Rule G-3. No broker, dealer or municipal securities
dealer or person who is a municipal securities representative,
municipal securities principal, municipal securities sales principal
or financial and operations principal (as hereafter defined) shall
be qualified for purposes of rule G-2 unless such broker, dealer
or municipal securities dealer or person meets the requirements
of this rule.
(a) Municipal Securities
Representative.
(i) Definition.
The term "municipal securities representative" means
a natural person associated with a broker, dealer or municipal
securities dealer, other than a person whose functions are solely
clerical or ministerial, whose activities include one or more
of the following:
(A) underwriting,
trading or sales of municipal securities;
(B) financial
advisory or consultant services for issuers in connection
with the issuance of municipal securities;
(C) research or
investment advice with respect to municipal securities; or
(D) any other
activities which involve communication, directly or indirectly,
with public investors in municipal securities; provided, however,
that the activities enumerated in subparagraphs (C) and (D)
above shall be limited to such activities as they relate to
the activities enumerated in subparagraphs (A) and (B) above.
(ii) Qualification
Requirements.
(A) Except as
otherwise provided in this paragraph (a)(ii), every municipal
securities representative shall take and pass the Municipal
Securities Representative Qualification Examination prior
to being qualified as a municipal securities representative.
The passing grade shall be determined by the Board.
(B) The requirements
of subparagraph (a)(ii)(A) of this rule shall not apply to
any person who is duly qualified as a general securities representative
by reason of having taken and passed the General Securities
Registered Representative Examination.
(C) The requirements
of subparagraph (a)(ii)(A) of this rule shall not apply to
any person who is duly qualified as a limited representative
– investment company and variable contracts products by reason
of having taken and passed the Limited Representative – Investment
Company and Variable Contracts Products Examination, but only
if such person’s activities with respect to municipal securities
described in paragraph (a)(i) of this rule are limited solely
to municipal fund securities.
(D) Any
person who ceases to be associated with a broker, dealer or
municipal securities dealer (whether as a municipal securities
representative or otherwise) for two or more years at any
time after having qualified as a municipal securities representative
in accordance with subparagraph (a)(ii)(A), (B) or (C) shall
again meet the requirements of subparagraph (a)(ii)(A), (B)
or (C) prior to being qualified as a municipal securities
representative.
(iii) Apprenticeship.
(A) Any person
who first becomes associated with a broker, dealer or municipal
securities dealer in a representative capacity (whether as
a municipal securities representative, general securities
representative or limited representative – investment company
and variable contracts products) without having previously
qualified as a municipal securities representative, general
securities representative or limited representative – investment
company and variable contracts products shall be permitted
to function in a representative capacity without qualifying
pursuant to subparagraph (a)(ii)(A), (B) or (C) for a period
of at least 90 days following the date such person becomes
associated with a broker, dealer or municipal securities dealer,
provided, however, that such person shall not transact business
with any member of the public with respect to, or be compensated
for transactions in, municipal securities during such 90 day
period, regardless of such person’s having qualified in accordance
with the examination requirements of this rule. A person subject
to the requirements of this paragraph (a)(iii) shall in no
event continue to perform any of the functions of a municipal
securities representative after 180 days following the commencement
of such person’s association with such broker, dealer or municipal
securities dealer, unless such person qualifies as a municipal
securities representative pursuant to subparagraph (a)(ii)(A),
(B) or (C).
(B) Prior experience,
of at least 90 days, as a general securities representative,
limited representative – investment company and variable contracts
products or limited representative – government securities,
will meet the requirements of this paragraph (a)(iii).
(b)Municipal Securities Principal; Municipal Fund Securities
Limited Principal.
(i) Definition. The
term "municipal securities principal" means a natural
person (other than a municipal securities sales principal), associated
with a broker, dealer or municipal securities dealer that has
filed with the Board in compliance with rule A-12, who is directly
engaged in the management, direction or supervision of one or
more of the following activities:
(A) underwriting,
trading or sales of municipal securities;
(B) financial advisory
or consultant services for issuers in connection with the issuance
of municipal securities;
(C) processing,
clearance, and, in the case of brokers, dealers and municipal
securities dealers other than bank dealers, safekeeping of municipal
securities;
(D) research or
investment advice with respect to municipal securities;
(E) any other activities
which involve communication, directly or indirectly, with public
investors in municipal securities;
(F) maintenance
of records with respect to the activities described in subparagraphs
(A) through (E); or
(G) training of
municipal securities principals or municipal securities representatives.
provided, however, that the activities enumerated in
subparagraphs (D) and (E) above shall be limited to such activities
as they relate to the activities enumerated in subparagraphs (A)
or (B) above.
(ii) Qualification
Requirements.
(A) Every municipal
securities principal shall take and pass the Municipal Securities
Principal Qualification Examination prior to being qualified
as a municipal securities principal. The passing grade shall
be determined by the Board.
(B) Any person seeking
to become qualified as a municipal securities principal in accordance
with subparagraph (b)(ii)(A) of this rule must, prior to being
qualified as a municipal securities principal:
(1) have been
duly qualified as either a municipal securities representative
or a general securities representative; provided, however,
that any person who qualifies as a municipal securities representative
solely by reason of subparagraph (a)(ii)(C) shall not be qualified
to take the Municipal Securities Principal Qualification Examination
on or after October 1, 2002; or
(2) have taken
and passed either the Municipal Securities Representative
Qualification Examination or the General Securities Registered
Representative Examination.
(C) Any person who
ceases to act as a municipal securities principal for two or
more years at any time after having qualified as such shall
meet the requirements of subparagraphs (b)(ii)(A) and (B) prior
to being qualified as a municipal securities principal.
(D) For the first
90 days after becoming a municipal securities principal, the
requirements of subparagraph (b)(ii)(A) shall not apply to any
person who is qualified as a municipal securities representative,
general securities representative or general securities principal,
provided, however, that such person shall take and pass
the Municipal Securities Principal Qualification Examination
within that period.
(iii) Numerical Requirements.
Every broker, dealer and municipal securities dealer shall have
at least two municipal securities principals, except:
(A) every broker,
dealer or municipal securities dealer which is a member of a
registered securities association and which conducts a general
securities business, or
(B) every broker,
dealer or municipal securities dealer having fewer than eleven
persons associated with it in whatever capacity on a full-time
or full-time equivalent basis who are engaged in the performance
of its municipal securities activities, or, in the case of a
bank dealer, in the performance of its municipal securities
dealer activities,
shall have at least one municipal securities
principal.
(iv) Municipal Fund
Securities Limited Principal.
(A) Definition. The term “municipal
fund securities limited principal” means a natural person (other
than a municipal securities principal or municipal securities
sales principal), associated with a broker, dealer or municipal
securities dealer that has filed with the Board in compliance
with rule A-12, who is directly engaged in the functions of
a municipal securities principal as set forth in paragraph (b)(i),
but solely as such activities relate to transactions in municipal
fund securities.
(B) Qualification
Requirements.
(1) Every municipal fund securities limited principal shall
take and pass the Municipal Fund Securities Limited Principal
Qualification Examination prior to being qualified as a
municipal fund securities limited principal. The passing
grade shall be determined by the Board.
(2) Any person seeking to become qualified as a municipal
fund securities limited principal in accordance with clause
(b)(iv)(B)(1) of this rule must, as a condition to being
qualified as a municipal fund securities limited principal:
(a) have been duly qualified as either a general securities
principal or an investment company/variable contracts
limited principal; or
(b) have taken and passed either the General Securities
Principal Qualification Examination or the Investment
Company and Annuity Principal Qualification Examination.
(3) Any person who ceases to act as a municipal fund securities
limited principal for two or more years at any time after
having qualified as such shall meet the requirements of
clauses (b)(iv)(B)(1) and (2) prior to being qualified as
a municipal fund securities limited principal.
(4) For the first 90 days after becoming a municipal fund
securities limited principal, the requirements of clauses
(b)(iv)(B)(1) and (2) shall not apply to any person who
is qualified as a general securities representative, investment
company/variable contracts limited representative, general
securities principal or investment company/variable contracts
limited principal, provided, however, that such person
shall meet the requirements of clauses (b)(iv)(B)(1) and
(2) within that period.
(C) Actions as Municipal
Securities Principal. Any municipal fund securities limited
principal may undertake all actions required or permitted under
any Board rule to be taken by a municipal securities principal,
but solely with respect to activities related to municipal fund
securities, and shall be subject to all provisions of Board rules applicable to municipal securities principals except to the extent inconsistent with this paragraph (b)(iv).
(D) Numerical Requirements. Any broker, dealer or municipal
securities dealer whose municipal securities activities are
limited exclusively to municipal fund securities may count
any municipal fund securities limited principal toward the
numerical requirement for municipal securities principal set
forth in paragraph (b)(iii).
(c) Municipal Securities Sales Principal.
(i) Definition. The
term "municipal securities sales principal" means a
natural person (other than a municipal securities principal) associated
with a broker, dealer or municipal securities dealer (other than
a bank dealer) whose supervisory activities with respect to municipal
securities are limited exclusively to supervising sales to and
purchases from customers of municipal securities.
(ii) Qualification
Requirements.
(A) Every municipal
securities sales principal shall take and pass the General Securities
Sales Supervisor Qualification Examination prior to acting in
such capacity. The passing grade shall be determined by the
Board.
(B) Any person seeking
to become qualified as a municipal securities sales principal
in accordance with subparagraph (c)(ii)(A) of this rule, must,
prior to being qualified as a municipal securities sales principal:
(1) have been
duly qualified as either a municipal securities representative
or a general securities representative; or
(2) have taken
and passed either the Municipal Securities Representative
Qualification Examination or the General Securities Registered
Representative Examination.
(C) Any person who
ceases to act as a municipal securities sales principal for
two or more years at any time after having qualified as such
shall meet the requirements of subparagraphs (c)(ii)(A) and
(B) prior to being qualified as a municipal securities sales
principal.
(D) For the first
90 days after becoming a municipal securities sales principal,
the requirements of subparagraph (c)(ii)(A) shall not apply
to any person who is qualified as a municipal securities representative,
general securities representative or general securities principal,
provided, however, that such person shall take and pass
the General Securities Sales Supervisory Qualification Examination
within that period.
(d) Financial and Operations Principal.
(i) Definition. The
term "financial and operations principal" means a natural
person associated with a broker, dealer or municipal securities
dealer (other than a bank dealer or a broker, dealer or municipal
securities dealer meeting the requirements of subparagraph (a)(2)(iv),
(v) or (vi) of rule 15c3-1 under the Act or exempted from the
requirements of rule 15c3-1 in accordance with paragraph (b)(3)
thereof), whose duties include:
(A) approval of
and responsibility for financial reports required to be filed
with the Commission or any self-regulatory organization;
(B) final preparation
of such reports;
(C) overall supervision
of individuals who assist in the preparation of such reports;
(D) overall supervision
of and responsibility for individuals who are involved in the
maintenance of the books and records from which such reports
are derived;
(E) overall supervision
and/or performance of the responsibilities of the broker, dealer
or municipal securities dealer pursuant to the financial responsibility
rules under the Act;
(F) overall supervision
of and responsibility for all individuals who are involved in
the administration and maintenance of the processing and clearance
functions of such broker, dealer or municipal securities dealer;
and
(G) overall supervision
of and responsibility for all individuals who are involved in
the administration and maintenance of the safekeeping functions
of such broker, dealer or municipal securities dealer.
(ii) Qualification
Requirements.
(A) Every financial
and operations principal shall be qualified in such capacity
in accordance with the rules of a registered securities association.
(B) Any person who
ceases to be associated with a broker, dealer or municipal securities
dealer as a financial and operations principal for two or more
years at any time after having qualified as such in accordance
with this paragraph (d)(ii) shall qualify in such capacity in
accordance with the rules of a registered securities association
prior to being qualified as a financial and operations principal.
(iii) Numerical Requirements.
Every broker, dealer and municipal securities dealer (other than
a bank dealer and a broker, dealer or municipal securities dealer
meeting the requirements of subparagraph (a)(2)(iv), (v) or (vi)
of rule 15c3-1 under the Act or exempted from the requirements
of rule 15c3-1 in accordance with paragraph (b)(3) thereof) shall
have at least one financial and operations principal, including
its chief financial officer, qualified in accordance with paragraph
(d)(ii) of this rule.
(e) Confidentiality
of Qualification Examinations. No associated person of a broker,
dealer or municipal securities dealer shall:
(i) in the course
of taking a qualification examination required by this rule
receive or give assistance of any nature;
(ii) disclose to
any person questions, or answers to any questions, on any qualification
examination required by this rule;
(iii) engage in
any activity inconsistent with the confidential nature of any
qualification examination required by this rule, or with its
purpose as a test of the qualification of persons taking such
examinations; or
(iv) knowingly sign
a false certification concerning any such qualification examination.
(f) Retaking of
Qualification Examinations. Any associated person of a broker,
dealer or municipal securities dealer who fails to pass a qualification
examination prescribed by the Board shall be permitted to take
the examination again after a period of 30 days has elapsed from
the date of the prior examination, except that any person who
fails to pass an examination three or more times in succession
shall be prohibited from again taking the examination until a
period of six months has elapsed from the date of such person's
last attempt to pass the examination.
(g) Waiver of Qualification
Requirements.
(i) The requirements
of paragraphs (a)(ii), (a)(iii), (b)(ii), (b)(iv)(B) and (c)(ii)
may be waived in extraordinary cases for any associated person
of a broker, dealer or municipal securities dealer who demonstrates
extensive experience in a field closely related to the municipal
securities activities of such broker, dealer or municipal securities
dealer. Such waiver may be granted by
(A) a registered
securities association with respect to a person associated
with a member of such association, or
(B) the appropriate
regulatory agency as defined in section 3(a)(34) of the Act
with respect to a person associated with any other broker,
dealer or municipal securities dealer.
(ii) The requirements
of paragraph (d)(ii) may be waived for any associated person
of a broker, dealer or municipal securities dealer in circumstances
sufficient to justify the granting of a waiver if such person
were seeking to register and qualify with a member of a registered
securities association as a financial and operations principal.
Such waiver may be granted by a registered securities association
with respect to a person associated with a member of such association.
(h) Continuing
Education Requirements
This section (h) prescribes
requirements regarding the continuing education of certain registered
persons subsequent to their initial qualification and registration
with a registered securities association with respect to a person
associated with a member of such association, or the appropriate
regulatory agency as defined in section 3(a)(34) of the Act with
respect to a person associated with any other broker, dealer or
municipal securities dealer ("the appropriate enforcement
authority"). The requirements shall consist of a Regulatory
Element and a Firm Element as set forth below.
(i) Regulatory Element
(A) Requirements—No
broker, dealer or municipal securities dealer shall permit
any registered person to continue to, and no registered person
shall continue to, perform duties as a registered person,
unless such person has complied with the requirements of section
(i) hereof.
Each registered
person shall complete the Regulatory Element on
the occurrence of their second registration anniversary
date and every three years thereafter or as otherwise
prescribed by the Board. On each occasion, the Regulatory
Element must be completed within 120 days after the person's
registration anniversary date. A person’s initial registration
date, also known as the “base date,” shall establish the cycle of anniversary dates for
purposes of this section (i). The content of the Regulatory
Element shall be determined by the Board for each
registration category of persons subject to the rule.
(B) Failure to
Complete—Unless otherwise determined by the Board, any
registered persons who have not completed the Regulatory Element
within the prescribed time frames will have their registrations
deemed inactive until such time as the requirements of the
program have been satisfied. Any person whose registration
has been deemed inactive under this section shall cease all
activities as a registered person and is prohibited from performing
any duties and functioning in any capacity requiring registration.
A registration that is inactive for a period of two years
will be administratively terminated. A person whose registration
is so terminated may reactivate the registration only by reapplying
for registration and meeting the qualification requirements
of the applicable provisions of this rule. The appropriate
enforcement authority may, upon application and a showing
of good cause, allow for additional time for a registered
person to satisfy the program requirements.
(C)
Disciplinary Actions—Unless otherwise determined by the appropriate
enforcement authority, a registered person will be required
to
retake
the Regulatory Element and satisfy all of its
requirements in the event such person:
(1) becomes
subject to any statutory disqualification as defined in
Section 3(a)(39) of the Securities Exchange Act of 1934;
(2) becomes
subject to suspension or to the imposition of a fine of
$5,000 or more for violation of any provision of any securities
law or regulation, or any agreement with or rule or standard
of conduct of any securities governmental agency, securities
self-regulatory organization, the appropriate enforcement
authority or as imposed by any such regulatory or self-regulatory
organization in connection with a disciplinary proceeding; or
(3) is ordered
as a sanction in a disciplinary action to
retake
the
Regulatory Element
by any securities governmental agency,
the appropriate enforcement authority or securities self-regulatory
organization.
The retaking of the Regulatory Element shall commence with participation within
120 days of the registered person becoming subject to the
statutory disqualification, in the case of (1) above, or the
completion of the sanction or the disciplinary action becomes
final, in the case of (2) or (3) above The date that the disciplinary
action becomes final will be deemed the person’s
new base
date for purposes of this section
(i).
(D) Any registered
person who has terminated association with a broker, dealer
or municipal securities dealer and who has, within two years
of the date of termination, become reassociated in a registered
capacity with a broker, dealer or municipal securities dealer
shall participate in the Regulatory Element at such intervals
that apply (second registration anniversary and every
three years thereafter) based on the initial registration
anniversary date rather than based on the date of reassociation
in a registered capacity.
(E) Any former
registered person who becomes reassociated in a registered
capacity with a broker, dealer or municipal securities dealer
more than two years after termination as such will be required
to satisfy the program’s requirements in their entirety
(second registration anniversary and every three years thereafter),
based on the most recent registration date.
(F) Definition
of registered person—For purposes of this section, the
term "registered person" means any person registered
with the appropriate enforcement authority as a municipal
securities representative, municipal securities principal,
municipal securities sales principal or financial and operations
principal pursuant to this rule.
(G) In-Firm Delivery
of the Regulatory Element
Brokers,
dealers and municipal securities dealers will be permitted
to administer the continuing education Regulatory Element
program to their registered persons by instituting an in-firm
program acceptable to the Board.
The following
procedures are required:
(1) Principal In-Charge.
The broker, dealer or municipal securities dealer has designated
a municipal securities principal or a general securities principal
to be responsible for the in-firm delivery of the Regulatory
Element.
(2) Site Requirements.
(a) The location
of all delivery sites will be under the control of the broker,
dealer or municipal securities dealer.
(b) Delivery of
Regulatory Element continuing education will take place in
an environment conducive to training. (Examples: a training
facility, conference room or other area dedicated to this
purpose would be appropriate. Inappropriate locations would
include a personal office or any location that is not or cannot
be secured from traffic and interruptions).
(c) Where multiple
delivery terminals are placed in a room, adequate separation
between terminals will be maintained.
(3) Technology
Requirements. The communication links and firm delivery computer
hardware must comply with standards defined by the Board or
its designated vendor.
(4) Supervision
(a) The broker,
dealer or municipal securities dealer’s written supervisory
procedures must contain the procedures implemented to comply
with the requirements of in-firm delivery of the Regulatory
Element continuing education.
(b) The broker,
dealer or municipal securities dealer’s written supervisory
procedures must identify the municipal securities principal
or general securities principal designated pursuant to section
(h)(i)(G)(1) of this rule and contain a list of individuals
authorized by the broker, dealer or municipal securities dealer
to serve as proctors.
(c) Firm locations
for delivery of the Regulatory Element continuing education
will be specifically listed in the broker, dealer or municipal
securities dealer’s written supervisory procedures.
(5)
Proctors
(a) All sessions
will be proctored by an authorized person during the entire
Regulatory Element session. Proctors must be present in the
session room or must be able to view the person(s) sitting
for Regulatory Element continuing education through a window
or by video monitor.
(b) The individual
responsible for proctoring at each administration will sign
a certification that required procedures have been followed,
that no material from Regulatory Element continuing education
has been reproduced, and that no candidate received any assistance
to complete the session. Such certification may be part of
the sign-in log required under section (h)(i)(G)(6)(c) of
this rule.
(c) Individuals
serving as proctors must be persons registered with a self-regulatory
organization and supervised by the designated principal for
purposes of in-firm delivery of the Regulatory Element continuing
education.
(d) Proctors will
check and verify the identification of all individuals taking
Regulatory Element continuing education.
(6)
Administration.
(a) All appointments
will be scheduled in advance using the procedures and software
specified by the Board to communicate with the Board’s system
and designated vendor.
(b) The broker,
dealer or municipal securities dealer and its proctor will
conduct each session in accordance with the administrative
appointment scheduling procedures established by the Board
or its designated vendor.
(c) A sign-in log
will be maintained at the delivery facility. Logs will contain
the date of each session, the name and social security number
of the individual taking the session, the fact that required
identification was checked, the sign-in time, the sign-out
time, and the name of the individual proctoring the session.
Such logs are required to be retained pursuant to rules G-8
and G-9.
(d) No material
will be permitted to be utilized for the session nor may any
session-related material be removed.
(e) Delivery sites
will be made available for inspection by the appropriate enforcement
authority.
(f) Before commencing
the in-firm delivery of the Regulatory Element continuing
education, brokers, dealers and municipal securities dealers
are required to file with the Board a letter of attestation
(as specified below) signed by a municipal securities principal
or general securities principal attesting to the establishment
of required procedures addressing principal in-charge, supervision,
site, technology, proctors, and administrative requirements.
Letters filed with the Board should be sent to the Municipal
Securities Rulemaking Board, Professional Qualifications Department,
1900 Duke Street, Suite 600, Alexandria, Virginia, 22314.
Letter of Attestation for In-Firm Delivery
of Regulatory Element Continuing Education
{Name of broker, dealer or municipal securities
dealer} has established procedures for delivering Regulatory
Element continuing education on its premises. I have determined
that these procedures are reasonably designed to comply with
SRO requirements pertaining to in-firm delivery of Regulatory
Element continuing education, including that such procedures
have been implemented to comply with principal in-charge,
supervision, site, technology, proctors, and administrative
requirements.
_____________________________
Signature
_____________________________
Printed name
Title (Must be signed by a municipal securities
principal or general securities principal of the broker, dealer
or municipal securities dealer)
_____________________________
Date
(ii) Firm Element
(A) Persons Subject
to the Firm Element—The requirements of this section
shall apply to any person registered with a broker, dealer
or municipal securities dealer who has direct contact with
customers in the conduct of the broker, dealer or municipal
securities dealer's securities sales, trading and investment
banking activities, and to the immediate supervisors of such
persons (collectively, "covered registered persons").
"Customer" shall mean any natural person and any
organization, other than another broker, dealer or municipal
securities dealer, executing securities transactions with
or through or receiving investment banking services from a
broker, dealer or municipal securities dealer.
(B) Standards
for the Firm Element
(1) Each broker,
dealer and municipal securities dealer must maintain a continuing
and current education program for its covered registered
persons to enhance their securities knowledge, skill, and
professionalism. At a minimum, each broker, dealer and municipal
securities dealer shall at least annually evaluate and prioritize
its training needs and develop a written training plan.
The plan must take into consideration the broker, dealer
and municipal securities dealer’s size, organizational
structure, and scope of business activities, as well as
regulatory developments and the performance of covered registered
persons in the Regulatory Element. If a broker, dealer or
municipal securities dealer’s analysis determines a
need for supervisory training for persons with supervisory
responsibility, such training must be included in the broker,
dealer or municipal securities dealer’s training plan.
(2) Minimum
Standards for Training Programs—Programs used to implement
a broker, dealer or municipal securities dealer's training
plan must be appropriate for the business of the broker,
dealer or municipal securities dealer and, at a minimum
must cover the following matters concerning securities products,
services and strategies offered by the broker, dealer or
municipal securities dealer:
(a) General investment features and associated risk factors;
(b) Suitability and sales practice considerations;
(c) Applicable regulatory requirements.
(3) Administration
of Continuing Education Program—A broker, dealer or
municipal securities dealer must administer its continuing
education programs in accordance with its annual evaluation
and written plan and must maintain records documenting the
content of the programs and completion of the programs by
covered registered persons.
(C) Participation
in the Firm Element—Covered registered persons included
in a broker, dealer or municipal securities dealer’s
plan must take all appropriate and reasonable steps to participate
in continuing education programs as required by the broker,
dealer or municipal securities dealer.
(D) Specific Training
Requirements--The appropriate enforcement authority may require
a broker, dealer or municipal securities dealer, individually
or as part of a larger group, to provide specific training
to its covered registered persons in such areas the appropriate
enforcement authority deems appropriate. Such a requirement
may stipulate the class of covered registered persons for
which it is applicable, the time period in which the requirement
must be satisfied and, where appropriate, the actual training
content.
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