[Federal Register Volume 87, Number 63 (Friday, April 1, 2022)]
[Notices]
[Pages 19146-19152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06851]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94528; File No. SR-CboeBZX-2022-022]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Rules Relating to the Continuing Education for Registered Persons 
and Move Those Rules From Interpretation and Policy .02 of Rule 2.5 to 
Proposed Rule 2.16 and To Amend Related Registration Requirements 
Provided Under Various Interpretations and Policies of Rule 2.5

March 28, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 15, 2022, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the ``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its rules relating to the Continuing 
Education for Registered Persons and move those rules from 
Interpretation and Policy .02 of Rule 2.5 to proposed Rule 2.16 and to 
amend related registration requirements provided under various 
Interpretations and Policies of Rule 2.5. The text of the proposed rule 
change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
(i) Existing CE Program Background
    The continuing education program for registered persons of broker-
dealers (``CE Program'') generally requires registered persons to 
complete continuing education consisting of a Regulatory Element. The 
Regulatory Element is delivered through a web-based delivery method 
called ``CE Online,'' which is administered through the Financial 
Industry Regulatory Authority, Inc. (``FINRA'') online continuing 
education system, and focuses on regulatory requirements and industry 
standards. The CE Program for registered persons is currently codified 
under Interpretation and Policy .02 of Exchange Rule 2.5. The Exchange 
now proposes to expand the CE Program to adopt rules pertaining to a 
Firm Element component of continuing education. The Firm Element would 
be provided by each firm and focus on securities products, services and 
strategies the firm offers, firm policies and industry trends. In 
addition, the Exchange proposes other changes to amend, move, 
reorganize and enhance its rules regarding its CE Program, as described 
below.
    The Commission recently approved a proposal submitted by FINRA 
relating to its CE Program.\5\ The Exchange

[[Page 19147]]

understands that other exchanges have or will propose similar 
amendments based on FINRA's rule changes. Therefore, the Exchange 
proposes to amend and enhance its own CE Program as provided under 
proposed Rule 2.16 and its related registration requirements as 
provided under various Interpretations and Policies of Rule 2.5 in 
response to FINRA's amended CE Program and to facilitate compliance 
with the Exchange's CE Program requirements by members of multiple 
exchanges. The Exchange proposes to implement the proposed rule changes 
to align with FINRA's CE Program implementation dates.\6\ Specifically, 
the proposed implementation dates are as follows: Changes relating to 
proposed Rule 2.16(c) (Continuing Education Program for Persons 
Maintaining Their Qualification Following the Termination of a 
Registration Category) will become effective March 15, 2022; changes to 
recognize waiver of examination programs for individuals working for a 
financial services industry affiliate of a member that are administered 
by the Exchange's affiliates, Cboe Exchange, Inc. (``Cboe'') and Cboe 
C2 Exchange, Inc. (``C2''), and by FINRA (referred to as the ``FSA 
waiver programs'' or ``FSAWPs'') will become effective March 15, 2022; 
and all other changes, including changes reflected in proposed Rules 
2.16(a) (Regulatory Element) \7\ and 2.16(b) (Firm Element) will become 
effective January 1, 2023.
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    \5\ See Securities and Exchange Act No. 93097 (September 21, 
2021) 86 FR 53358 (September 27, 2021) (SR-FINRA-2021-015) (Order 
Approving a Proposed Rule Change To Amend FINRA Rules 1210 
(Registration Requirements) and 1240 (Continuing Education 
Requirements)).
    \6\ See FINRA Regulatory Notice 21-41 (November 17, 2021).
    \7\ An individual's initial annual Regulatory Element due date 
will be December 31, 2023.
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a. Regulatory Element
    Interpretation and Policy .02(a) of Rule 2.5 currently requires a 
registered person to complete the applicable Regulatory Element 
initially within 120 days after the person's second registration 
anniversary date and, thereafter, within 120 days after every third 
registration anniversary date.\8\ The Exchange may extend these time 
frames for good cause shown.\9\ Unless otherwise determined, any 
registered persons who have not completed the Regulatory Element of the 
program within the prescribed time frames will have their 
registration(s) deemed inactive and will be designated as ``CE 
inactive'' in the CRD system until the requirements of the Regulatory 
Element have been satisfied.\10\ A CE inactive person is prohibited 
from performing, or being compensated for, any activities requiring 
registration, including supervision. Moreover, if registered persons 
remain CE inactive for two consecutive years, they must requalify by 
retaking required examinations (or obtain a waiver of the applicable 
qualification examinations).\11\
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    \8\ See Rule 2.5.02(a). An individual's registration anniversary 
date is generally the date they initially registered in the Central 
Registration Depository (``CRD[supreg]'') system. However, an 
individual's registration anniversary date would be reset if the 
individual has been out of the industry for two or more years and is 
required to requalify by examination, or obtain an examination 
waiver, in order to reregister. An individual's registration 
anniversary date would also be reset if the individual obtains a 
conditional examination waiver that requires them to complete the 
Regulatory Element by a specified date. Non-registered individuals 
who are participating in the waiver program under proposed Rule 
2.5.07 (Waiver of Examinations for Individuals Working for a 
Financial Services Industry Affiliate of a Member) (``FSAWP 
participants'') are also subject to the Regulatory Element. See also 
proposed Rule 2.16(a)(5) (Definition of Covered Person). The 
Regulatory Element for FSAWP participants correlates to their most 
recent registration(s), and it must be completed based on the same 
cycle had they remained registered. FSAWP participants are eligible 
for a single, fixed seven-year waiver period from the date of their 
initial designation, subject to specified conditions. Registered 
persons who become subject to a significant disciplinary action, as 
specified in proposed Rule 2.16(a)(2) (Disciplinary Actions), may be 
required to retake the Regulatory Element within 120 days of the 
effective date of the disciplinary action, if they remain 
registered. Further, their cycle for participation in the Regulatory 
Element may be adjusted to reflect the effective date of the 
disciplinary action rather than their registration anniversary date.
    \9\ See Rule 2.5.02(b).
    \10\ Supra note 8. Individuals must complete the entire 
Regulatory Element session to be considered to have ``completed'' 
the Regulatory Element; partial completion is the same as non-
completion.
    \11\ See Rule 2.5.02(b). This CE inactive two-year period is 
calculated from the date such persons become CE inactive, and it 
continues to run regardless of whether they terminate their 
registrations before the end of the two-year period. Therefore, if 
registered persons terminate their registrations while in a CE 
inactive status, they must satisfy all outstanding Regulatory 
Element prior to the end of the CE inactive two-year period in order 
to reregister with a Member without having to requalify by 
examination or having to obtain an examination waiver.
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    The Regulatory Element currently consists of a subprogram for 
registered persons generally, and a subprogram for principals and 
supervisors.\12\ While some of the current Regulatory Element content 
is unique to particular registration categories, most of the content 
has broad application to both representatives and principals.\13\ The 
Regulatory Element was originally designed at a time when most 
individuals had to complete the Regulatory Element at a test center, 
and its design was shaped by the limitations of the test center-based 
delivery model. In 2015, the delivery of the Regulatory Element was 
transitioned to an online platform, referred to above as CE Online, 
which allows individuals to complete the content online at a location 
of their choosing, including their private residence. This online 
delivery provides for much greater flexibility in updating content in a 
timelier fashion, developing content tailored to each registration 
category and presenting the material in an optimal learning format.
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    \12\ The S101 (General Program for Registered Persons) and the 
S201 (Registered Principals and Supervisors).
    \13\ The current content is presented in a single format leading 
individuals through a case that provides a story depicting 
situations that they may encounter in the course of their work.
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b. Firm Element
    As noted above, Exchange Rules do not currently provide for a Firm 
Element of the CE Program. However, as discussed in more detail further 
below, the Exchange is now proposing to introduce a Firm Element, which 
would be modeled after FINRA Rule 1240 and Cboe Rule 3.33(c).
c. Termination of a Registration
    Currently, individuals whose registrations as representatives or 
principals have been terminated for two or more years may reregister as 
representatives or principals only if they requalify by retaking and 
passing the applicable representative- or principal-level examination 
or if they obtain a waiver of such examination(s) (the ``two-year 
qualification period'').\14\ The two-year qualification period was 
intended to ensure that individuals who

[[Page 19148]]

reregister are relatively current on their regulatory and securities 
knowledge.
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    \14\ See Rule 2.5.02(d). The two-year qualification period is 
calculated from the date individuals terminate their registration 
and the date the Exchange receives a new application for 
registration. The two-year qualification period does not apply to 
individuals who terminate a limited registration category that is a 
subset of a broader registration category for which they remain 
qualified. Such individuals have the option of reregistering in the 
more limited registration category without having to requalify by 
examination or obtain an examination waiver so long as they continue 
to remain qualified for the broader registration category. Further, 
the two-year qualification period only applies to the 
representative- and principal-level examinations; it does not extend 
to the Securities Industry Essentials (``SIE'') examination. The SIE 
examination is valid for four years, but having a valid SIE 
examination alone does not qualify an individual for registration as 
a representative or principal. Individuals whose registrations as 
representatives or principals have been revoked pursuant to Exchange 
Rule 8.11 (Judgment and Sanction) may only requalify by retaking the 
applicable representative- or principal-level examination in order 
to reregister as representatives or principals, in addition to 
satisfying the eligibility conditions for association with a firm. 
Waivers are granted on a case-by-case basis under Rule 2.5.01(b).
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(ii) Proposed Rule Change
    After extensive work with the Securities Industry/Regulatory 
Council on Continuing Education (``CE Council''), FINRA, other Self-
Regulatory Organizations and industry participants, the Exchange 
proposes the following changes to the Exchange's CE Program under Rule 
2.5 and proposed Rule 2.16 to align with FINRA Rule 1240 and Cboe Rule 
3.33.
a. Transition to Annual Regulatory Element for Each Registration 
Category
    As noted above, currently, the Regulatory Element generally must be 
completed every three years, and the content is broad in nature. Based 
on changes in technology and learning theory, the Regulatory Element 
content can be updated and delivered in a timelier fashion and tailored 
to each registration category, which would further the goals of the 
Regulatory Element.\15\ Therefore, to provide registered persons with 
more timely and relevant training on significant regulatory 
developments, the Exchange proposes adopting Rule 2.16(a) to require 
registered persons to complete the Regulatory Element annually by 
December 31.\16\ The proposed amendment would also require registered 
persons to complete Regulatory Element content for each representative 
or principal registration category that they hold, which would also 
further the goals of the Regulatory Element.\17\
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    \15\ When other self-regulatory organizations' CE Programs were 
originally adopted in 1995, registered persons were required to 
complete the Regulatory Element on their second, fifth and 10th 
registration anniversary dates. See Securities Exchange Act Release 
No. 35341 (February 8, 1995), 60 FR 8426 (February 14, 1995) (Order 
Approving File Nos. SR-AMEX-94-59; SR-CBOE-94-49; SR-CHX-94-27; SR-
MSRB-94-17; SR-NASD-94-72; SR-NYSE-94-43; SR-PSE-94-35; and SR-PHLX-
94-52). The change to the current three-year cycle in the other 
self-regulatory organizations' CE Programs was made in 1998 to 
provide registered persons more timely and effective training, 
consistent with the overall purpose of the Regulatory Element. See 
Securities Exchange Act Release No. 39712 (March 3, 1998), 63 FR 
11939 (March 11, 1998) (Order Approving File Nos. SR-CBOE-97-68; SR-
MSRB-98-02; SR-NASD-98-03; and SR-NYSE-97-33).
    \16\ See proposed Rules 2.16(a)(1) and (a)(4).
    \17\ See proposed Rules 2.5.04 and 2.16(a)(1).
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    Under the proposed rule change, Members would have the flexibility 
to require their registered persons to complete the Regulatory Element 
sooner than December 31, which would allow Members to coordinate the 
timing of the Regulatory Element with other training requirements, 
including the Firm Element.\18\ For example, a Member could require its 
registered persons to complete both their Regulatory Element and Firm 
Element by October 1 of each year.
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    \18\ See proposed Rules 2.16(a)(1) and (a)(4).
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    Individuals who would be registering as a representative or 
principal for the first time on or after the implementation date of the 
proposed rule change would be required to complete their initial 
Regulatory Element for that registration category in the next calendar 
year following their registration.\19\ In addition, subject to 
specified conditions, individuals who would be reregistering as a 
representative or principal on or after the implementation date of the 
proposed rule change would also be required to complete their initial 
Regulatory Element for that registration category in the next calendar 
year following their reregistration.\20\
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    \19\ See proposed Rule 2.16(a)(1).
    \20\ See proposed Rule 2.16(a)(4).
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    Consistent with current requirements, individuals who fail to 
complete their Regulatory Element within the prescribed period would be 
automatically designated as CE inactive.\21\ However, the proposed rule 
change preserves the Exchange's ability to extend the time by which a 
registered person must complete the Regulatory Element for good cause 
shown.\22\
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    \21\ See proposed Rule 2.16(a)(2).
    \22\ Id. The proposed rule change provides that the request for 
an extension of time must be in writing and include supporting 
documentation, which is consistent with current practice.
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    The Exchange also proposes adopting Rule 2.16(a) to provide that: 
(1) Individuals who are designated as CE inactive would be required to 
complete all of their pending and upcoming annual Regulatory Element, 
including any annual Regulatory Element that becomes due during their 
CE inactive period, to return to active status; \23\ (2) the two-year 
CE inactive period is calculated from the date individuals become CE 
inactive, and it continues to run regardless of whether individuals 
terminate their registrations; \24\ (3) individuals who become subject 
to a significant disciplinary action may be required to complete 
assigned continuing education content as prescribed by the Exchange; 
\25\ (4) individuals who have not completed any Regulatory Element 
content for a registration category in the calendar year(s) prior to 
reregistering would not be approved for registration for that category 
until they complete that Regulatory Element content, pass an 
examination for that registration category or obtain an unconditional 
examination waiver for that registration category, whichever is 
applicable; \26\ and (5) the Regulatory Element requirements apply to 
individuals who are registered, or in the process of registering, as a 
representative or principal.\27\
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    \23\ Id.
    \24\ Id.
    \25\ Id.
    \26\ See proposed Rule 3.33(a)(4).
    \27\ See proposed Rule 3.33(a)(5).
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    Under the proposed rule change, the amount of content that 
registered persons would be required to complete in a three-year, 
annual cycle for a particular registration category is expected to be 
comparable to what most registered persons are currently completing 
every three years. In some years, there may be more required content 
for some registration categories depending on the volume of rule 
changes and regulatory issues. In addition, an individual who holds 
multiple registrations may be required to complete additional content 
compared to an individual who holds a single registration because, as 
noted above, individuals would be required to complete content specific 
to each registration category that they hold. However, individuals with 
multiple registrations would not be subject to duplicative regulatory 
content in any given year. The more common registration combinations 
would likely share much of their relevant regulatory content each year. 
For example, individuals registered as General Securities 
Representatives and General Securities Principals would receive the 
same content as individuals solely registered as General Securities 
Representatives, supplemented with a likely smaller amount of 
supervisory-specific content on the same topics. The less common 
registration combinations may result in less topic overlap and more 
content overall.
b. Adoption of Firm Element, Recognition of Other Training Requirements 
for Firm Element, and Application of Firm Element to Covered Registered 
Persons
    The Exchange proposes to adopt proposed Rule 2.16(b) to include a 
Firm Element component for its CE Program that aligns with Cboe Rule 
3.33(b) and FINRA Rule 1240(b). The proposed rule would require Members 
to maintain a continuing and current education program for its 
registered persons to enhance their securities knowledge, skills and 
professionalism. At a minimum, each Member would be required to at 
least annually evaluate and prioritize its training needs and develop a 
written training plan. The

[[Page 19149]]

plan must take into consideration the Member's size, organizational 
structure, and scope of business activities, as well as regulatory 
developments and the performance of registered persons in the 
Regulatory Element. If a Member's analysis determines a need for 
supervisory training for persons with supervisory responsibilities such 
training must be included in the Member's training plan. The proposed 
rule would also require that programs used to implement a Member's 
training plan must be appropriate for the business of the Member and, 
at a minimum, must cover training topics related to the role, 
activities or responsibilities of the registered person and to 
professional responsibility. In addition, the proposed rule would 
provide that each Member must administer its continuing education Firm 
Element program in accordance with its annual evaluation and written 
plan and must maintain records documenting the content of the programs 
and completion of the programs by registered persons.
    To align the Firm Element requirement with other required training, 
proposed Rule 2.16(b) would also expressly allow Members to consider 
training relating to the AML compliance program and the annual 
compliance meeting toward satisfying an individual's annual Firm 
Element requirement.\28\ The Exchange also proposes to apply the Firm 
Element requirement to ``covered registered persons,'' which would 
include any person registered with a Member, including person who is 
permissively registered as a representative or principle pursuant to 
proposed Rule 2.5.08, as discussed below, thereby aligning the 
description of ``covered registered persons'' in the Firm Element 
requirement with the description of ``covered persons'' in the 
Regulatory Element requirement.\29\
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    \28\ See proposed Rule 2.16(b)(2)(D).
    \29\ The group of persons who may be considered a ``covered 
registered person'' under the Firm Element provisions in proposed 
Rule 2.16(b)(1) is a subset of the group of persons who may be 
considered a ``covered person'' under the Regulatory Element 
provisions in proposed Rule 2.15(a)(5).
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c. Maintenance of Qualification After Termination of Registration
    The Exchange proposes to adopt Rules 2.16(c), 2.16.01, and 2.16.02 
to provide eligible individuals who terminate any of their 
representative or principal registrations the option of maintaining 
their qualification for any of the terminated registrations by 
completing continuing education. The proposed rule change would not 
eliminate the two-year qualification period. Rather, it would provide 
such individuals an alternative means of staying current on their 
regulatory and securities knowledge following the termination of a 
registration(s). Eligible individuals who elect not to participate in 
the proposed continuing education program would continue to be subject 
to the current two-year qualification period. The proposed rule change 
is generally aligned with other professional continuing education 
programs that allow individuals to maintain their qualification to work 
in their respective fields during a period of absence from their 
careers (including an absence of more than two years) by satisfying 
continuing education requirements for their credential.
    The proposed rule change would impose the following conditions and 
limitations:
     Individuals would be required to be registered in the 
terminated registration category for at least one year immediately 
prior to the termination of that category; \30\
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    \30\ See proposed Rule 2.16(c)(1).
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     individuals could elect to participate when they terminate 
a registration or within two years from the termination of a 
registration; \31\
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    \31\ See proposed Rule 2.16(c)(2).
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     individuals would be required to complete annually all 
prescribed continuing education; \32\
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    \32\ See proposed Rule 2.16(c)(3). However, upon a participant's 
request and for good cause shown, the Exchange would have the 
ability to grant an extension of time for the participant to 
complete the prescribed continuing education. A participant who is 
also a registered person must directly request an extension of the 
prescribed continuing education from the Exchange.
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     individuals would have a maximum of five years in which to 
reregister; \33\
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    \33\ See proposed Rule 2.16(c).
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     individuals who have been CE inactive for two consecutive 
years, or who become CE inactive for two consecutive years during their 
participation, would not be eligible to participate or continue; \34\ 
and
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    \34\ See proposed Rule 2.16(c)(4) and (c)(5).
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     individuals who are subject to a statutory 
disqualification, or who become subject to a statutory disqualification 
following the termination of their registration or during their 
participation, would not be eligible to participate or continue.\35\
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    \35\ See proposed Rules 2.16(c)(1) and (c)(6). Individuals who 
are subject to a statutory disqualification would not be eligible to 
enter the proposed continuing education program. Individuals who 
become subject to a statutory disqualification while participating 
in the proposed continuing education program would not be eligible 
to continue in the program. Further, any content completed by such 
participants would be retroactively nullified upon disclosure of the 
statutory disqualification. The following example illustrates the 
application of the proposed rule change to individuals who become 
subject to a statutory disqualification while participating in the 
proposed continuing education program. Individual A participates in 
the proposed continuing education program for four years and 
completes the prescribed content for each of those years. During 
year five of his participation, he becomes subject to a statutory 
disqualification resulting from a foreign regulatory action. In that 
same year, the Exchange receives a Form U4 submitted by a member on 
behalf of Individual A requesting registration with the Exchange. 
The Form U4 discloses the statutory disqualification event. The 
Exchange would then retroactively nullify any content that 
Individual A completed while participating in the proposed 
continuing education program. Therefore, in this example, in order 
to become registered with the Exchange, he would be required to 
requalify by examination. This would be in addition to satisfying 
the eligibility conditions for association with a Member. See also 
Exchange Act Sections 3(a)(39) and 15(b)(4).
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    The proposed rule change also includes a look-back provision that 
would, subject to specified conditions, extend the proposed option for 
maintaining qualifications following a registration category 
termination to (i) individuals who have been registered as a 
representative or principal within two years immediately prior to the 
March 15, 2022 implementation date of the proposed rule change; and 
(ii) individuals who have been FSWAP participants immediately prior to 
the March 15, 2022 implementation date of the proposed rule change.\36\ 
With respect to the FSAWP, the Exchange itself does not have an FSW 
waiver program. However, the Exchange proposes to recognize waivers 
granted to individuals who are designated as participants in, and 
satisfying the conditions of, the FSW waiver program(s) of Cboe, C2 
and/or FINRA, and also to make the look-back provision for the new 
maintaining qualifications requirements available to individuals who 
are participants in the FSA waiver programs of Cboe, C2 and/or FINRA 
immediately preceding March 15, 2022. The Exchange understands that, 
effective March 15, 2022, Cboe, C2 and FINRA do not plan to accept any 
new initial designations for individuals under their respective FSA 
waiver programs. Thus, what will remain of those programs will only be 
applicable to pre-existing participants. The Exchange also understands 
that,

[[Page 19150]]

ultimately, the FSA waiver programs will expire in favor of the 
maintenance of qualification requirements under the Cboe, C2 and FINRA 
Rules, for which the Exchange's maintenance of qualification 
requirements under proposed are modeled.\37\
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    \36\ See proposed Rule 2.16.01. Such individuals would be 
required to elect whether to participate by the March 15, 2022 
implementation date of the proposed rule change. If such individuals 
elect to participate, they would be required to complete their 
initial annual content by the end of 2022 (i.e., the end of the 
calendar year in which the proposed rule change is implemented). In 
addition, if such individuals elect to participate, their initial 
participation period would be adjusted based on the date that their 
registration was terminated.
    \37\ See proposed Rules 2.5.07 and 2.16.01.
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    In addition, the proposed rule change includes a re-eligibility 
provision that would allow individuals to regain eligibility to 
participate each time they reregister with a Member for a period of at 
least one year and subsequently terminate their registration, provided 
that they satisfy the other participation conditions and 
limitations.\38\ The proposed rule change will have several important 
benefits. It will provide individuals with flexibility to address life 
and career events and necessary absences from registered functions 
without having to requalify each time. It will also incentivize them to 
stay current on their respective securities industry knowledge 
following the termination of any of their registrations. The continuing 
education under the proposed option will be as rigorous as the 
continuing education of registered persons, which promotes investor 
protection. Further, the proposed rule change will enhance diversity 
and inclusion in the securities industry by attracting and retaining a 
broader and diverse group of professionals.
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    \38\ See proposed Rule 2.16.02.
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    Significantly, the proposed rule change will be of particular value 
to women, who continue to be the primary caregivers for children and 
aging family members and, as a result, are likely to be absent from the 
industry for longer periods.\39\ In addition, the proposed rule change 
will provide longer-term relief for women, individuals with low incomes 
and other populations, including older workers, who are at a higher 
risk of a job loss during certain economic downturns and who are likely 
to remain unemployed for longer periods.\40\
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    \39\ See The Female Face of Family Caregiving (November 2018), 
available at https://www.nationalpartnership.org/our-work/resources/economic-justice/femaleface-family-caregiving.pdf.
    \40\ See The COVID-19 Recession is the Most Unequal in Modern 
U.S. History (September 30, 2020), available at https://www.washingtonpost.com/graphics/2020/business/coronavirus-recessionequality/ and Unemployment's Toll on Older Workers Is Worst 
in Half a Century (October 21, 2020), available at https://www.aarp.org/work/working-at-50-plus/info-2020/pandemic-unemployment-older-workers/.
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d. Other Changes to Exchange Rule 2.5
    The Exchange proposes to adopt Rules 2.5.05 through 2.5.07 to 
conform to Cboe Rules 3.30.07 through 3.30.09, respectively, and to 
adopt Rule 2.5.08 to conform to Cboe Rule 3.30.02. Further, based on 
the Exchange's proposal to move the subject matter of current Rule 
2.5.02 to proposed Rule 2.16, the Exchange also proposes to renumber 
various Interpretations and Policies under Rule 2.5 accordingly. The 
Exchange proposes to adopt Rule 2.5.05 to provide that all registered 
representatives and principals must satisfy the regulatory element of 
continuing education. Specifically, proposed Rule 2.5.05 provides that 
all registered representatives and principals, including those 
individuals who solely maintain permissive registrations pursuant to 
proposed Rule 2.5.08 shall satisfy the Regulatory Element of continuing 
education for each representative or principal registration category 
that they hold as specified in Rule 2.5.01(i). If a person registered 
with a Member has a continuing education deficiency with respect to 
that registration as provided under proposed Rule 2.16, such person 
shall not be permitted to be registered in another registration 
category under Rule 2.5.01(i) with that Member or to be registered in 
any registration category under Rule 2.5.01(i), with another Member, 
until the person has satisfied the deficiency.
    The Exchange also proposes to adopt Rule 2.5.06 to address lapses 
of registrations and expirations of the SIE. Specifically, proposed 
Rule 2.5.06 would provide that any person who was last registered in a 
representative registration category two or more years immediately 
preceding the date of receipt by the Exchange of a new application for 
registration in that registration category shall be required to pass a 
representative qualification examination appropriate to that 
registration category as specified in Rule 2.5.01(i), unless the person 
has maintained his or her qualification status for that registration 
category in accordance with proposed Rule 2.16(c) or as otherwise 
permitted by the Exchange. In addition, any person who last passed the 
SIE or who was last registered as a representative, whichever occurred 
last, four or more years immediately preceding the date of receipt by 
the Exchange of a new application for registration as a representative 
shall be required to pass the SIE in addition to a representative 
qualification examination appropriate to his or her category of 
registration as specified in Rule 2.5.01(i). Any person who was last 
registered in a principal registration category two or more years 
immediately preceding the date of receipt by the Exchange of a new 
application for registration in that registration category shall be 
required to pass a principal qualification examination appropriate to 
that registration category as specified in Rule 2.5.01(i), unless the 
person has maintained his or her qualification status for the 
registration category in accordance with proposed Rule 2.16(c) or as 
otherwise permitted by the Exchange. Any person whose registration has 
been revoked and any person who has a continuing education deficiency 
for a period of two years as provided under Rule 2.5.01(i) shall be 
required to pass a representative or principal qualification 
examination appropriate to his or her category of registration as 
specified in Rule 2.5.01(i), to be eligible for registration with the 
Exchange. Finally, for purposes of Rule 2.5.06, an application shall 
not be considered to have been received by the Exchange if that 
application does not result in a registration.
    The Exchange proposes to adopt Rule 2.5.07 which, as discussed 
above, would recognize a waiver for participants in the financial 
services industry affiliate waiver program(s) of Cboe, C2 and/or FINRA. 
Specifically, Rule 2.5.07 would provide that upon request by a Member, 
the Exchange shall waive the applicable qualification examination(s) 
for an individual designated as a participant in, and satisfying the 
conditions of, the FSA waiver program(s) of Cboe under its Rule 
3.30.09, C2 under its Chapter 3, Section B, and/or FINRA under its Rule 
2110.09.
    By way of background, very generally, these FSA waiver programs 
provide that a member of Cboe, C2 or FINRA, respectively, may request 
that the exchange/FINRA waive the applicable qualification 
examination(s) for an individual designated with it as working for a 
financial services industry affiliate of a member if the following 
conditions are met:
     Prior to the individual's initial designation, the 
individual was registered as a representative or principal with Cboe, 
C2 or FINRA, as applicable, for a total of five years within the most 
recent 10 year period, including for the most recent year with the 
member that initially designated the individual;
     The waiver request is made within seven years of the 
individual's initial designation;
     The initial designation and any subsequent designation(s) 
were made concurrently with the filing of the individual's related Form 
U5;
     The individual continuously worked for the financial 
services

[[Page 19151]]

industry affiliate(s) of a member since the individual's last Form U5 
filing;
     The individual has complied with the Regulatory Element of 
continuing education as specified in the Cboe, C2 or FINRA Rules, as 
applicable; and
     The individual does not have any pending or adverse 
regulatory matters, or terminations, that are reportable on the Form 
U4, and has not otherwise been subject to a statutory disqualification 
as defined in Section 3(a)(39) of the Exchange Act while the individual 
was designated as eligible for a waiver.
    As used in Rule 2.5.07, a ``financial services industry affiliate'' 
is a legal entity that controls, is controlled by or is under common 
control with a member and is regulated by the SEC, CFTC, state 
securities authorities, federal or state banking authorities, state 
insurance authorities, or substantially equivalent foreign regulatory 
authorities.
    Last, the Exchange proposes to adopt Rule 2.5.08, which would 
provide for permissive registrations. Specifically, proposed Rule 
2.5.08 would provide that a Member may make application for or maintain 
the registration as a representative or principal of any associated 
person of a Member and any individual engaged in the securities 
business of a foreign securities affiliate or subsidiary of the Member. 
Individuals maintaining such permissive registrations shall be 
considered registered persons and subject to all Exchange rules, to the 
extent relevant to their activities. Consistent with the requirements 
of the Exchange's supervision rules, Members shall have adequate 
supervisory systems and procedures reasonably designed to ensure that 
individuals with permissive registrations do not act outside the scope 
of their assigned functions. With respect to an individual who solely 
maintains a permissive registration(s), the individual's direct 
supervisor shall not be required to be a registered person. However, 
for purposes of compliance with the Exchange's supervision rules, a 
Member shall assign a registered supervisor who shall be responsible 
for periodically contacting such individual's direct supervisor to 
verify that the individual is not acting outside the scope of his or 
her assigned functions. If such individual is permissively registered 
as a representative, the registered supervisor shall be registered as a 
representative or principal. If the individual is permissively 
registered as a principal, the registered supervisor shall be 
registered as a principal. Moreover, the registered supervisor of an 
individual who solely maintains a permissive registration(s) shall not 
be required to be registered in the same representative or principal 
registration category as the permissively-registered individual.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\41\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \42\ requirements that the rules 
of an exchange be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \43\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \41\ 15 U.S.C. 78f(b).
    \42\ 15 U.S.C. 78f(b)(5).
    \43\ Id.
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    The Exchange believes that the proposal to move to an annual 
Regulatory Element training with content tailored to an individual's 
representative or principal registration categories is designed to 
protect investors and is in the public interest. As noted in the order 
approving the similar changes to the FINRA CE Program,\44\ the 
Commission found that ``the rule is reasonably designed to minimize the 
potential adverse impact on firms and their registered persons. 
Furthermore, increasing the timeliness of registered persons' training, 
as well as the relevance of the training's content by tailoring it to 
each registration category that they hold, would enhance their 
education and compliance with their regulatory obligations.''
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    \44\ Supra note 5.
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    The Exchange believes that the proposed changes to the Regulatory 
Element and the proposal to adopt the Firm Element portions of its CE 
Program will ensure that all registered persons receive timely and 
relevant training, which will, in turn, enhance compliance and investor 
protection. Further, the Exchange believes that establishing a path for 
individuals to maintain their qualification following the termination 
of a registration will reduce unnecessary impediments to 
requalification and promote greater diversity and inclusion in the 
securities industry without diminishing investor protection.
    The Exchange also believes that the proposed rule change will bring 
consistency and uniformity with Cboe's and FINRA's recently amended CE 
Program rules, which will, in turn, assist Members and their associated 
persons in complying with these rules and improve regulatory 
efficiency. The proposed rule changes conform certain of the Exchange's 
continuing education and registration rules to align them with rules of 
Cboe, which will, in turn, prevent unnecessary regulatory burdens and 
to promote efficient administration of the rules. Finally, the proposed 
amendment also makes minor updates and corrections to the Exchange's 
rules which improve readability.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule changes which are, in all material respects, based 
upon and substantially similar to, recent rule changes adopted by FINRA 
and Cboe, will reduce the regulatory burden placed on market 
participants engaged in trading activities across different markets. 
The Exchange believes that the harmonization of the CE Program 
requirements across the various markets will reduce burdens on 
competition by removing impediments to participation in the national 
market system and promoting competition among participants across the 
multiple national securities exchanges.

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on

[[Page 19152]]

which it was filed, or such shorter time as the Commission may 
designate, it has become effective pursuant to Section 19(b)(3)(A) of 
the Act \45\ and Rule 19b-4(f)(6) thereunder.\46\
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    \45\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \46\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay so that this proposed 
rule change may become operative immediately upon filing. In addition, 
Rule 19b-4(f)(6)(iii) \47\ requires a self-regulatory organization to 
give the Commission written notice of its intent to file a proposed 
rule change under that subsection at least five business days prior to 
the date of filing, or such shorter time as designated by the 
Commission. The Exchange has provided such notice.
---------------------------------------------------------------------------

    \47\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    Waiver of the 30-day operative delay would allow the Exchange to 
implement proposed changes to its Continuing Education Rules by March 
15, 2022 to coincide with one of FINRA's announced implementation 
dates, thereby eliminating the possibility of a significant regulatory 
gap between the FINRA and the Exchange rules, providing more uniform 
standards across the securities industry, and helping to avoid 
confusion for Members of the Exchange that are also FINRA members. For 
this reason, the Commission believes that waiver of the 30-day 
operative delay for this proposal is consistent with the protection of 
investors and the public interest. Accordingly, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\48\
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    \48\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2022-022 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBZX-2022-022. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change.
    Persons submitting comments are cautioned that we do not redact or 
edit personal identifying information from comment submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-CboeBZX-2022-
022 and should be submitted on or before April 22, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
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    \49\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06851 Filed 3-31-22; 8:45 am]
BILLING CODE 8011-01-P


