Notice To Members 89-52

SEC Approval of Amendment to Schedule C of By-Laws to Establish Waiting Periods Between Attempts to Pass Qualification Examinations — Effective July 17, 1989

Published Date:

SUGGESTED ROUTING*

Legal & Compliance
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Training

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EXECUTIVE SUMMARY

The Securities and Exchange Commission recently approved an amendment to Schedule C of the By-Laws that establishes waiting periods between attempts to pass qualification examinations.

BACKGROUND AND SUMMARY

In response to certain recommendations of the NASD Regulatory Review Task Force, the Qualifications Committee of the NASD Board of Governors has reviewed the NASD qualification system to consider additional means to maintain an appropriate level of knowledge and professionalism for persons associated with NASD members. This review not only addressed the adequacy of existing NASD qualifications standards, but also considered issues relating to the need to provide the investing public that registered persons remain knowledgeable about products and services available to investors, as well as applicable rules, regulations, and policies governing the investment banking and securities business.

The Securities and Exchange Commission has approved an amendment to Part VI of Schedule C to the NASD By-Laws to establish waiting periods between attempts to pass NASD qualification examinations. Waiting periods were in effect in the NASD qualification program until 1979 and now are used in connection with the qualification examinations of the Municipal Securities Rulemaking Board (MSRB). The extensive automation of the registration and qualification process has made it possible for applicants to make multiple attempts to pass examinations in rapid succession, often within very brief periods.

The NASD believes this practice promotes "test learning" rather than a proper understanding of the substantive material covered in the various qualification examinations. The waiting periods are intended to encourage a more professional approach to the examination process and to training applicants, as well as to protect the integrity of the qualification examinations.

In the interest of uniformity, the waiting periods, except for the Series 7 examination, are the same as those prescribed by the MSRB — 30 days between the first and second attempts, 30 days between the second and third attempts, and six months after the third and all subsequent attempts. For the Series 7 examination, the waiting period is based on the monthly administration of that examination.

Questions concerning this notice can be directed to Craig L. Landauer, Senior Attorney, Office of General Counsel, at (202) 728-8291.

AMENDMENT TO PART VI, SCHEDULE C OF THE NASD BY-LAWS

(Note: New text is underlined; deleted text is in brackets.)

VI

QUALIFICATION OF EXAMINATIONS AND WAIVER OF REQUIREMENTS

(6) Any person associated with a member who fails to pass a qualification examination prescribed by the Corporation shall be permitted to take the examination again after either a period of 30 calendar days has elapsed from the date of the prior examination or the next administration of an examination administered on a monthly basis, except that any person who fails to pass an examination three or more times in succession shall be prohibited from again taking such examination either until a period of 180 calendar days has elapsed from the date of such person's last attempt to pass the examination or until the sixth subsequent administration of an examination administered on a monthly basis.