[Federal Register Volume 87, Number 129 (Thursday, July 7, 2022)]
[Notices]
[Pages 40560-40566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14397]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95190; File No. SR-PEARL-2022-25]


Self-Regulatory Organizations: MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 3100, Registration Requirements, Exchange Rule 3103, Continuing 
Education Requirements, and Exchange Rule 3104, Electronic Filing 
Requirements for Uniform Forms

June 30, 2022.
    Pursuant to the provisions of 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 June 28, 2022, MIAX PEARL, LLC (``MIAX Pearl'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. 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 Exchange Rule 3103, Continuing 
Education Requirements. The proposed rule change also makes conforming 
amendments to Exchange Rule 3100, Registration Requirements. Among 
other changes, the proposed rule change requires 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 requirements in Exchange Rule 3104, Electronic Filing 
Requirements for Uniform Forms.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/pearl, at MIAX 
Pearl's principal office, 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
    The Exchange proposes to amend Exchange Rules 3100 and 3103. This 
proposed rule change is based on a filing recently submitted by the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') \3\ and is 
intended to harmonize the Exchange's registration rules with those of 
FINRA so as to promote uniform standards across the securities 
industry.\4\ The Exchange also proposes to amend its manual signature 
requirements in Exchange Rule 3104, Electronic Filing Requirements for 
Uniform Forms, to align with changes FINRA has made to similar 
rules.\5\ Each change is discussed in detail below.
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    \3\ See Securities Exchange Act Release Nos. 92183 (June 15, 
2021), 86 FR 33427 (June 24, 2021) (SR-FINRA-2021-15); and 93097 
(September 21, 2021), 86 FR 53358 (September 27, 2021) (SR-FINRA-
2021-15).
    \4\ See, e.g., Securities Exchange Act Release Nos. 94400 (March 
11, 2022), 87 FR 15286 (March 17, 2022) (SR-NASDAQ-2022-021); 92562 
(August 4, 2021), 86 FR 143701 (August 10, 2021) (SR-CBOE-2021-043); 
94794 (April 26, 2022), 87 FR 25683 (May 2, 2022) (SR-BOX-2022-016); 
94429 (March 16, 2022), 87 FR 16268 (March 22, 2022) (SR-MEMX-2022-
05); and 95140 (June 22, 2022) (SR-MIAX-2022-23).
    \5\ See Securities Exchange Act 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 filed with the 
Commission in SR-FINRA-2021-003 and SR-FINRA-2021-015.\6\ The Exchange 
proposes to adopt such changes substantially in the same form as 
proposed by FINRA, with only minor changes necessary to conform to the 
Exchange's existing rules such as to remove cross-references and rules 
that are applicable to FINRA members but not to Exchange Members.\7\
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    \6\ See supra notes 3 and 5.
    \7\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
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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 and a 
Firm Element. The Regulatory Element, which is administered by FINRA on 
behalf of the Exchange, focuses on regulatory requirements and industry 
standards, while the Firm Element is provided by each firm and focuses 
on securities products, services, and strategies the firm offers, firm 
policies, and industry trends. 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 Exchange 
Rules 3100 and 3103.\8\
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    \8\ See Exchange Rules 3100 and 3103.
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a. Regulatory Element
    Exchange Rule 3103(a), Regulatory Element, 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.\9\ The

[[Page 40561]]

Exchange may extend these time frames for good cause shown.\10\ 
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.\11\ A CE inactive person is prohibited from performing, or 
being compensated for, any activities requiring Exchange 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).\12\
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    \9\ See Exchange Rule 3103(a)(1). 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. 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 Exchange Rule 3100, Interpretation and Policy .09, 
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 Exchange Rule 
3103(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 
Exchange Rule 3103(a)(3), 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.
    \10\ See Exchange Rule 3103(a)(2).
    \11\ See id. 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.
    \12\ 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.\13\ 
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.\14\
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    \13\ The S101 (General Program for Registered Persons) and the 
S201 (Registered Principals and Supervisors). For more information 
on both subprograms, see Content Outline for the S101 Regulatory 
Element Program, available at https://www.finra.org/sites/default/files/S101P_Outline.pdf and Content Outline for the S201 Regulatory 
Element Program, available at https://www.finra.org/sites/default/files/2020-11/s201.pdf.
    \14\ 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. Firm Element
    Exchange Rule 3103(b), Firm Element, currently requires each firm 
to develop and administer an annual Firm Element training program for 
covered registered persons.\15\ The rule requires firms to conduct an 
annual needs analysis to determine the appropriate training.\16\ 
Currently, at a minimum, the Firm Element must cover training in ethics 
and professional responsibility as well as the following items 
concerning securities products, services, and strategies offered by the 
Member: (1) general investment features and associated risk factors; 
(2) suitability and sales practices considerations; and (3) applicable 
regulatory requirements.\17\
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    \15\ ``Covered registered persons'' means any person registered 
with the Exchange pursuant to Rule 3100, including any person who is 
permissively registered pursuant to Exchange Rule 3100, 
Interpretation and Policy .02, and any person who is designated as 
eligible for a waiver pursuant to Exchange Rule 3100, Interpretation 
and Policy .09. See Exchange Rule 3103(a)(5).
    \16\ See Exchange Rule 3103(b)(2), Standards for the Firm 
Element.
    \17\ Id.
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    A firm, consistent with its needs analysis, may determine to apply 
toward the Firm Element other required training. The current rule does 
not expressly recognize other required training, such as training 
relating to the anti-money laundering (``AML'') compliance program,\18\ 
for purposes of satisfying Firm Element training.
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    \18\ See MIAX Rule 315(e) (applicable to the Exchange by being 
incorporated into the Exchange Rules by reference).
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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'').\19\ 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 currently on 
their regulatory and securities knowledge.
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    \19\ See Exchange Rule 3100, Interpretation and Policy .08. 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 Exchange Rule 1011, 
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 either on a case-by-case basis under Exchange 
Rule 3100, Interpretation and Policy .03, Qualification Examinations 
and Waivers of Examinations, or as part of the waiver program under 
Exchange Rule 3100, Interpretation and Policy .09.
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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.\20\ In order to 
promote uniform standards across the securities industry, the Exchange 
now proposes to adopt the same changes to its continuing education 
rules.
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    \20\ 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

[[Page 40562]]

registration category, which would further the goals of the Regulatory 
Element.\21\ Therefore, to provide registered persons with more timely 
and relevant training on significant regulatory developments, the 
Exchange proposes to amend Exchange Rule 3103(a) to require registered 
persons to complete the Regulatory Element annually by December 31.\22\ 
The proposed amendment would also require registered persons to 
complete the Regulatory Element content for each representative or 
principal registration category that they hold, which would also 
further the goals of the Regulatory Element.\23\
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    \21\ When the CE Program was originally adopted in 1995, 
registered persons were required to complete the Regulatory Element 
on their second, fifth and tenth 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).
    \22\ See proposed changes to Exchange Rules 3103(a)(1) and 
(a)(4).
    \23\ See proposed changes to Exchange Rules 3100, Interpretation 
and Policy .07, and 3103(a)(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, 
including the Firm Element.\24\ For example, a firm could require its 
registered persons to complete both their Regulatory Element and Firm 
Element by October 1 of each year.
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    \24\ See proposed changes to Exchange Rules 3103(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.\25\ 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.\26\
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    \25\ See proposed changes to Exchange Rule 3103(a)(1).
    \26\ See proposed changes to Exchange Rule 3103(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.\27\ 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.\28\
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    \27\ See proposed changes to Exchange Rule 3103(a)(2).
    \28\ See id. 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 to amend Exchange Rule 3103(a) 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; \29\ (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; \30\ (3) 
individuals who become subject to a significant disciplinary action may 
be required to complete assigned continuing education content as 
prescribed by the Exchange; \31\ (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; \32\ and (5) the Regulatory Element 
requirements apply to individuals who are registered, or in the process 
of registering, as a representative or principal.\33\ In addition, the 
Exchange proposed making conforming amendments to Exchange Rule 3100, 
Interpretation and Policy .07.
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    \29\ Id.
    \30\ Id.
    \31\ See proposed changes to Exchange Rule 3103(a)(3). As 
previously noted, Exchange Rule 3103(a)(3) currently provides that 
such individuals may be required to retake the Regulatory Element. 
See supra note 9.
    \32\ See proposed changes to Exchange Rule 3103(a)(4).
    \33\ See proposed changes to Exchange Rule 3103(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.\34\ 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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    \34\ As discussed in the Economic Impact Assessment section in 
the FINRA Rule Change, supra note 3, individuals with multiple 
registrations represent a small percentage of the population of 
registered persons.
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b. Recognition of Other Training Requirements for Firm Element and 
Extension of Firm Element to All Registered Persons
    To better align the Exchange's Rulebook with FINRA's Rulebook, and, 
in addition, to better align the Firm Element requirement with other 
required training, the Exchange proposes amending Rule 3103(b) to 
expressly allow firms to consider training relating to the AML 
compliance program and the annual compliance meeting toward satisfying 
an individual's annual Firm Element requirement.\35\ The Exchange also 
proposes to amend the rule to extend the Firm Element requirement to 
all registered persons, including individuals who maintain solely a 
permissive registration consistent with Exchange Rule 3100, 
Interpretation and Policy .02, Permissive Registrations, thereby 
further aligning the Firm Element requirement with other

[[Page 40563]]

broadly-based training requirements.\36\ In conjunction with this 
proposed change, the Exchange proposes modifying the current minimum 
training criteria under Exchange Rule 3103(b) to instead provide that 
the training must cover topics related to the role, activities, or 
responsibilities of the registered person and to professional 
responsibility.\37\
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    \35\ See proposed Exchange Rule 3103(b)(2)(iv).
    \36\ See proposed changes to Exchange Rule 3103(b)(1). As noted 
earlier, the current requirement only applies to ``covered 
registered persons'' and not all registered persons.
    \37\ See proposed changes to Exchange Rule 3103(b)(2)(ii).
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c. Maintenance of Qualification After Termination of Registration
    The Exchange proposes adopting paragraph (c) under Exchange Rule 
3103 and Interpretation and Policies .01 and .02 to Exchange Rule 3103 
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.\38\ The proposed rule change would not 
eliminate the two-year qualification period. Rather, it would provide 
such individuals as 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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    \38\ The proposed option would also be available to individuals 
who terminate any permissive registrations as provided under 
Exchange Rule 3100, Interpretation and Policy .02. 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; \39\
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    \39\ See proposed Exchange Rule 3103(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; \40\
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    \40\ See proposed Exchange Rule 3103(c)(2). 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; \41\
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    \41\ See proposed Exchange Rule 3103(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. The 
continuing education content for participants would consist of a 
combination of Regulatory Element content and content selected by 
FINRA and the CE Council from the Firm Element content catalog. 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 co-requisite 
representative registrations must also complete required annual 
continuing education for the co-requisite 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.
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     Individuals would have a maximum of five years in which to 
reregister; \42\
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    \42\ See proposed Exchange Rule 3103(c). 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; \43\ 
and
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    \43\ See proposed Exchange Rules 3103(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.\44\
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    \44\ See proposed Exchange Rules 3103(c)(1) and (c)(6). 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).
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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 implementation date of the 
proposed rule change and individuals who have been FSAWP participants 
immediately prior to the implementation date of the proposed rule 
change.\45\
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    \45\ See proposed Exchange Rule 3103, Interpretation and Policy 
.01. Such individuals would be required to elect whether to 
participate by the 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 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. The current waiver program for FSAWP 
participants would not be available to new participants upon 
implementation of the proposed rule change. See proposed Exchange 
Rule 3100, Interpretation and Policy .09. However, individuals who 
are FSAWP participants immediately prior to the implementation date 
of the proposed rule change could elect to continue in that waiver 
program until the program has been retired. As noted above, FSAWP 
participants may participate for up to seven years in that waiver 
program, subject to specified conditions. See supra note 9. As 
discussed above, the proposed rule change provides a five-year 
participation period for participants in the proposed continuing 
education program. So as not to disadvantage FSAWP participants, the 
Exchange has determined to preserve that waiver program for 
individuals who are participating in the FSAWP immediately prior to 
the implementation date of the proposed rule change. Because the 
proposed rule change transitions the Regulatory Element to an annual 
cycle, FSAWP participants who remain in that waiver program 
following the implementation of the proposed rule change would be 
subject to an annual Regulatory Element requirement. See proposed 
changes to Exchange Rule 3103(a)(1). Finally, the proposed rule 
change preserves the Exchange's ability to extend the time by which 
FSAWP participants must complete the Regulatory Element for good 
cause shown. See proposed changes to Exchange Rule 3103(a)(2).

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[[Page 40564]]

    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.\46\ Finally, the Exchange proposes making conforming 
amendments to Exchange Rule 3100, including adding references to 
proposed Exchange Rule 3103(c) and Interpretation and Policy .08 to 
Exchange Rule 3100.
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    \46\ See proposed Exchange Rule 3103, Interpretation and Policy 
.02.
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    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.\47\ 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.\48\
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    \47\ See The Female Face of Family Caregiving (November 2018), 
available at https://www.nationalpartnership.org/our-work/resources/economic-justice/female-face-family-caregiving.pdf.
    \48\ 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-recession-equality/ 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-unemployement-older-workers.
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d. CE Program Implementation
    As stated in the FINRA 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.\49\ As it 
relates to the rule changes themselves, the changes relating to the 
Maintaining Qualifications Program (proposed paragraph (c) of Exchange 
Rule 3103, and Interpretations and Policies .01 and .02) and the 
Financial Services Affiliate Waiver Program (FSAWP) (Interpretation and 
Policy .09 to Exchange Rule 3100) will be implemented July 1, 2022. All 
other changes related to the FINRA Rule Change, including the changes 
relating to the Regulatory Element, Firm Element and the two-year 
qualification period, will be implemented January 1, 2023.\50\
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    \49\ See supra note 3. Similar to FINRA, these additional 
enhances do not require any changes to Exchange Rules.
    \50\ See FINRA Regulatory Notice 21-41 at https://www.finra.org/rules-guidance/notices/21-41.
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Manual Signature
    Exchange Rule 3104(c) 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, Exchange Rule 3104, Interpretation and Policy .03, 
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 
on such amendment reflecting the information pursuant to proposed 
Exchange Rule 3103(c)(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.\51\ Several 
other exchanges have also updated their rules to reflect FINRA's 
updated Rule 1010(c).\52\
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    \51\ See supra note 5.
    \52\ See e.g., Securities Exchange Act Release Nos. 94400 (March 
11, 2022), 87 FR 15286 (March 17, 2022) (SR-NASDAQ-2022-021); 92562 
(August 4, 2021), 86 FR 143701 (August 10, 2021) (SR-CBOE-2021-043); 
and 94794 (April 26, 2022), 87 FR 25683 (May 2, 2022) (SR-BOX-2022-
016).
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    The Exchange proposes to amend Exchange Rule 3104(c) and 
Interpretation and Policy .03 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 Exchange Rule 3104(c) and Interpretation and Policy 
.03, 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 
Commission relating to the E-Sign Act.\53\
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    \53\ 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 its proposal is consistent with Section 
6(b) of the Act,\54\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\55\ in particular, in that it is designed to 
prevent fraudulent and manipulative 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

[[Page 40565]]

system, and, in general to protect investors and the public interest.
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    \54\ 15 U.S.C. 78f(b).
    \55\ 15 U.S.C. 78f(b)(5).
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    As noted above, the proposed rule changes seek to align the 
Exchange Rules with recent changes to FINRA rules.\56\ The Exchange 
believes the proposed rule changes are consistent with the provisions 
of Section 6(b)(5) of the Act,\57\ which requires, among other things, 
that Exchange Rules must be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest, and Section 6(c)(3) of the Act,\58\ which authorizes 
the Exchange to prescribe standards of training, experience, and 
competence for persons associated with the Exchange. The Exchange is 
proposing to adopt such changes substantially in the same form proposed 
by FINRA with only minor changes necessary to conform to the Exchange's 
existing rules, such as removal of cross-references to rules that are 
applicable to FINRA members but not Members of the Exchange.\59\ The 
Exchange believes the proposal is consistent with the Act for the 
reasons described above.
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    \56\ See supra note 3.
    \57\ 15 U.S.C. 78f(b)(5).
    \58\ 15 U.S.C. 78f(c)(3).
    \59\ Proposed changes to Interpretation and Policy .08 of 
Exchange Rule 3100 is based on and substantially similar to FINRA 
Rule 1210.08. The proposed changes to Exchange Rule 3103(a)(1)-(4), 
proposed changes to Exchange Rule 3103(b), proposed Exchange Rule 
3103(c), and proposed Interpretations and Policies .01-.02 to 
Exchange Rule 3103(c) are based on and substantially similar to 
FINRA Rules 1240(a)(1)-(4), FINRA Rule 1240(b), FINRA Rule 1240(c) 
and Supplementary Materials .01 and .02 to FINRA Rule 1240. The 
Exchange does not currently have a provision analogous to FINRA Rule 
3110 and thus has omitted language referring to such provision in 
its proposed Rules.
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    The Exchange believes the proposed changes to the Regulatory 
Element will ensure that all Registered Representatives receive timely 
and relevant training, which will, in turn, enhance compliance and 
investor protection. 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.
    As it relates to the proposed changes to Exchange Rule 3104(c), the 
Exchange believes the proposed rule change provides firms with the 
flexibility to rely on electronic signatures to satisfy the signature 
requirements of Exchange Rule 3104(c). Specifically, the Exchange 
proposes to amend Exchange Rule 3104(c) and Interpretation and Policy 
.03, similar to the amendments made by FINRA, 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 Exchange Rule 3104(c) 
and Interpretation and Policy .03 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 Exchange Rule 3104(c) and Interpretation and 
Policy .03, 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 recent 
filings SR-FINRA-2021-003 and SR-FINRA-2021-015.\60\
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    \60\ See supra notes 3 and 5.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. All Members would be subject 
to the proposed rule change. The proposed rule change relating to the 
Exchange's CE Program, which is materially identical to the FINRA 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 Exchange Rule 3104(c), 
the proposed rule change relating to manual signatures is, in all 
material respects, substantively identical to a recent rule change 
adopted by FINRA. 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

    Written comments were neither solicited nor received.

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 \61\ and Rule 19b-
4(f)(6) thereunder.\62\
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    \61\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \62\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    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) \63\ 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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    \63\ 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. First, the 
proposed rule changes regarding manual signatures address operational 
challenges facing firms due to the ongoing public health risks

[[Page 40566]]

stemming from the outbreak of COVID-19 and permit firms to rely on 
electronic signatures to satisfy the signature requirements of Exchange 
Rule 3104(c) and Interpretation and Policy .03, 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 by FINRA. Second, 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.\64\
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    \64\ 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).
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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-PEARL-2022-25 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-PEARL-2022-25. 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; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.
    All submissions should refer to File Number SR-PEARL-2022-25 and 
should be submitted on or before July 28, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\65\
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    \65\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-14397 Filed 7-6-22; 8:45 am]
BILLING CODE 8011-01-P


