving File No. SR-FINRA-2017-027). CAB
Rules 203 and 458 became effective on December 6, 2017. On September
20, 2018 FINRA filed for immediate effectiveness changes to CAB Rule
331 (Anti-Money Laundering Compliance Program) to reflect the
Financial Crimes Enforcement Network's adoption of a final rule on
Customer Due Diligence Requirements for Financial Institutions. See
Securities Exchange Act Release No. 84363 (October 4, 2018), 83 FR
51532 (October 11, 2018) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2018-035).
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FINRA Qualification, Registration and Continuing Education Rules
    In July 2017 the SEC approved a proposed rule change to: (1) Adopt
consolidated FINRA registration rules; (2) restructure the
representative-level qualification examinations by creating an
examination called the Securities Industry Essentials (SIE) to test
knowledge regarding fundamental securities-related topics and
transforming the representative-level examinations into specialized
knowledge examinations; and (3) amend the Continuing Education (CE)
requirements.\7\
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    \7\ See Securities Exchange Act Release No. 81098 (July 7,
2017), 82 FR 32419 (July 13, 2017) (Order Approving File No. SR-
FINRA-2017-007) (``Consolidated Rule Filing'').
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    The proposed rule change consolidated the NASD and Incorporated
NYSE registration rules as FINRA Rules, which streamlined and brought
consistency and uniformity to FINRA's qualification and registration
requirements. The Consolidated Rules, among other things, allow a
member to permissively register, or maintain the registration(s) as a
representative or principal of, any associated person of the firm,
establish a waiver program for individuals working for a financial
services industry affiliate of a member, and require firms to designate
a Principal Financial Officer and a Principal Operations Officer. The
rule change also establishes new registration categories. These new
requirements are discussed in more detail below.
    In conjunction with these changes, FINRA also restructured the
representative-level qualification examination program into a more
efficient format whereby all representative-level applicants take the
SIE examination, and a tailored, specialized knowledge examination (a
revised representative-level qualification examination) for their
particular registered role. Individuals who are not associated persons
of firms,

such as members of the general public, are also eligible to take the
SIE examination. The restructured program, among other things,
eliminated duplicative testing of fundamental securities knowledge on
representative-level examinations and eliminated several
representative-level registration categories that had become outdated
or had limited utility. In addition, FINRA made corresponding and
clarifying changes to the CE requirements.
    In October 2017 FINRA published Regulatory Notice 17-30, which
announced SEC approval of the consolidated FINRA registration rules,
restructured representative-level qualification examinations, and
changes to the continuing education requirements.\8\
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    \8\ See Regulatory Notice 17-30 (October 2017).
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B. CAB Qualification, Registration and Continuing Education Rules
    CAB Rules 119(b) and 121-125 govern the qualification, registration
and continuing education of associated persons of CABs. Each of these
rule provisions subjects CABs to a corresponding NASD or FINRA rule
governing that area. For example, CABs are subject to NASD IM-1000-2
with respect to their associated persons who are serving in the United
States Armed Forces. Similarly, CABs are subject to NASD Rules 1021 and
1031 with respect to the registration requirements for CABs' principals
and representatives. Additionally, associated persons of CABs are
subject to the continuing education requirements of FINRA Rule 1250.
    The purpose of these rules is to ensure that associated persons of
CABs are subject to the same rules governing qualification,
registration and continuing education as associated persons of member
firms that have not elected CAB status. Thus, CAB principals and
representatives must pass the same qualification examinations and are
subject to the same registration requirements as principals and
representatives that engage in the same activities through a non-CAB
firm.
    Maintaining consistent qualification, registration and continuing
education requirements for associated persons of both CAB and non-CAB
firms is also important since some non-CAB firms elect CAB status after
the date their associated persons' registrations becomes effective.
Additionally, it is possible that associated persons of non-CAB firms
may leave their firms and become associated with CABs, and that
associated persons of CABs also may leave their firms and become
associated with non-CAB firms. Thus FINRA believes, as a matter of
investor protection and regulatory consistency, that its rules should
impose substantially similar qualification, registration and continuing
education requirements on associated persons of both CABs and non-CAB
member firms.
    The current CAB qualification, registration and continuing
education rules now cross-reference FINRA and NASD Rules that either
have been eliminated, or have been moved and renumbered. Thus, to
further the goals of maintaining regulatory consistency, as well as
having rules that function as intended, FINRA must update its CAB
qualification, registration and continuing education rules to correctly
cite the appropriate Consolidated Rules.
C. Updating of Cross-References to FINRA Rules
    In order to maintain consistent qualification, registration and
continuing education rules for both CAB and non-CAB firms, FINRA is
proposing to update the cross-references to FINRA Rules in CAB Rules
119-125. This section also discusses particular aspects of the
Consolidated Rules that may impact CABs and their associated persons.
CAB Rule 119
    Currently CAB Rule 119 (Foreign Members and Associates) subjects
CABs to NASD Rule 1090 (Foreign Members) and NASD Rule 1100 (Foreign
Associates). The Consolidated Rule Filing deleted NASD Rule 1100 and
eliminated the Foreign Associate registration category as of October 1,
2018. Accordingly, FINRA is proposing to amend CAB 119 to delete the
provisions subjecting CABs to NASD Rule 1100.\9\
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    \9\ Because the Consolidated Rule Filing did not delete NASD
Rule 1090 (Foreign Members), CAB Rule 119 will continue to subject
CABs to that rule. However, the title of CAB Rule 119 will be
shortened to ``Foreign Members.''
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CAB Rule 121
    CAB Rule 121 (Registration Requirements) subjects CABs to NASD IM-
1000-2 (Status of Persons Serving in the Armed Forces of the United
States), NASD IM-1000-3 (Failure to Register Personnel), NASD Rule 1021
(Registration Requirements--Principals), and NASD Rule 1031
(Registration Requirements--Representatives). The Consolidated Rule
Filing deleted each of these NASD rules as of October 1, 2018.
Accordingly, FINRA proposes to amend CAB Rule 121 by eliminating the
references to NASD IMs 1000-2 and 1000-3 and NASD Rules 1021 and 1031,
and providing that all CABs are subject to FINRA Rule 1210
(Registration Requirements).
    As of October 1, 2018 FINRA Rule 1210.10 governs the status of
persons serving in the U.S. Armed Forces. Rule 1210.10 is substantially
similar to NASD IM-1000-2, except that it requires a member to notify
FINRA promptly of such a person's return to employment with the member.
    FINRA did not adopt a new FINRA Rule to replace NASD IM-1000-3,
which provided that the failure of any member to register an employee,
who should be so registered, as a Registered Representative may be
deemed to be conduct inconsistent with just and equitable principles of
trade. FINRA noted that NASD IM-1000-3 was superfluous, since the
failure to register a representative was in fact a violation of other
FINRA Rules.\10\ Accordingly, FINRA likewise does not propose to adopt
a new CAB Rule to replace NASD IM-1000-3.
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    \10\ See Securities Exchange Act Release No. 80371 (April 4,
2017), 82 FR 17336, 17337 (April 10, 2017) (Notice of Filing of File
No. SR-FINRA-2017-007).
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    FINRA Rule 1210 (Registration Requirements) consolidated and
streamlined NASD Rules 1021(a) and 1031(a) with regard to the
registration requirements for principals and representatives, subject
to a number of changes.
    FINRA Rule 1210 provides that each person engaged in the investment
banking or securities business must register with FINRA as a
representative or principal in each category of registration
appropriate to his or her functions and responsibilities as specified
in FINRA Rule 1220 (Registration Categories), unless exempt from
registration pursuant to FINRA Rule 1230 (Associated Persons Exempt
from Registration). Rule 1230 also provides that such a person is not
qualified to function in any registered capacity other than that for
which the person is registered. This latter provision consolidated
similar provisions in the registration categories under the NASD
rules.\11\
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    \11\ See NASD Rules 1022(a)(6), (b)(3), (c)(4), (d)(2), (e)(3)
and (f)(4), and NASD Rules 1032 (b)(2), (c)(2), (d)(3), (e)(2),
(f)(3), (g)(2), (h)(3) and (i)(4).
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    FINRA Rule 1210 also includes multiple Supplementary Materials that
address many of the topics previously addressed in NASD qualification
and registration rules, subject to changes intended to modernize and
streamline these rules. These topics include:

     Minimum Number of Registered Persons; \12\
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    \12\ See FINRA Rule 1210.01.
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     Permissive Registrations; \13\
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    \13\ See FINRA Rule 1210.02.
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     Qualification Examinations and Waivers of Examinations;
\14\
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    \14\ See FINRA Rule 1210.03.
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     Requirements for Registered Persons Functioning as
Principals for a Limited Period; \15\
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    \15\ See FINRA Rule 1210.04.
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     Rules of Conduct for Taking Examinations and
Confidentiality of Examinations; \16\
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    \16\ See FINRA Rule 1210.05.
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     Waiting Periods for Retaking a Failed Examination; \17\
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    \17\ See FINRA Rule 1210.06.
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     Satisfaction of the Regulatory Element of Continuing
Education; \18\
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    \18\ See FINRA Rule 1210.07.
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     Lapse of Registration and Expiration of the Securities
Industry Essentials Qualification Examination; \19\
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    \19\ See FINRA Rule 1210.08.
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     Waiver of Examinations for Individuals Working for a
Financial Services Industry Affiliate of a Member; \20\
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    \20\ See FINRA Rule 1210.09.
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     Status of Persons Serving in the Armed Forces of the
United States; \21\ and
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    \21\ See FINRA Rule 1210.10.
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     Impermissible Registrations.\22\
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    \22\ See FINRA Rule 1210.11.
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    A more detailed discussion of these provisions can be found in
Regulatory Notice 17-30 (October 2017).\23\
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    \23\ See also Securities Exchange Act Release No. 80371 (April
4, 2017), 82 FR 17336 (April 10, 2017) (Notice of Filing of File No.
SR-FINRA-2017-007), and Securities Exchange Act Release No. 81098
(July 7, 2017), 82 FR 32419 (July 13, 2017) (Order Approving File
No. SR-FINRA-2017-007).
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CAB Rules 122 and 123
    CAB Rule 122 (Qualification Examinations) currently subjects CABs
to NASD Rule 1070 (Qualification Examinations and Waiver of
Requirements) and NASD Rule 1080 (Confidentiality of Examinations). CAB
Rule 123 (Categories of Registration) subjects CABs to NASD Rule 1022
(Categories of Principal Registration), NASD Rule 1032 (Categories of
Representative Registration), and paragraph (b)(6) (Operations
Professional) of FINRA Rule 1230 (Registration Categories). The
Consolidated Rule Filing deleted NASD Rules 1022 and 1032 and paragraph
(b)(6) of FINRA Rule 1230 as of October 1, 2018.
    As of October 1, 2018 FINRA Rule 1220 (Registration Categories)
largely governs the substance of these rules, subject to a number of
changes. Accordingly, FINRA proposes to eliminate the references to
these NASD Rules and FINRA Rule 1230(b)(6) in CAB Rules 122 and 123,
and to combine current CAB Rules 122 and 123 into a single CAB Rule 122
(Registration Categories), which will provide that all CABs are subject
to FINRA Rule 1220.
    FINRA Rule 1220 integrates the various registration categories
under the NASD rules into a single rule, subject to a number of
changes. Rule 1220 sets forth the definitions of ``principal'' and
``representative,'' as well as the qualification and registration
requirements for principals and representatives. The rule also
addresses:
     Foreign Registrations; \24\
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    \24\ See FINRA Rule 1220.01.
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     Additional Qualification Requirements for Persons Engaged
in Securities Futures Activities; \25\
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    \25\ See FINRA Rule 1220.02.
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     Members with One Registered Options Principal; \26\
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    \26\ See FINRA Rule 1220.03.
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     Scope of General Securities Sales Supervisor Registration
Category; \27\
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    \27\ See FINRA Rule 1220.04.
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     Scope of Operations Professional Requirement; \28\ and
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    \28\ See Supplementary Material 1220.05.
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     Eliminated Registration Categories.\29\

    \29\ See Supplementary Material 1220.06.
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A more detailed discussion of these provisions can be found in
Regulatory Notice 17-30.\30\
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    \30\ See also Securities Exchange Act Releases No. 80371 and
81098, supra note 23.
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    FINRA Rule 1220 includes grandfathering provisions that provide
that, subject to the lapse of registration provisions in FINRA Rule
1210.08, individuals who are registered with FINRA in specified
registration categories on October 1, 2018 and individuals who had been
registered in such categories in the past two years prior to October 1,
2018 are qualified to register in the corresponding registration
categories without having to take any additional examinations.\31\
These registration categories include many categories that associated
persons of CABs may hold as of October 1, 2018 such as General
Securities Principal (Series 24), General Securities Representative
(Series 7), Operations Professional (Series 99), Investment Banking
Representative (Series 79), Direct Participations Programs
Representative (Series 22), and Private Securities Offerings
Representative (Series 82).
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    \31\ See FINRA Rules 1220 (a)(2), (a)(3), (a)(5), (a)(6),
(a)(8), (a)(9), (a)(13), (b)(2), (b)(3), (b)(4), (b)(5), (b)(6),
(b)(7), (b)(8), and (b)(9).
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    FINRA Rule 1220 eliminated a number of registration categories,
including the Corporate Securities Representative category (Series 62),
which some CAB associated persons may possess. However, under FINRA
Rule 1220.06, any person registered in one of these eliminated
categories on October 1, 2018 and any person who was registered with
FINRA in such categories within two years prior to October 1, 2018 is
eligible to maintain such registrations with FINRA. If such a person
subsequently terminates his or her registration with FINRA and the
registration remains terminated for two or more years, he or she will
not be eligible to re-register in such categories.
Principal Financial Officer and Principal Operations Officer Categories
    Among other changes, as of October 1, 2018 all firms are required
to designate: (1) A Principal Financial Officer (``PFO'') with primary
responsibility for financial filings and the related books and records;
and (2) a Principal Operations Officer (``POO'') with primary
responsibility for the day-to-day operations of the business.\32\ This
requirement, among other things, replaced the requirement that FINRA
members designate a Chief Financial Officer. The requirement to
designate such individuals applies to all firms. Firms, such as CABs,
that neither self-clear nor provide clearing services may designate the
same person as the PFO, POO, FinOp or Introducing FinOp.
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    \32\ See FINRA Rule 1220(a)(4)(B).
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New Registration Categories
    FINRA Rule 1220 establishes three new principal registration
categories: Compliance Officer, Investment Banking Principal and
Private Securities Offering Principal. Of particular importance to CABs
are the latter two principal registration categories, since they apply
in part to the permissible activities of CABs.
Compliance Officer Requirement
    Beginning on October 1, 2018 and subject to an exception discussed
below, each person designated as a Chief Compliance Officer (``CCO'')
on Schedule A of Form BD is required to register with FINRA as a
Compliance Officer. Individuals can qualify as Compliance Officers in
several ways. An individual who is designated as CCO on Schedule A of
Form BD of a member and who was registered with FINRA as an General
Securities Representative (Series 7) and a General Securities Principal
(Series 24) prior to October 1, 2018 and who continued to maintain

the CCO designation and Series 7 and Series 24 registrations on October
1, 2018 was automatically granted a Compliance Officer registration on
October 1, 2018.
    Further, other individuals who were registered with FINRA as a
General Securities Representative and a General Securities Principal
prior to October 1, 2018 and who continued to maintain those
registrations on October 1, 2018 are qualified to register as
Compliance Officers without having to take any additional examinations.
Similarly, an individual who was registered as a Compliance Official
(Series 14) in the CRD system prior to October 1, 2018 and who
continued to maintain that registration on or after October 1, 2018 is
qualified to register as a Compliance Officer without having to take
any additional examinations.
    In addition, individuals whose registrations as a General
Securities Representative and a General Securities Principal were
terminated between October 1, 2016 and September 30, 2018 are qualified
to register as Compliance Officers without having to take any
additional examinations, provided they register as Compliance Officers
within two years from the date of terminating those registrations. An
individual designated as a CCO on Schedule A of Form BD of a member
that is engaged in limited investment banking or securities business
may be registered in a principal category under FINRA Rule 1220 that
corresponds to the limited scope of the member's business, rather than
registering as a Compliance Officer. All other individuals registering
as Compliance Officers on or after October 1, 2018 are required to: (1)
Satisfy the General Securities Representative prerequisite
registration, including passing the SIE, and passing the General
Securities Principal qualification examination; or (2) pass the
Compliance Official qualification examination.
Investment Banking Principal
    Effective October 1, 2018 principals responsible for supervising
specified investment banking activities are required to register as
Investment Banking Principals.\33\ These activities include:
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    \33\ See FINRA Rule 1220(a)(5).
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    (i) Advising on or facilitating debt or equity securities offerings
through a private placement or a public offering, including but not
limited to origination, underwriting, marketing, structuring,
syndication, and pricing of such securities and managing the allocation
and stabilization activities of such offerings; or
    (ii) advising on or facilitating mergers and acquisitions, tender
offers, financial restructurings, asset sales, divestitures or other
corporate reorganizations or business combination transactions,
including but not limited to rendering a fairness, solvency or similar
opinion.\34\
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    \34\ See FINRA Rule 1220(b)(5)(A).
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    Because CABs may engage in many of these activities (subject to the
conditions described in CAB Rule 016(c)), if approved, CAB Rule 122
will require CABs that engage in these activities to have an Investment
Banking Principal. Individuals who were registered with FINRA as an
Investment Banking Representative (Series 79) and a General Securities
Principal (Series 24) prior to October 1, 2018 and who continued to
maintain those registrations on October 1, 2018 were automatically
granted an Investment Banking Principal registration on October 1,
2018.
    Further, an individual whose registrations as an Investment Banking
Representative and a General Securities Principal were terminated
between October 1, 2016 and September 30, 2018 is qualified to register
as an Investment Banking Principal without having to take any
additional examinations, provided he or she registers as an Investment
Banking Principal within two years from the date of terminating those
registrations. All other individuals registering as Investment Banking
Principals on or after October 1, 2018 are required to satisfy the
Investment Banking Representative prerequisite registration, including
passing the SIE, and passing the General Securities Principal
qualification examination.
Private Securities Offering Principal
    Also effective October 1, 2018 principals solely responsible for
supervising specified activities related to private securities
offerings may register as Private Securities Offerings Principals,
instead of registering as a General Securities Principal.\35\ These
activities are limited to effecting sales as part of a primary offering
of securities not involving a public offering, pursuant to Sections
3(b), (4)(2) or 4(6) of the Securities Act of 1933 and the Securities
Act rules and regulations, provided that such person shall not effect
sales of municipal or government securities, or equity interests in or
the debt of direct participation programs.\36\
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    \35\ See FINRA Rule 1220(a)(13) (Private Securities Offerings
Principal).
    \36\ See FINRA Rule 1220(b)(9)(A).
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    Individuals can qualify for registration as a Private Securities
Offerings Principal in several ways. An individual who was registered
as a Private Securities Offerings Representative (Series 82) and a
General Securities Principal prior to October 1, 2018 and who continued
to maintain those registrations on October 1, 2018 was automatically
granted a Private Securities Offerings Principal registration on
October 1, 2018.
    Further, an individual whose registrations as a Private Securities
Offerings Representative and a General Securities Principal were
terminated between October 1, 2016 and September 30, 2018 is qualified
to register as a Private Securities Offerings Principal without having
to take any additional examinations, provided he or she registers as a
Private Securities Offerings Principal within two years from the date
of terminating those registrations. All other individuals registering
as Private Securities Offerings Principals on or after October 1, 2018
are required to satisfy the Private Securities Offerings Representative
prerequisite registration, including passing the SIE, and passing the
General Securities Principal qualification examination.
    Because CABs may engage in these activities (subject to the
conditions described in CAB Rule 016(c)), if approved, CAB Rule 122 may
require CABs that engage in these activities to have a Private
Securities Offerings Principal as described above.
CAB Rule 124
    CAB Rule 124 provides that all CABs are subject to NASD Rule 1060
(Persons Exempt from Registration). As of October 1, 2018 the
Consolidated Rule Filing deleted NASD Rule 1060, and adopted in its
place FINRA Rule 1230 (Associated Persons Exempt from Registration).
New FINRA Rule 1230 modified the provisions of NASD 1060 in certain
respects. For example, NASD Rule 1060(a) exempted from registration
those associated persons who are not actively engaged in the investment
banking and securities business, and persons whose activities are
related solely and exclusively to a member's need for corporate
officers or for capital participation. FINRA believes that the
determination of whether an associated person is required to register
must be based on an analysis of the person's activities and functions
in the context of the various registration categories. The exemptions
for persons who are not ``actively engaged'' in the securities business
or whose functions are related solely to the need for corporate
officers, are not consistent with this analytical framework. Therefore,
FINRA has deleted these exemptions.

    Accordingly, FINRA proposes to eliminate the reference to NASD Rule
1060 and to provide that all CABs are subject to FINRA Rule 1230. In
addition, because FINRA proposes to combine current CAB Rules 122 and
123 as new CAB Rule 122, and because the rule subjects CABs to FINRA
Rule 1230, FINRA proposes to renumber CAB Rule 124 as CAB Rule 123.
FINRA also proposes to name CAB Rule 123 ``Associated Persons Exempt
from Registration.''
CAB Rule 125
    CAB Rule 125 provides that all CABs are subject to FINRA Rule 1250
(Continuing Education Requirements). The Consolidated Rule Filing made
amendments to FINRA Rule 1250 and renumbered the revised rule as FINRA
Rule 1240. Accordingly, FINRA proposes to amend CAB Rule 125 to provide
that all CABs are subject to FINRA Rule 1240. Because the rule subjects
CABs to FINRA Rule 1240, FINRA proposes to renumber CAB Rule 125 as CAB
Rule 124.
D. Rulemaking Process
    FINRA undertook an extensive and comprehensive rulemaking process
in eliminating the NASD Rules governing qualification and registration
requirements and adopting new revised FINRA Rules governing these
areas. As part of the process of developing the Consolidated Rules,
FINRA published Regulatory Notice 09-70 (December 2009), seeking
comment on a set of proposed consolidated registration rules.
Commenters on this Notice were concerned with the complexity and
operational and cost burden of the proposal, and FINRA staff engaged in
discussions with SEC staff regarding the impact of the proposal.
    As a result, FINRA substantially revised the proposal as published
in Regulatory Notice 09-70. In addition, in May 2015 FINRA published
Regulatory Notice 15-20, seeking comment on a proposal to restructure
the representative-level qualification examinations. FINRA filed a
revised version of the proposal (SR-FINRA-2017-007) with the SEC in
March 2017 which included the restructuring proposal. The SEC published
the revised proposal for comment in April 2017 \37\ and received 18
comment letters in response to the proposal. FINRA revised the proposal
further in response to these comment letters, and the SEC approved the
proposal in July 2017.\38\ Further, the Consolidated Rules apply to
associated persons of all FINRA members and ensure that such
individuals attain and maintain specified levels of competence and
knowledge pertinent to their function. FINRA did not exclude any
specific category of FINRA members, such as CABs, from the proposal.
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    \37\ See Securities Exchange Act Release No. 80371, supra note
10.
    \38\ See Securities Exchange Act Release No. 81098, supra note
7.
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    Accordingly, FINRA believes that all members, including CABs, have
had opportunities to comment on the Consolidated Rules. Additionally,
as discussed above, FINRA believes that associated persons of CABs
should be subject to the same qualification and registration
requirements as associated persons of non-CAB members.
    FINRA has filed the proposed rule change for immediate
effectiveness and has requested that the SEC waive the requirement that
the proposed rule change not become operative for 30 days after the
date of filing, so FINRA can implement the proposed rule change
immediately.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\39\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, and, in general, to protect investors and the
public interest, and section 15A(g)(3) of the Act,\40\ which authorizes
FINRA to prescribe standards of training, experience and competence for
persons associated with FINRA members.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78o-3(b)(6).
    \40\ 15 U.S.C. 78o-3(g)(3).
---------------------------------------------------------------------------

    As discussed above, the Consolidated Rule Filing either deleted, or
revised and renumbered, the former FINRA qualification, registration,
and continuing education rules. Thus, the current CAB qualification,
registration and continuing education rules largely cross-reference
former FINRA rules that no longer exist. In order to implement the
current CAB rules' purpose, the references to former FINRA rules
suggest that they are intended to now refer to the relevant
Consolidated Rules, since any other interpretation would defeat the
rules' purposes. FINRA believes that the proposal will confirm that the
qualification, registration and continuing education rules that apply
to CABs are the same as the rules that apply to firms that have not
elected CAB status.

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

    FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change will
align the qualification, registration and continuing education rules
that apply to CABs with the rules that apply industry-wide and to firms
that have not elected CAB status. FINRA notes that CABs have unique
features that could render certain provisions of the new registration
rules more relevant to them than other provisions.\41\ For example, the
Investment Banking Principal and Private Securities Offering Principal
registration categories are relevant to the activities of CABs, and, as
a result, economic impacts associated with these registration
categories would be directly applicable to CABs.
---------------------------------------------------------------------------

    \41\ FINRA examined the registration history of individuals
associated with both CABs and non-CAB firms during the period
January-November 2018. Based on this analysis, FINRA determined that
there were 839 registration series held by persons associated with
CAB firms, versus 1,000,220 registration series held by persons
associated with non-CAB firms. Thus, the number of series held by
persons associated with CAB firms reflects less than 0.1% of those
held by persons associated with non-CAB firms. However, compared to
the non-CAB associated persons' registration series, there was an
over representation of Series 79 registrations (10 times more for
the CAB population), and an under representation of Series 6
registrations (20 times less) held by CABs' associated persons.
Moreover, CABs' associated persons, held no Series 11, 17, 37, 38,
42, 57, and 72 registrations.
---------------------------------------------------------------------------

    When conducting the Economic Impact Assessment (EIA) for the
Consolidated Rules,\42\ FINRA evaluated and discussed the economic
impact to all firms, including CABs. Thus, FINRA believes that
interested parties can look to the EIA as presented in the Consolidated
Rule Filing as representing fairly the economic impact that CABs would
experience under the proposed rule. While CABs have unique features and
are subject to a separate rule set, CABs have been and will continue to
be subject to registration, qualification and continuing education
requirements that mirror those that apply to members that have not
elected CAB status.
---------------------------------------------------------------------------

    \42\ See Securities Exchange Act Release No. 81098, supra note
7. Although the Consolidated Rule Filing did not specifically
reference CABs in its Economic Impact Assessment, the data used in
the analysis encompassed both CABs and non-CAB firms.

---------------------------------------------------------------------------

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

    Because the 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 which it was filed, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \43\ and Rule 19b-
4(f)(6) thereunder.\44\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(3)(A).
    \44\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires FINRA to give the Commission written notice of FINRA's
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. FINRA
has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \9\ normally
does not become operative for 30 days after the date of filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\10\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. FINRA has asked the
Commission to waive the 30-day operative delay so that the proposal may
become operative upon filing. FINRA states that such waiver will help
align the qualification, registration, and continuing education rules
that apply to CABs, with the rules that apply industry-wide, and to
firms that have not elected CAB status. Additionally, by cross
referencing rules that are currently in effect, rather than rules that
have been eliminated, moved, or renumbered, FINRA states the proposed
rule change will further the goal of maintaining regulatory consistency
and having rules that function as intended. Because the proposed rule
change corrects cross-references that became inaccurate, the Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest and, therefore, the
Commission designates the proposed rule change to be operative upon
filing.\45\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \45\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

    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 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-FINRA-2019-006 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-FINRA-2019-006. 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 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the principal office of FINRA. 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-
FINRA-2019-006 and should be submitted on or before April 22, 2019.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
---------------------------------------------------------------------------

    \46\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-06180 Filed 3-29-19; 8:45 am]
BILLING CODE 8011-01-P


7. Opacity........................  10 percent...........  6-run average (1 hour       Method 9 of appendix A of
                                                            minimum sample time per     this part.
                                                            run).
8. Oxides of nitrogen.............  103 parts per million  3-run average (1 hour       Method 7, 7A, 7C, 7D, or
                                     by dry volume.         minimum sample time per     7E of appendix A of this
                                                            run).                       part, or ANSI/ASME PTC
                                                                                19.10-1981 (IBR, see
                                                                                Sec.   60.17(h)) in lieu
                                                                                of Methods 7 and 7C
                                                                                only.
9. Particulate matter.............  0.013 grains per dry   3-run average (1 hour       Method 5 or 29 of
                                     standard cubic foot.   minimum sample time per     appendix A of this part.
                                                            run).
10. Sulfur dioxide................  3.1 parts per million  3-run average (1 hour       Method 6 or 6C of
                                     by dry volume.         minimum sample time per     appendix A of this part,
                                                            run).                       or ANSI/ASME PTC 19.10-
                                                                                1981 (IBR, see Sec.
                                                                                60.17(h)) in lieu of
                                                                                Method 6 only.
----------------------------------------------------------------------------------------------------------------
a All emission limitations (except for opacity) are measured at 7 percent oxygen, dry basis at standard
  conditions.
b Calculated each hour as the average of the previous 12 operating hours.

    As stated in Sec.  60.3023, you must comply with the following:

      Table 3 to Subpart FFFF of Part 60.--Model Rule--Operating Limits for Incinerators and Wet Scrubbers
----------------------------------------------------------------------------------------------------------------
                                                            And monitoring using these minimum frequencies
 For these operating parameters   You must establish -----------------------------------------------------------
                                   operating limits    Data measurement     Data recording      Averaging time
----------------------------------------------------------------------------------------------------------------
1. Charge rate..................  Maximum charge      Continuous........  Every hour........  Daily for batch
                                   rate.                                                       units. 3-hour
                                                                                rolling for
                                                                                continuous and
                                                                                intermittent
                                                                                units. a
2. Pressure drop across the wet   Minimum pressure    Continuous........  Every 15 minutes..  3-hour rolling. a
 scrubber or amperage to wet       drop or amperage.
 scrubber.
3. Scrubber liquor flow rate....  Minimum flow rate.  Continuous........  Every 15 minutes..  3-hour rolling. a
4. Scrubber liquor pH...........  Minimum pH........  Continuous........  Every 15 minutes..  3-hour rolling. a
----------------------------------------------------------------------------------------------------------------
a Calculated each hour as the average of the previous 3 operating hours.

    As stated in Sec.  60.3039, you must comply with the following:

 Table 4 to Subpart FFFF of Part 60.--Model Rule--Requirements for Continuous Emission Monitoring Systems (CEMS)
----------------------------------------------------------------------------------------------------------------
                                                                                If needed to meet
                                                                   Use the following           minimum data
                                                                      performance         requirements, use the
     For the following pollutants       Use the following span   specifications (P.S.)     following alternate
                                         values for your CEMS    in appendix B of this    methods in appendix A
                                                                   part for your CEMS    of this part to collect
                                                                                data
----------------------------------------------------------------------------------------------------------------
1. Carbon Monoxide...................  125 percent of the       P.S.4A.................  Method 10.
                                        maximum hourly
                                        potential carbon
                                        monoxide emissions of
                                        the waste combustion
                                        unit.
2. Oxygen............................  25 percent oxygen......  P.S.3..................  Method 3A or 3B, or
                                                                                ANSI/ASME PTC 19.10-
                                                                                1981 (IBR, see Sec.
                                                                                60.17(h)) in lieu of
                                                                                Method 3B only.
----------------------------------------------------------------------------------------------------------------

    As stated in Sec.  60.3048, you must comply with the following:

             Table 5 to Subpart FFFF of the Part 60.--Model Rule--Summary of Reporting Requirements
----------------------------------------------------------------------------------------------------------------
               Report                         Due date                  Contents                Reference
----------------------------------------------------------------------------------------------------------------
1. Initial test report..............  a. No later than 60 days  i. Complete test report  Sec.   60.3049.
                                       following the initial     for the initial
                                       performance test          performance test; and.
                                      ........................  ii. The values for the   Sec.   60.3049.
                                                                 site-specific
                                                                 operating limits.
2. Waste management plan............  a. No later than 60 days  i. Reduction or          Sec.  Sec.   60.3010
                                       following the initial     separation of            through 60.3012.
                                       performance test          recyclable materials;
                                                                 and.
                                      ........................  ii. Identification of    Sec.  Sec.   60.3010
                                                                 additional waste         through 60.3012.
                                                                 management measures
                                                                 and how they will be
                                                                 implemented.
3. Annual Report....................  a. No later than 12       i. Company Name and      Sec.  Sec.   60.3050
                                       months following the      address;.                and 60.3051.
                                       submission of the
                                       initial test report.
                                       Subsequent reports are
                                       to be submitted no more
                                       than 12 months
                                       following the previous
                                       report
                                      ........................  ii. Statement and        Sec.  Sec.   60.3050
                                                                 signature by the owner   and 60.3051.
                                                                 or operator;.
                                      ........................  iii. Date of report;...  Sec.  Sec.   60.3050
                                                                                and 60.3051.
                                      ........................  iv. Values for the       Sec.  Sec.   60.3050
                                                                 operation limits;.       and 60.3051.
                                      ........................  v. If no deviations or   Sec.  Sec.   60.3050
                                                                 malfunctions were        and 60.3051.
                                                                 reported, a statement
                                                                 that no deviations
                                                                 occurred during the
                                                                 reporting period;.
                                      ........................  vi. Highest and lowest   Sec.  Sec.   60.3050
                                                                 recorded 12-hour         and 60.3051.
                                                                 averages, as
                                                                 applicable, for carbon
                                                                 monoxide emissions and
                                                                 highest and lowest
                                                                 recorded 3-hour
                                                                 averages, as
                                                                 applicable, for each
                                                                 operating parameter
                                                                 recorded for the
                                                                 calendar year being
                                                                 reported;.
                                      ........................  vii. Information for     Sec.  Sec.   60.3050
                                                                 deviations or            and 60.3051.
                                                                 malfunctions recorded
                                                                 under Sec.
                                                                 60.2949(b)(6) and (c)
                                                                 through (e);.
                                      ........................  viii. If a performance   Sec.  Sec.   60.3050
                                                                 test was conducted       and 60.3051.
                                                                 during the reporting
                                                                 period, the results of
                                                                 the test;.
                                      ........................  ix. If a performance     Sec.  Sec.   60.3050
                                                                 test was not conducted   and 60.3051.
                                                                 during the reporting
                                                                 period, a statement
                                                                 that the requirements
                                                                 of Sec.   60.2934(a)
                                                                 or (b) were met; and.
                                      ........................  x. Documentation of      Sec.  Sec.   60.3050
                                                                 periods when all         and 60.3051.
                                                                 qualified OSWI unit
                                                                 operators were
                                                                 unavailable for more
                                                                 than 12 hours but less
                                                                 than 2 weeks.
4. Emission limitation or operating   a. By August 1 of that    i. Dates and times of    Sec.  Sec.   60.3052
 limit deviation report.               year for data collected   deviation;.              and 60.3053.
                                       during the first half
                                       of the calendar year.
                                       By February 1 of the
                                       following year for data
                                       collected during the
                                       second half of the
                                       calendar year
                                      ........................  ii. Averaged and         Sec.  Sec.   60.3052
                                                                 recorded data for        and 60.3053.
                                                                 those dates;.
                                      ........................  iii. Duration and        Sec.  Sec.   60.3052
                                                                 causes of each           and 60.3053.
                                                                 deviation and the
                                                                 corrective actions
                                                                 taken..
                                      ........................  iv. Copy of operating    Sec.  Sec.   60.3052
                                                                 limit monitoring data    and 60.3053.
                                                                 and any test reports;.
                                      ........................  v. Dates, times, and     Sec.  Sec.   60.3052
                                                                 causes for monitor       and 60.3053.
                                                                 downtime incidents;.
                                      ........................  vi. Whether each         Sec.  Sec.   60.3052
                                                                 deviation occurred       and 60.3053.
                                                                 during a period of
                                                                 startup, shutdown, or
                                                                 malfunction; and.
                                      ........................  vii. Dates, times, and   Sec.  Sec.   60.3052
                                                                 duration of any bypass   and 60.3053.
                                                                 of the control device.

5. Qualified operator deviation       a. Within 10 days of      i. Statement of cause    Sec.   60.3054(a)(1).
 notification.                         deviation                 of deviation;.
                                      ........................  ii. Description of       Sec.   60.3054(a)(1).
                                                                 efforts to have an
                                                                 accessible qualified
                                                                 operator; and.
                                      ........................  iii. The date a          Sec.   60.3054(a)(1).
                                                                 qualified operator
                                                                 will be accessible.
6. Qualified operation deviation      a. Every 4 weeks          i. Description of        Sec.   60.3054(a)(2).
 status report.                        following deviation       efforts to have an
                                                                 accessible qualified
                                                                 operator;.
                                      ........................  ii. The date a           Sec.   60.3054(a)(2).
                                                                 qualified operator
                                                                 will be accessible;
                                                                 and.
                                      ........................  iii. Request to          Sec.   60.3054(a)(2).
                                                                 continue operation.
7. Qualified operator deviation       a. Prior to resuming      i. Notification that     Sec.   60.3054(b).
 notification of resumed operation.    operation                 you are resuming
                                                                 operation.
----------------------------------------------------------------------------------------------------------------
Note: This table is only a summary, see the referenced sections of the rule for the complete requirements.

[FR Doc. 05-23716 Filed 12-15-05; 8:45 am]

BILLING CODE 6560-50-P