Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Revisions to the General Securities Sales Supervisor (Series 8) Examination, and the Corresponding Examination Specifications and Content Outline

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34842; File No. SR-Phlx-94-51]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the Philadelphia Stock Exchange, Inc. Relating to Revisions

to the General Securities Sales Supervisor (Series 8) Examination, and

the Corresponding Examination Specifications and Content Outline

October 14, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act'')\1\ notice is hereby given that on October 3, 1994, the

Philadelphia Stock Exchange, Inc. (``Phlx'' or ``Exchange'') filed with

the Securities and Exchange Commission (``Commission'') the proposed

rule change as described in Items I, II and III below, which Items have

been prepared by the Phlx. 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. Sec. 78s(b)(1) (1988).

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

of the Proposed Rule Change

The Phlx proposes, in conjunction with the other self-regulatory

organizations (``SROs''), to adopt and use a revised version of the

General Securities Sales Supervisor (``Series 8'') Examination,

examination specifications and content outline.\2\ The Phlx proposes to

incorporate references to this examination into its rules by adding

paragraph (d) to rule 748, Supervision.

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\2\For a detailed description of the revised Series 8

examination, specifications and content outline, see Securities

Exchange Act Release Nos. 34335 (July 8, 1994), 59 FR 35961 [File

No. SR-NYSE-94-23] (notice of proposed rule change relating to the

revision of the Series 8 examination content outline); and 34336

(July 8, 1994) 59 FR 35962 [File No. SR-NYSE-94-24] (notice of

proposed rule change relating to the revision of the Series 8

examination and specifications).

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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 Phlx 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 Phlx 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

The General Securities Sales Supervisor (``Series 8'') Examination

is an industry-wide qualification examination for securities sales

supervisors. The Series 8 examination is generally required under rules

of the self-regulatory organizations (``SROs'') for persons who are

engaged in the supervision of general securities branch offices (i.e.,

branch office managers) and of general securities registered

representatives. The Series 8 examination tests a candidate's knowledge

of securities industry rules and regulations and certain statutory

provisions applicable to general securities sales supervision. The

Series 8 examination specifications detail the areas covered by the

examination and break down the number of examination questions culled

from each area. The Series 8 content outline details the subject

coverage and question allocation of the examination. The content

outline reflects the revised content of the examination.

Revision of the Series 8 examination, specifications and content

outline was recently undertaken by an industry committee composed of

representatives from SROs (the New York Stock Exchange, the American

Stock Exchange, the Chicago Board Options Exchange, the Municipal

Securities Rulemaking Board, the National Association of Securities

Dealers and the Philadelphia Stock Exchange) and representatives from

broker-dealers, including branch office managers, compliance personnel

and corporate executives, in order to update the examination in view of

changes in relevant laws, rules and regulations, the development of new

products, and to reflect various changes in industry practices. The

committee reviewed the examination specifications, content areas and

item bank and developed new questions in new areas.

The revised examination continues to cover the areas of knowledge

required to supervise sales activities in securities, however, the

focus of the content of the examination has been shifted to concentrate

more closely on supervisory duties. Accordingly, certain questions have

been deleted which deal with routine calculations and basic product

knowledge and questions on new federal and SRO rules and regulations

have been incorporated into the exam, as well as questions on new

products, supervision and changes in industry practices. The revised

examination and specifications include coverage of these new areas. The

examination will remain a six-hour, two-part, 200 question examination.

The Phlx also proposes to adopt a new paragraph to Phlx Rule 748,

Supervision, to expressly incorporate a supervisory examination into

Exchange rules. Specifically, persons delegated supervisory

responsibility pursuant to Rule 748 (b) and (c) would be required by

proposed paragraph (d) to meet the Exchanges' qualification

requirements, including successful completion of a supervisory

examination deemed acceptable by the Exchange. This requirement is

substantially similar to existing provision of other exchanges.\3\

Currently, Rule 748 requires member or participant organizations to

supervise all registered representatives and each office, department or

business activity. In addition, a general partner or principal

executive officer must be designated to assume overall responsibility

for internal supervision of the organization and compliance with

securities laws and regulations, including establishing written

supervisory procedures delegating supervisory responsibilities and

instituting a supervisory review procedure.

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\3\See e.g., NYSE Rule 342(d) and Supplementary Material .13.

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With respect to qualifications for supervisory personnel, Rule 748

merely requires employees with delegated supervisory responsibility to

be ``qualified,'' and persons responsible for any group of employees to

``reasonably discharge'' those duties. The proposed new language is

intended to bridge this gap by expressly requiring supervisory

personnel to qualify with the Exchange by successfully completing the

appropriate examination, which will be indicated in the Exchange's

memorandum to its membership. The Exchange notes that although options

activity and personnel, including foreign currency options, are also

subject to Rule 748, additional supervisory requirements for option

accounts apply.\4\

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\4\See Phlx Rules 1024 and 1025.

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The other SRO participants will also file the revised examination

and specifications for approval by the SEC. The Exchange intends to

implement the new Series 8 content outline and examination jointly with

the other SROs after the Commission has approved the proposed rule

changes of all the other SROs.

The statutory basis for the Series 8 Examination lies in Section

6(c)(3)(B) of the Act. Under that Section, it is the Exchange's

responsibility to prescribe standards of training, experience and

competence for persons associated with Exchange members and member

organizations. Pursuant to this statutory obligation, the Exchange has

developed examinations that are administered to establish that persons

associated with Exchange members and member organizations have attained

specific levels of competence and knowledge.

The addition of new language to Phlx Rule 748 is also consistent

with Section 6(b)(5) in that it is designed to promote just and

equitable principles of trade, prevent fraudulent and manipulative acts

and practices, and protect investors and the public interest by

bolstering the Exchange's supervision rule through a qualification and

examination requirement for supervisory personnel.

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

The Phlx 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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants or Others

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 publication of this notice in the Federal

Register or within such other 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 self-regulatory organization consents, the Commission will:

(A) by order approve the 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. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.

Copies of the submission, all subsequent amendments, all written

statements with respect to the proposed rule change that are 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. Sec. 552, will be available for inspection and copying at

the Commission's Public Reference Room, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of the filing will also be available for

inspection and copying at the principal office of the Phlx. All

submissions should refer to File No. SR-Phlx-94-51 and should be

submitted by November 10, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\5\

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\5\17 CFR 200.30-3(a)(12) (1994).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-26056 Filed 10-19-94; 8:45 am]

BILLING CODE 8010-01-M