[Federal Register Volume 87, Number 84 (Monday, May 2, 2022)]
[Notices]
[Pages 25683-25689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09312]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94794; File No. SR-BOX-2022-16]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend IM-2040-
3, IM-2040-5 and Establish BOX Rule 2130 (Continuing Education Program 
for Persons Maintaining Their Qualification Following the Termination 
of a Registration Category) and IM-2130-1

April 26, 2022.
    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 April 13, 2022, BOX Exchange LLC (the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the self-regulatory organization. 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.
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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 BOX IM-2040-5 and establish BOX Rule 
2130 (Continuing Education Program for Persons Maintaining Their 
Qualification Following the Termination of a Registration Category) and 
IM-2130-1 to require that the Regulatory Element of continuing 
education be completed annually rather than every three years and 
provide a path through continuing education for individuals to maintain 
their qualification following the termination of a registration. The 
Exchange also proposes to amend its manual signature requirement in IM-
2040-3. The text of the proposed rule change is available from the 
principal office of the Exchange, at the Commission's Public Reference 
Room and also on the Exchange's internet website at http://boxoptions.com.

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 self-regulatory organization 
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 self-regulatory organization 
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
    The Exchange proposes to amend IM-2040-5 and establish BOX Rule 
2130 (Continuing Education Program for Persons Maintaining Their 
Qualification Following the Termination of a Registration Category) to 
amend its continuing education requirements. This is a conforming 
filing that is based on a filing submitted by the Financial Industry 
Regulatory Authority, Inc. (``FINRA''), and is intended to harmonize 
the Exchange's continuing education rules with those of FINRA so as to 
promote uniform standards across the securities industry.\3\ The 
Exchange also proposes to amend its manual signature requirements in 
IM-2040-3 to align with changes FINRA has made to similar rules.\4\ 
Each change is discussed in detail below.
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    \3\ See Securities Exchange Act Release No. 93097 (September 21, 
2021), 86 FR 53358 (September 27, 2021) (SR-FINRA-2021-015) (``FINRA 
Continuing Education Rule Change'').
    \4\ See Securities Exchange Release No. 91262 (March 5, 2021), 
86 FR 13935 (March 11, 2021) (SR-FINRA-2021-003).
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    The proposed changes are based on the changes approved by the 
Commission in the approval order for SR-FINRA-2021-015 and as noticed 
in SR-FINRA-2021-003.\5\ The Exchange is proposing to adopt such 
changes substantially in the same form as proposed by FINRA, with the 
exception of differences necessary to conform to the Exchange's 
existing rules. The Exchange has excluded changes in 1240(b) (Firm 
Element) \6\ as the

[[Page 25684]]

Exchange does not currently have provisions analogous within its Rule 
Book. The Exchange has also omitted cross-references and rules that are 
applicable to FINRA members but not to Exchange members.
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    \5\ See supra notes 3 and 4.
    \6\ The Firm Element of the FINRA Continuing Education (``CE'') 
Program was adopted in 1995 and requires broker-dealers to establish 
a formal training program to keep covered registered persons up to 
date on job and product-related subjects. Each broker-dealer must 
administer its Firm Element CE Program in accordance with its annual 
Needs Analysis and Written Training Plan and maintain records 
documenting the content and completion of the program. Each firm is 
required to analyze and evaluate its training needs in light of the 
firm's size, organizational structure, scope of business, types of 
products and services it offers, as well as regulatory developments 
and the performance of its registered persons in the Regulatory 
Element. When the Exchange was approved in May 2012 there was no 
requirement for the Exchange to adopt the Firm Element portion of 
FINRA's CE Program and therefore the Firm Element was not included 
in the Exchange's Rulebook. However, the Exchange believes that all 
BOX Participants are currently complying with the Firm Element 
requirements due to their memberships at other options exchanges. 
Specifically, BOX Participants who are FINRA Members are meeting 
FINRA's Continuing Education requirements under Rule 1240 which 
includes both a Regulatory Element and a Firm Element. BOX 
Participants who are CBOE Members are meeting CBOE's Continuing 
Education Requirements under Rule 3.33 which includes both a 
Regulatory Element and a Firm Element. Finally, BOX Participants who 
are NASDAQ-OMX-PHLX Members are meeting NASDAQ-OMX-PHLX's 
requirements of Continuing Education under General 4, Rules 1210 and 
1240 which includes both a Regulatory Element and a Firm Element. 
BOX is in discussions with FINRA to include the Firm Element as part 
of its examination program and anticipates adding this requirement 
to the BOX rulebook in the near future.
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Continuing Education Rules
(i) Background
    The continuing education program for registered persons of broker-
dealers (``CE Program'') currently requires registered persons to 
complete continuing education consisting of a Regulatory Element. The 
Regulatory Element, which is administered by FINRA, focuses on 
regulatory requirements and industry standards. The CE Program is 
codified under the rules of the self-regulatory organizations 
(``SROs''). The CE Program for registered persons of Exchange members 
is codified under IM-2040-5.\7\
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    \7\ See also IM-2040-5(b) (Continuing Education Requirements).
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a. Regulatory Element
    IM-2040-5 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\ 
Registered persons who have not completed the Regulatory Element within 
the prescribed time frames will have their Exchange registrations 
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 FINRA 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 IM-2040-5(b) (Continuing Education Requirements) and (f) 
(Reassociation in a Registered Capacity). An individual's 
registration anniversary date is generally the date they initially 
registered with the Exchange 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. See also IM-2040-5(g) (Definition of Covered Person). In 
BOX's proposed rule change all references to the Financial Services 
Affiliate Waiver Program (``FSAWP'') have been omitted as BOX has 
never included the FSAWP rules within the BOX Rule Book. Registered 
persons who become subject to a significant disciplinary action, as 
specified in IM-2040-5(e) (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 IM-2040-5(c) (Failure to Complete), and IM-2040-5(d) 
(Requirements of the applicable provisions of these Rules).
    \10\ See 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\ 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 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\
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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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    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, FINRA transitioned the delivery of the 
Regulatory Element to an online platform (``CE Online''), which allows 
individuals to complete the content online at a location of their 
choosing, including their private residence. This online delivery 
provides FINRA with 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.
b. 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 
adopted prior to the creation of the CE Program and was intended to 
ensure that individuals who reregister are relatively current on their 
regulatory and securities knowledge.
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    \14\ See IM-2040-5(k) (Lapse of Registration and Expiration of 
SIE). 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. For instance, 
it would not apply to an individual who maintains his registration 
as a General Securities Representative but who terminates his 
registration as an Investment Company and Variable Contracts 
Products Representative. 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 BOX Rule 12110 (Judgment 
and Sanctions) 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.
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(ii) Proposed Rule Change
    After extensive work with the Securities Industry/Regulatory 
Council on Continuing Education (``CE Council'') and discussions with 
stakeholders, including industry participants and the North American 
Securities Administrators Association (``NASAA''), FINRA adopted the 
following changes to the CE Program under its rules.\15\ In order to 
promote

[[Page 25685]]

uniform standards across the securities industry, the Exchange now 
proposes to adopt changes to its continuing education rules 
substantially in the same form as proposed by FINRA, with the exception 
of differences necessary to conform to the Exchange's existing rules. 
The Exchange has excluded changes in 1240(b) (Firm Element) as the 
Exchange does not currently have provisions analogous within its Rule 
Book. The Exchange has also omitted cross-references and rules that are 
applicable to FINRA members but not to Exchange members.
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    \15\ See supra note 3. FINRA's changes are based on the CE 
Council's September 2019 recommendations to enhance the CE Program. 
See Recommended Enhancements for the Securities Industry Continuing 
Education Program, available at http://cecouncil.org/media/266634/council-recommendations-final-.pdf. The CE Council is composed of 
securities industry representatives and representatives of SROs. The 
CE Council was formed in 1995 upon a recommendation from the 
Securities Industry Task Force on Continuing Education and was 
tasked with facilitating the development of uniform continuing 
education requirements for registered persons of broker-dealers.
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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.\16\ Therefore, to provide registered persons with 
more timely and relevant training on significant regulatory 
developments, the Exchange proposes amending IM-2040-5(b) to require 
registered persons to complete the Regulatory Element annually by 
December 31.\17\ 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.\18\
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    \16\ When the CE Program was 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 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).
    \17\ See proposed IM-2040-5(b)(1), and (f).
    \18\ See proposed IM-2040-5(b)(1).
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    Under the proposed rule change, firms would have the flexibility to 
require their registered persons to complete the Regulatory Element 
sooner than December 31, which would allow firms to coordinate the 
timing of the Regulatory Element with other training requirements.\19\ 
For example, a firm could require its registered persons to complete 
their Regulatory Element by October 1 of each year.
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    \19\ See proposed IM-2040-5(b)(1), and (f).
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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.\20\ 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.\21\
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    \20\ See proposed IM-2040-5(b)(1).
    \21\ See proposed IM-2040-5(f).
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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.\22\ 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.\23\
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    \22\ See proposed IM-2040-5(c), and (d).
    \23\ See supra note 21. The proposed rule change clarifies 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 amending IM-2040-5 to clarify 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; \24\ (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; \25\ (3) individuals who become subject 
to a significant disciplinary action may be required to complete 
assigned continuing education content as prescribed by the Exchange; 
\26\ (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; \27\ and (5) the Regulatory Element requirements apply to 
individuals who are registered, or in the process of registering, as a 
representative or principal.\28\ In addition, the Exchange proposes 
making conforming amendments to IM-2040-5.
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    \24\ See supra note 21.
    \25\ See supra note 21.
    \26\ See proposed IM-2040-5(e). As previously noted, IM-2040-
5(e) currently provides that such individuals may be required to 
retake the Regulatory Element. See supra note 8.
    \27\ See proposed IM-2040-5(f).
    \28\ See proposed IM-2040-5(g).
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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.\29\ 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.
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    \29\ As discussed in the economic impact assessment in the FINRA 
Continuing Education Rule Change, individuals with multiple 
registrations represent a smaller percentage of the population of 
registered persons.
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b. Maintenance of Qualification After Termination of Registration
    The Exchange proposes adopting BOX Rule 2130 (Continuing Education

[[Page 25686]]

Program for Persons Maintaining Their Qualification Following the 
Termination of a Registration Category) and IM-2130-1 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.\30\ 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.
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    \30\ The proposed option would also be available to individuals 
who terminate any permissive registrations as provided under BOX 
Rule 2070. However, the proposed option would not be available to 
individuals who terminate a limited registration category that is a 
subset of a broader registration category for which they remain 
qualified. As previously noted, such individuals currently 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. In addition, the proposed option would not be 
available to individuals who are maintaining an eliminated 
registration category, such as the category for Corporate Securities 
Representative, or individuals who have solely passed the Securities 
Industry Essentials examination, which does not, in and of itself, 
confer registration.
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    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; \31\
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    \31\ See proposed BOX Rule 2130(a).
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     individuals could elect to participate when they terminate 
a registration or within two years from the termination of a 
registration; \32\
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    \32\ See proposed BOX Rule 2130(b). Individuals who elect to 
participate at the later date would be required to complete, within 
two years from the termination of their registration, any continuing 
education that becomes due between the time of their Form U5 
(Uniform Termination Notice for Securities Industry Registration) 
submission and the date that they commence their participation. In 
addition, FINRA would enhance its systems to notify individuals of 
their eligibility to participate, enable them to affirmatively opt 
in, and notify them of their annual continuing education requirement 
if they opt in.
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     individuals would be required to complete annually all 
prescribed continuing education; \33\
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    \33\ See proposed BOX Rule 2130(c). 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. The 
continuing education content for participants would consist of the 
Regulatory Element content discussed below. The content would 
correspond to the registration category for which individuals wish 
to maintain their qualifications. Participants who are maintaining 
their qualification status for a principal registration category 
that includes one or more corequisite representative registrations 
must also complete required annual continuing education for the 
corequisite registrations in order to maintain their qualification 
status for the principal registration category. The proposed rule 
change clarifies that the prescribed continuing education must be 
completed by December 31 of the calendar year, which is consistent 
with the timing for the proposed annual Regulatory Element. The 
Exchange does not currently have provisions analogous to FINRA Rule 
1240(b) (Firm Element) and thus has omitted language referring to 
such provisions in its proposed Rules.
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     individuals would have a maximum of five years in which to 
reregister; \34\
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    \34\ See proposed Rule 2130. In addition, individuals applying 
for reregistration must satisfy all other requirements relating to 
the registration process (e.g., submit a Form U4 (Uniform 
Application for Securities Industry Registration or Transfer) and 
undergo a background check).
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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; \35\ 
and
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    \35\ See proposed Rules 2130(d) and (e).
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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.\36\
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    \36\ See proposed Rules 2130(a) and (f). Further, any content 
completed by 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 an 
Exchange member firm. See Exchange Act Sections 3(a)(39) and 
15(b)(4) and BOX Rule 2020.
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    The proposed rule change also includes a look-back provision that 
would, subject to specified conditions, extend the proposed option to 
individuals who have been registered as a representative or principal 
within two years immediately prior to the effective date of the 
proposed rule change.\37\
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    \37\ See proposed IM-2130-1. Such individuals would be required 
to elect whether to participate by the effective 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 the calendar year in which the proposed rule change is 
effective. In addition, if such individuals elect to participate, 
their initial participation period would be adjusted based on the 
date that their registration was terminated. As discussed above, the 
proposed rule change provides a five-year participation period for 
participants in the proposed continuing education program.
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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 firm for a period of at 
least one year and subsequently terminate their registration, provided 
that they satisfy the other participation conditions and 
limitations.\38\ Finally, the Exchange proposes to adopt new paragraph 
(k) to IM-2040-5, entitled Lapse of Registration and Expiration of SIE 
based on FINRA Rule 1210.08. Currently, IM-2040-3 states that any 
person who last passed the Securities Industry Essentials Examination 
(``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. This same language is contained in FINRA Rule 
1210.08 but with additional detail. The Exchange proposes adopting new 
paragraph (k) in IM-2040-5 to more closely align with FINRA Rule 
1210.08.
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    \38\ See proposed IM-2130-1(b).
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    As proposed, any person who was last registered in a representative 
registration category two or more years immediately preceding the date 
of receipt by FINRA 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 IM-2040-3 unless the person has maintained his or her 
qualification status for that registration category in accordance with 
proposed

[[Page 25687]]

BOX Rule 2130 or as otherwise permitted by the Exchange. Any person who 
was last registered in a principal registration category two or more 
years immediately preceding the date 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 IM-2040-5, unless the person has maintained 
his or her qualification status for that registration category in 
accordance with proposed BOX Rule 2130 or as otherwise permitted by the 
Exchange. Any person whose registration has been revoked pursuant to 
BOX Rule 12110 and any person who has a continuing education deficiency 
for a period of two years as provided under proposed BOX Rule 2130 
shall be required to pass a representative or principal qualification 
examination appropriate to his or her category of registration as 
specified in IM-2040-5, to be eligible for registration. Lastly, for 
purposes of proposed paragraph (k), an application shall not be 
considered as a new application for registration if that application 
does not result in a registration.
    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.
    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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c. CE Program Implementation
    As stated in the FINRA Continuing Education Rule Change, FINRA and 
the CE Council also plan to enhance the CE Program in other ways, and 
these additional enhancements do not require any changes to the FINRA 
rules.\41\ As it relates to the rule changes themselves, the changes 
relating to the Maintaining Qualifications Program (BOX Rule 2130) will 
become effective upon filing. All other changes related to the FINRA 
Continuing Education Rule Change, including the changes relating to the 
Regulatory Element and the two-year qualification period, will have an 
implementation date of January 1, 2023.\42\
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    \41\ See supra note 3. As described in more detail in the FINRA 
Continuing Education Rule Change, FINRA will work with the CE 
Council to develop and incorporate additional resources in 
connection with the Regulatory and Firm Elements. Similar to FINRA, 
these additional enhancements do not require any changes to the 
Exchange rules.
    \42\ See FINRA Regulatory Notice 21-41 at https://www.finra.org/rulesguidance/notices/21-41.
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Manual Signature
    IM-2040-3 currently provides that every initial and transfer 
electronic Form U4 filing and any amendments to the disclosure 
information on Form U4 must be based on a manually signed Form U4 
provided to the member or applicant for membership by the person on 
whose behalf the Form U4 is being filed, consistent with FINRA Rule 
1010(c). Similarly, the Exchange's IM-2040-3 currently provides that in 
the event a member is not able to obtain an associated person's manual 
signature or written acknowledgement of amended disclosure information 
on that person's Form U4 prior to filing of such amendment reflecting 
the information pursuant to IM-2040-3 the member must enter 
``Representative Refused to Sign/Acknowledge'' or ``Representative Not 
Available'' or a substantially similar entry in the electronic Form U4 
field for the associated person's signature. However, FINRA has since 
amended their Rule 1010(c) to permit firms to choose to rely on 
electronic signatures to satisfy the signature requirements when filing 
Form U4.\43\ Cboe Exchange, Inc. (``CBOE'') has also updated its Rule 
3.34 to reflect FINRA's updated Rule 1010(c).\44\
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    \43\ See supra note 4.
    \44\ See Securities Exchange Release No. 92562 (August 4, 2021), 
86 FR 143701 (August 10, 2021) (SR-CBOE-2021-043).
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    The Exchange proposes to amend IM-2040-3 to similarly allow firms 
to rely on electronic signatures when filing Form U4, consistent with 
FINRA Rule 1010(c). Specifically, the Exchange proposes to remove the 
term ``manual'' from ``manual signature'' and the term ``manually'' 
from ``manually signed''. The proposed rule change provides members, 
and applicants for membership, with an opportunity to better manage 
operational challenges. Particularly, the COVID-19 pandemic amplified 
the need to better manage operational challenges like those that arose 
during the pandemic and that may continue to arise in the future. 
Additionally, the proposed rule change would not require the use of a 
particular type of technology to obtain a valid electronic signature 
from the associated person. The Exchange believes that some firms may 
be unable to obtain the manual signature of applicants for registration 
resulting in a significant operational backlog. By permitting these 
firms to rely on electronic signatures to satisfy the signature 
requirements of IM-2040-3, the proposed rule change may reduce or 
eliminate this backlog. For purposes of the proposed rule change, a 
valid electronic signature would be any electronic mark that clearly 
identifies the signatory and is otherwise in compliance with the 
Electronic Signatures in Global and National Commerce Act (``E-Sign 
Act'') and the guidance issued by the SEC relating to the E-Sign 
Act.\45\
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    \45\ See accord Securities Exchange Act Release No. 85282 (March 
11, 2019), 84 FR 9573 (March 15, 2019) (Order Approving File No. SR-
FINRA-2018-040) (discussing valid electronic signatures under 
existing guidance).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\46\ in general, and Section 6(b)(5) of the Act,\47\ in 
particular, in that it is 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 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

[[Page 25688]]

public interest. In particular, the Exchange believes proposed changes 
to the Regulatory Element 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 is proposing to adopt such changes in similar 
form proposed by FINRA with additional changes necessary to conform to 
the Exchange's existing rules, such as excluding the changes to the 
Firm Element and the removal of cross-references to rules that are 
applicable to FINRA members but not Members of the Exchange.\48\
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    \46\ 15 U.S.C. 78f(b).
    \47\ 15 U.S.C. 78f(b)(5).
    \48\ The proposed changes to IM-2040-5 is based on and 
substantially similar to FINRA Rules 1240(a)(1)-(4). The proposed 
BOX Rule 2130 is based on and is substantially similar to FINRA Rule 
1240(c) and Supplementary Materials .01 and .02 to FINRA Rule 1240. 
The Exchange does not currently have provisions analogous to FINRA 
Rules 1210.02, 1210.09, or 1240(b) and thus has omitted language 
referring to such provisions in its proposed Rules.
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    As it relates to the proposed changes to IM-2040-3, the Exchange 
believes the proposed rule change provides firms with the flexibility 
to rely on electronic signatures to satisfy the signature requirements 
of IM-2040-3. Specifically, the Exchange proposes to amend IM-2040-3, 
similar to the amendments made by FINRA and CBOE, to provide the option 
of filing an initial or a transfer Form U4 based on a manually or an 
electronically signed copy of the form provided to the member, or 
applicant for membership, by the individual on whose behalf the form is 
being filed. Considering the technological advancements that provide 
for enhanced authentication and security of electronic signatures, the 
Exchange believes that it is appropriate to amend IM-2040-3 to provide 
such flexibility. The proposed rule change also addresses the ongoing 
public health risks stemming from the outbreak of COVID-19 and the 
operational challenges that firms continue to face as a result of 
pandemic repercussions. By permitting these firms to rely on electronic 
signatures to satisfy the signature requirements of IM-2040-3, the 
proposed rule change may reduce or eliminate an operational backlog due 
to the difficulty firms may have faced in obtaining the manual 
signature of applicants for registration as a result of the impact of 
the pandemic on daily work environments.
    The Exchange believes the proposal is consistent with the Act for 
the reasons described above and for the reasons outlined in the 
approval order for SR-FINRA-2021-015 and as noticed in SR-FINRA-2021-
003.\49\
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    \49\ See supra, notes 3 and 4.
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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 not necessary or appropriate in 
furtherance of the purposes of the Act. In this regard and as indicated 
above, the Exchange notes that the rule change is being proposed as a 
conforming response to a filing submitted by FINRA and is intended to 
harmonize the Exchange's continuing education rules with those of FINRA 
so as to promote uniform standards across the securities industry. All 
members would be subject to the proposed rule change. The proposed rule 
change relating to the Exchange's CE Program, which is similar to the 
FINRA Continuing Education Rule Change, is designed to result in a more 
efficient CE Program that addresses relevant regulatory requirements 
and provides individuals with improved tools and resources to 
understand and comply with such requirements, enhancing investor 
protection. Moreover, the proposed rule change would provide new 
channels for individuals to maintain their qualification status for a 
terminated registration category and, in so doing, could increase the 
likelihood that professionals who need to step away from the industry 
for a period could return, subject to satisfying all other requirements 
relating to the registration process.
    As it relates to the proposed amendments to IM-2040-3, the proposed 
rule change relating to manual signatures is, in all material respects, 
substantively identical to rule changes adopted by FINRA and CBOE. The 
Exchange believes the proposed change will reduce a regulatory filing 
burden for members by allowing them to rely on Form U4 copies with an 
electronic signature. All members will have the option to rely on such 
forms with an electronic signature (or continue to rely on forms with a 
manual signature).

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

    The Exchange has 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 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 \50\ and Rule 19b-
4(f)(6) thereunder.\51\
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    \50\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \51\ 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) \52\ 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.
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    \52\ 17 CFR 240.19b-4(f)(6)(iii).
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    Waiver of the 30-day operative delay would allow the Exchange to 
implement proposed changes in a more timely fashion. The proposed rule 
changes to IM-2040-3 address operational challenges facing firms due to 
the ongoing public health risks stemming from the outbreak of COVID-19 
and permit firms to rely on electronic signatures to satisfy the 
signature requirements of IM-2040-3, which may reduce or eliminate an 
operational backlog, ultimately benefiting the investing public. 
Moreover, the proposed rule changes do not impose any significant 
burden on competition because they will apply uniformly to all 
similarly situated members and associated persons of members. Also, as 
stated above, the proposed rule changes are substantively the same as 
changes made to FINRA Rule 1010(c) and CBOE

[[Page 25689]]

Rule 3.34. Waiver of the 30-day operative delay would also allow the 
Exchange to implement the proposed continuing education changes noted 
above thereby reducing the possibility of a significant regulatory gap 
between the FINRA and Exchange Rules. This is consistent with the 
protection of investors and the public interest by providing more 
uniform standards across the securities industry and helping to avoid 
confusion for members of the Exchange that are also FINRA members. 
Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposal operative upon filing.\53\
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    \53\ 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). We also note that the Exchange initially filed a proposed 
rule change on the same subject matter on March 24, 2022 (``March 24 
Filing''). See https://rules.boxexchange.com/rulefilings. The 
Exchange withdrew the March 24 Filing on April 5, 2022 and filed an 
updated proposed rule change as its replacement on the same day 
(``April 5 Filing''). See id. The Exchange subsequently withdrew the 
April 5 Filing on April 13, 2022 and filed this proposed rule change 
as its replacement on the same day. See id. This filing is 
substantially the same as both the March 24 Filing and the April 5 
Filing, with only minor clarifying changes as compared to both the 
March 24 Filing and April 5 Filing. Accordingly, given the waiver of 
the 30-day operative delay, this proposal was operative upon the 
initial March 24 Filing.
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    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-BOX-2022-16 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-BOX-2022-16. 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, on official business days 
between the hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street 
NE, Washington, DC 20549. 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-BOX-2022-16 and should be 
submitted on or before May 23, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\54\
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    \54\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-09312 Filed 4-29-22; 8:45 am]
BILLING CODE 8011-01-P


