11706 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices 

196 15 U.S.C. 78s(b)(2). 

197 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 73708 

(December 1, 2014), 79 FR 72225 (December 5, 

2014) (the ‘‘Proposing Release’’). 

4See Letters from Anonymous, dated December 

25, 2014; Leslie M. Norwood, Managing Director 

and Associate General Counsel, Securities Industry 

and Financial Markets Association (‘‘SIFMA’’), 

dated December 26, 2014 (‘‘SIFMA Letter’’); 

Anonymous Attorney, on behalf of a registered 

investment advisor and municipal advisor 

(‘‘Anonymous Attorney’’), dated December 26, 2014 

(‘‘Anonymous Letter’’); Tamara K. Salmon, Senior 

Associate Counsel, Investment Company Institute 

(‘‘ICI’’), dated December 29, 2014 (‘‘ICI Letter’’); and 

Terri Heaton, President, National Association of 

Municipal Advisors (‘‘NAMA’’), dated January 27, 

2015 (‘‘NAMA Letter No. 1’’). 

5See Letter to Secretary, Commission, from 

Lawrence P. Sandor, Deputy General Counsel, 

MSRB, dated February 5, 2015 (‘‘MSRB Response 

Letter No. 1’’). 

6See Letter to Secretary, Commission, from 

Lawrence P. Sandor, Deputy General Counsel, 

MSRB, dated February 5, 2015. Amendment No. 1 

partially amends the text of the proposed rule 

change to revise Rules G–1(a)(ii)(B), G–3(a)(i)(A)(2) 

and G–3(b)(i)(B) by deleting the following clause: 

‘‘Except to the extent a person must be qualified as 

a municipal advisor representative to perform such 

services.’’ The MSRB believes that it would be 

premature to include such clause until certain 

foundational rules regarding municipal advisors are 

approved and effective. 

7See Letters from Dave A. Sanchez Attorney at 

Law (‘‘Sanchez’’), dated February 12, 2015 

(‘‘Sanchez Letter’’); and Terri Heaton, President, 

NAMA, dated February 12, 2015 (‘‘NAMA Letter 

No. 2’’). 

8See Letter to Secretary, Commission, from 

Lawrence P. Sandor, Deputy General Counsel, 

MSRB, dated February 20, 2015 (‘‘MSRB Response 

Letter No. 2’’ and together with MSRB Response 

Letter No. 1, the ‘‘MSRB Response Letters’’). 

9See Letter to Secretary, Commission, from 

Michael Cowart, Assistant General Counsel, MSRB, 

dated February 25, 2015. Amendment No. 2 

partially amends Amendment No. 1 to correct a 

technical error in a quotation of rule text. 

10See supra note 3 at 2. 

11See Exhibit 5 of the Amendments. 

12 Id. 

13See supra note 3 at 9. 

14 Id. 

15 Id. 

16See supra note 11. 

17 Id. 

V. Conclusion 

It is therefore ordered pursuant to 

section 19(b)(2) of the Act 196 that the 

proposed rule change (SR–FINRA– 

2014–028) be and hereby is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.197

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–04419 Filed 3–3–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74384; File No. SR–MSRB– 

2014–08] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing of Amendment 

No. 1 and Amendment No. 2 and Order 

Granting Accelerated Approval of a 

Proposed Rule Change Consisting of 

Proposed Amendments to MSRB Rules 

G–1, on Separately Identifiable 

Department or Division of a Bank; 

G–2, on Standards of Professional 

Qualification; G–3, on Professional 

Qualification Requirements; and D–13, 

on Municipal Advisory Activities 

February 26, 2015. 

I. Introduction 

On November 18, 2014, the Municipal 

Securities Rulemaking Board (the 

‘‘MSRB’’ or ‘‘Board’’) filed with the 

Securities and Exchange Commission 

(the ‘‘SEC’’ or ‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change consisting of proposed 

amendments to MSRB Rules G–1, on 

separately identifiable department or 

division of a bank; G–2, on standards of 

professional qualification; G–3, on 

professional qualification requirements; 

and D–13, on municipal advisory 

activities (the ‘‘proposed rule change’’). 

The proposed rule change was 

published for comment in the Federal 

Register on December 5, 2014.3

The Commission received five 

comment letters on the proposed rule 

change.4 On February 5, 2015, the 

MSRB submitted a response to the 

comments on the proposed rule change 5

and filed Amendment No. 1 

(‘‘Amendment No. 1’’).6

The Commission received two 

comment letters on Amendment No. 1.7

On February 20, 2015, the MSRB 

submitted a response to the comments 

on Amendment No.1.8 On February 25, 

2015, the MSRB submitted Amendment 

No. 2 (‘‘Amendment No. 2’’ and together 

with Amendment No. 1, the 

‘‘Amendments’’).9 The Commission is 

publishing this notice to solicit 

comments on the Amendments from 

interested persons and is approving the 

proposed rule change, as modified by 

the Amendments, on an accelerated 

basis. 

II. Description of the Proposed Rule 

Change 

According to the MSRB, the purpose 

of the proposed rule change is to 

establish professional qualification 

requirements for municipal advisors 

and their associated persons and to 

make related changes to select MSRB 

rules.10 A full description of the 

proposed rule change is contained in 

the Proposing Release. 

1. Proposed Amendments to Rule G–1 

The proposed amendments to Rule G– 

1 includes language to provide that, for 

purposes of its municipal advisory 

activities, the term ‘‘separately 

identifiable department or division of a 

bank’’ would have the same meaning as 

used in 17 CFR 240.15Ba1–1(d)(4).11

2. Proposed Amendments to Rule G–2 

The proposed amendments to Rule G– 

2 add a basic requirement that no 

municipal advisor shall engage in 

municipal advisory activities unless 

such municipal advisor and every 

natural person associated with such 

municipal advisor is qualified in 

accordance with the rules of the 

Board.12

3. Proposed Amendments to Rule G–3 

Apprenticeship 

MSRB Rule G–3 currently requires a 

municipal securities representative to 

serve an apprenticeship period of 90 

days before transacting business with 

any member of the public or receiving 

compensation for such activities.13 The 

MSRB believes that dealers and 

municipal advisors should determine 

the length and nature of the initial 

training for newly registered persons, 

consistent with industry feedback and 

the approach taken by Financial 

Industry Regulatory Authority 

(‘‘FINRA’’).14 Accordingly, the proposed 

amendments to Rule G–3 eliminate the 

apprenticeship requirement for 

municipal securities representatives 

and, similarly, do not propose an 

apprenticeship requirement for 

municipal advisor representatives.15

New Registration Classifications 

The proposed amendments to Rule G– 

3 create two new registration 

classifications: (i) Municipal advisor 

representative; and (ii) municipal 

advisor principal.16

The proposed amendments to Rule G– 

3 define a ‘‘municipal advisor 

representative’’ as a natural person 

associated with a municipal advisor 

who engages in municipal advisory 

activities on the municipal advisor’s 

behalf, other than a person performing 

only clerical, administrative, support or 

similar functions.17 The proposed 

amendments to Rule G–3 require each 

municipal advisor representative to take 

and pass the Municipal Advisor 

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18 Id. 

19 Id. 

20 Id. 

21 Id. 

22 Id. 

23See supra note 3 at 5. 

24See supra note 11. 25 Id. 26See supra note 3 at 10. 27 Id. 28 Id. at 6. 29See supra notes 4 and 7. 30See supra notes 5 and 8. 31See SIFMA Letter at 2. 32 Id. 

33See MSRB Response Letter No. 1 at 3. 34 Id. at 3–4. 35 Id. at 4. 36 Id. 37See SIFMA Letter at 3. 

38 Id. at 4. 

39 Id. at 3. 

40See MSRB Response Letter No. 1 at 4. 

41 Id. 

42 Id. 

Representative Qualification 

Examination prior to being qualified as 

a municipal advisor representative.18

The proposed amendments to Rule G– 

3 define a ‘‘municipal advisor 

principal’’ as a natural person 

associated with a municipal advisor 

who is qualified as a municipal advisor 

representative and is directly engaged in 

the management, direction or 

supervision of the municipal advisory 

activities of the municipal advisor and 

its associated persons.19 The proposed 

amendments to Rule G–3 require each 

municipal advisor to designate at least 

one municipal advisor principal.20

In addition, the proposed 

amendments to Rule G–3 require any 

person who ceases to be associated with 

a municipal advisor for two or more 

years (at any time after having qualified 

as a municipal advisor representative) to 

take and pass the Municipal Advisor 

Representative Qualification 

Examination prior to being qualified as 

a municipal advisor representative, 

unless a waiver is granted.21

MSRB Waiver 

The proposed amendments to Rule G– 

3 and the Supplementary Material 

permit the MSRB to consider waiving 

the requirement that a municipal 

advisor representative or municipal 

advisor principal pass the Municipal 

Advisor Representative Qualification 

Examination in extraordinary cases: (1) 

Where the applicant participated in the 

development of the Municipal Advisor 

Representative Qualification 

Examination as a member of the MSRB’s 

Professional Qualifications Advisory 

Committee (‘‘PQAC’’); or (2) where the 

applicant previously qualified as a 

municipal advisor representative by 

passing the Municipal Advisor 

Representative Qualification 

Examination and such qualification 

lapsed pursuant to Rule G–3(d)(ii)(B).22

4. Proposed Amendments to Rule D–13 

Currently, Rule D–13 defines 

municipal advisory activities as the 

activities described in Section 

15B(e)(4)(A)(i) and (ii) of the Act.23 The 

proposed amendments to Rule D–13 

incorporate Commission rules into the 

definition by providing that the term 

‘‘municipal advisory activities’’ means, 

except as otherwise specifically 

provided by rule of the Board, the 

activities described in Section 

15B(e)(4)(A)(i) and (ii) of the Act and 

the rules and regulations promulgated 

thereunder.24

5. Technical Amendments 

The proposed rule change would also 

make minor technical amendments to 

select MSRB rules, such as amending 

Rule G–3(a)(ii) to correctly re-letter G– 

3(a)(ii)(D) as G–3(a)(ii)(C).25

6. Effective Date 

The MSRB requested that the 

proposed rule change become effective 

60 days following the date of 

Commission approval.26 The MSRB 

stated that the effective date of the 

Municipal Advisor Representative 

Qualification Examination will be 

announced by the MSRB with at least 30 

days notice.27 The MSRB further stated 

that prospective municipal advisor 

representatives will have one year from 

the effective date of the Municipal 

Advisor Representative Qualification 

Examination to pass such 

examination.28

III. Summary of Comments Received 

and the MSRB’s Response 

The Commission received five 

comment letters in response to the 

proposed rule change (four of which 

provide substantive comments) and two 

comment letters in response to 

Amendment No. 1.29 The Commission 

received MSRB Response Letter No. 1 in 

response to comments regarding the 

proposed rule change and MSRB 

Response Letter No. 2 in response to 

comments regarding Amendment No. 

1.30 A full description of the comments, 

MSRB responses, and amendments are 

contained in the comment letters, the 

MSRB Response Letters, and the 

Amendments, respectively. 

1. SIFMA Letter 

Professional Qualifications Examination 

SIFMA believes that persons currently 

qualified to perform municipal 

securities activities should also be 

qualified to perform municipal advisor 

activities.31 In other words, SIFMA 

believes that after the effective date of 

the proposed rule change, the Series 52 

qualification examination should be 

sufficient for both municipal securities 

representatives and municipal advisor 

representatives.32

Given the new regulatory regime for 

municipal advisors and the differences 

in the roles of municipal advisor and 

securities professionals, the MSRB does 

not believe the Series 52 examination 

(or the general securities representative 

examination that qualified municipal 

securities representatives before 

November 7, 2011) would sufficiently 

determine whether a municipal advisor 

professional meets a minimal level of 

competency to engage in municipal 

advisory activities.33 The MSRB stated 

that the focus of the Series 52 

examination is not on municipal 

advisory activities.34 The MSRB further 

stated that the questions being 

developed for the Municipal Advisor 

Representative Qualification 

Examination target the job 

responsibilities of municipal advisor 

professionals.35 The MSRB noted that 

the roles and job responsibilities of 

municipal advisor representatives and 

municipal securities representatives are 

distinct, and the body of law that 

applies to each type of professional 

reflects the differences in such roles and 

responsibilities.36

SIFMA is concerned that 

development of a new qualification 

examination would take an additional 

two to three years.37 SIFMA states that 

because the Series 52 examination 

currently exists there would be no 

unnecessary delay in developing test 

material and administering the test, 

thereby avoiding an unnecessary delay 

in testing.38 SIFMA also contends it 

would be faster and more cost efficient 

for municipal advisor professionals to 

take the Series 52 examination.39

The MSRB does not agree with 

SIFMA’s assertion that developing a 

new qualification examination would 

take an additional two to three years.40

The MSRB stated that PQAC has been 

working expeditiously in developing the 

Municipal Advisor Representative 

Qualification Examination.41 The MSRB 

also reiterated its position that it does 

not believe the Series 52 examination 

would test the basic competency of 

municipal advisor professionals.42 The 

MSRB believes that while it is hard to 

dispute that using an existing exam 

would be faster and less costly, such an 

approach would fail to demonstrate 

basic competency of municipal advisor 

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43 Id. 4–5. 

44 Id. at 5. 

45See SIFMA Letter at 5. 

46See MSRB Response Letter No. 1 at 5. 

47 Id. 

48 Id. 

49See SIFMA Letter at 5. 

50 Id. 

51See MSRB Response Letter No. 1 at 5. 

52 Id. 

53 Id. 

54See SIFMA Letter at 6. 

55 Id. at 2. 

56See MSRB Response Letter No. 1 at 6. 

57 Id. 

58 Id. 

59See SIFMA Letter at 6. 

60 Id. 

61See MSRB Response Letter No. 1 at 6. 

62 Id. 

63See SIFMA Letter at 6. 

64 Id. at 6–7. 

65See MSRB Response Letter No. 1 at 6. 

66 Id. 

67 Id. at 7. 

68 Id. 

69 Id. 

70See ICI Letter at 2. 

71 Id. 

72See MSRB Response Letter No. 1 at 7. 

professionals to engage in municipal 

advisory activities.43 The MSRB stated 

that the costs, timing, and efficiency of 

the proposed rule change should only 

be appropriately compared to 

reasonable regulatory alternative—a 

criterion the Series 52 examination does 

not meet.44

SIFMA suggests that developing a 

separate test for municipal advisor 

professionals is an inefficient process 

and unfairly burdens the large 

percentage of municipal advisor 

professionals who are associated with 

municipal securities dealers.45

The MSRB does not believe that such 

individuals would be unfairly burdened 

by a new test.46 To the contrary, the 

MSRB believes that failing to develop a 

separate test for municipal advisor 

professionals could place individuals 

not associated with dealers at a 

competitive disadvantage and could 

result in an undue burden on small 

municipal advisors.47 The MSRB stated 

that the market for municipal advisory 

services is separate and distinct from 

the market for the services of municipal 

securities brokers and dealers and, as 

such, it is both appropriate and 

reasonable that all professionals 

providing municipal advisory services 

should be evaluated according to 

identical criteria, regardless of the status 

of their employer.48

Grandfathering Current Municipal 

Securities Representatives 

SIFMA suggests that if the MSRB 

decides to continue with the 

development of a new test for 

qualification as a municipal advisor 

representative, then associated persons 

currently qualified as municipal 

securities representatives should be 

grandfathered in as municipal advisor 

representatives, if they so choose.49

SIFMA believes that this methodology 

would be consistent with other major 

changes to qualifications 

examinations.50

The MSRB responded by reiterating 

its view that grandfathering would be 

inconsistent with the intent of 

Congress.51 The MSRB believes that 

requiring municipal advisor 

professionals to take and pass a basic 

qualification examination ensures that 

these individuals possess a minimum 

level of understanding of the role and 

responsibilities of municipal advisors 

and the applicable rules and 

regulations.52 The MSRB stated that 

investors, municipal entities, and the 

general public will be better served by 

a regulatory regime that requires all 

municipal advisor professionals to pass 

the same basic competency test.53

Economic Analysis 

SIFMA believes that the cost-benefit 

analysis contained in in the Proposing 

Release was inadequate.54 SIFMA 

suggests that the MSRB conduct a full 

cost-benefit analysis of the proposed 

rule change prior to its approval.55

The MSRB responded by stating that 

it considered the costs and benefits of 

the proposed rule change and even 

utilized the cost estimate per individual 

test taker provided by SIFMA in 

determining the likely initial cost to the 

industry and the likely ongoing 

expense.56 The MSRB also refined its 

estimate of the initial cost based on the 

number of Form MA-Is filed with the 

SEC by registered municipal advisors 

(as of January 20, 2015), which the 

MSRB stated is not materially different 

from the cost estimate used in its 

economic analysis.57 The MSRB 

believes its economic analysis was 

sound and that no further analysis is 

warranted.58

Continuing Education Requirement for 

Municipal Advisor Representatives 

SIFMA suggests that the MSRB 

develop continuing education 

requirements for municipal advisor 

representatives.59 SIFMA believes this 

concern was not addressed by the 

proposed rule change.60

The MSRB responded by stating that 

such suggestion is not relevant to the 

proposed rule change.61 The MSRB 

noted that the Act requires the MSRB to 

provide continuing education 

requirements for municipal advisors 

and it will likely consider rulemaking 

on this topic in the near future.62

PQAC Nomination Process 

SIFMA and its members believe that 

the process for nomination to the 

MSRB’s PQAC should be fully 

transparent and the members of PQAC 

should be listed on the MSRB’s Web 

site.63 Also, SIFMA further states that it 

is in the best interest of every industry 

member to ensure that the test questions 

that are developed are fair, even-handed 

and suitable for a basic competency 

examination.64

The MSRB stated that it understands 

the concern raised by SIFMA and 

believes that its examinations are 

developed in a fair, even-handed and 

suitable manner.65 The MSRB stated it 

contemplated publishing the names of 

PQAC members but is concerned that 

such transparency will undermine the 

test development process.66 The MSRB 

believes that it is not appropriate to 

publish the names of PQAC members 

given the importance of confidentiality 

and the integrity of the process.67 The 

MSRB further stated that it contracts 

with an external testing professional to 

ensure the overall integrity of the test 

development process, including the 

selection of PQAC members, is fair and 

in accordance with accepted standards 

for professional test development.68

Nevertheless, the MSRB stated that it 

will consider providing more 

information about the selection process 

and the criteria used by the MSRB to 

select PQAC members.69

2. ICI Letter 

ICI recommends that the MSRB 

reconsider its current approach to 

develop only one examination for 

representatives because such approach 

will result in use of an examination that 

does not sufficiently test competencies 

relevant to the advisory representative’s 

business and is inconsistent with the 

approach taken by other self-regulatory 

organizations.70 ICI suggests that the 

MSRB utilize at least two 

examinations—one for representatives 

of a municipal advisor whose advisory 

activities are limited to municipal fund 

securities, and one for representatives 

whose advice is limited to municipal 

securities other than municipal fund 

securities.71

The MSRB responded by stating that 

it believes that individuals who engage 

in municipal advisory activities 

regarding municipal fund securities 

should demonstrate knowledge of all of 

the rules and regulations governing 

municipal advisors.72 The MSRB stated 

that these rules and regulations 

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73 Id. 74 Id. 75See ICI Letter at 3–4. 76 Id. 77See MSRB Response Letter at 7–8. 78 Id. 79 Id. at 8. 80See Anonymous Letter No. 1 at 1. 

81 Id. 82 Id. 83 Id. at 2. 84 Id. at 3. 85See MSRB Response Letter No. 1 at 8. 86 Id. 87 Id. 88 Id. 89 Id. 90 Id. 

91 Id. at 8–9. 

92 Id. at 9. 

93See NAMA Letter No. 1 at 1. 

94 Id. at 2. 

95 Id. at 1. 

96 Id. at 2. 

97 Id. 

98See MSRB Response Letter No. 1 at 9. 

99 Id. 

100See Sanchez Letter at 1. 

generally will apply to all municipal 

advisors, regardless of the product that 

is the subject of the advice provided.73

As such, the MSRB believes that all 

municipal advisors should have 

knowledge of the regulatory framework 

and the basic obligations of municipal 

advisors.74

ICI stated that it recognizes its 

recommendation of two examinations 

may impose additional burdens, 

however, ICI believes such approach is 

consistent with the manner in which 

self-regulatory organizations have long 

implemented examination 

requirements.75 ICI further stated that 

there is a long-standing self-regulatory 

organization practice of developing 

discrete examinations based on the 

nature of the business conducted.76

The MSRB responded by noting that 

self-regulatory organizations have 

developed a number of qualification 

examinations; however, most of these 

examinations are focused on the role of 

the investment professional, such as 

compliance officer (Series 14), 

investment adviser (Series 65), 

operations professional (Series 99), 

research analyst (Series 86 and 87), 

equity trader (Series 55), financial and 

operations principal (Series 27), general 

securities principal (Series 24), general 

securities sales supervisor (Series 9 and 

10), and general securities 

representative (Series 7).77 The MSRB 

stated that for each of these 

examinations, a test taker may be 

required to demonstrate knowledge of a 

variety of products, consistent with the 

role of the individual; even where an 

examination is limited a candidate is 

expected to be familiar with a variety of 

products.78 Consequently, the MSRB 

believes its approach to the Municipal 

Advisor Representative Qualification 

Examination is consistent with its prior 

practice and the practice of other selfregulatory organizations.79

3. Anonymous Letter 

Anonymous Attorney believes that 

individuals who are Chartered Financial 

Analyst (‘‘CFA’’) charterholders should 

be exempt from the proposed Municipal 

Advisor Representative Qualification 

Examination requirement in the manner 

suggested by the CFA Institute (‘‘CFAI’’) 

in the CFAI’s response to MSRB 

Regulatory Notice 2014–08.80 CFAI 

proposed that the examination 

requirement be constructed in a 

modular fashion with one component 

focusing on the knowledge of business 

and the second component devoted to 

the rules and regulations of the 

municipal securities market.81 CFAI 

also requested that CFA charterholders 

be granted a waiver from the 

examination component focusing on the 

knowledge of business.82 Anonymous 

Attorney believes that separating the 

examination into two modules can be 

undertaken with minimal effort.83

Anonymous Attorney also stated that 

the examination requirement is 

burdensome and concluded that such 

examination could drive some CFA 

charterholders out of the municipal 

advisory business.84

The MSRB stated that it recognizes 

the requirements established by CFAI 

for CFA charterholders and understands 

that fixed income securities are covered 

on its examinations.85 However, the 

MSRB explained that the Municipal 

Advisor Representative Qualification 

Examination will focus on the role and 

responsibilities of municipal advisor 

professionals and the rules and 

regulations governing their conduct.86

The MSRB highlighted that the 

Municipal Advisor Representative 

Qualification Examination will not 

solely test a candidate’s knowledge of 

municipal securities.87 In addition, the 

MSRB stated that Anonymous Attorney 

has not provided any evidence that the 

CFA examinations (Levels I, II or III) test 

an individual’s knowledge of the role 

and responsibilities of a municipal 

advisor.88 The MSRB believes the 

assertion that CFA charterholders may 

be driven out of the market because of 

the new test is purely speculative.89 The 

MSRB further stated that Anonymous 

Attorney offers no information regarding 

the number of CFA charterholders that 

are engaged in municipal advisory 

activities or why they would be in any 

different position than individuals who 

passed other qualification 

examinations.90 Given that the costs and 

time associated with receiving and 

maintaining a CFA charter exceed any 

reasonable estimate of the costs to 

complete a new municipal advisor 

examination, the MSRB stated its 

expectation that the new exam would 

add only marginally to a CFA 

charterholder’s professional 

qualification expenses.91 For the 

foregoing reasons, the MSRB does not 

believe that a modular examination for 

municipal advisor professionals would 

be appropriate.92

4. NAMA Letter No. 1 

NAMA supports the efforts of the 

MSRB to set professional qualification 

standards for municipal advisor 

professionals.93 NAMA believes the 

MSRB has taken the most cost-effective 

approach at this time.94 Additionally, 

NAMA supports the decision by the 

MSRB to have a uniform competency 

requirement for all persons deemed to 

be municipal advisor representatives 

regardless of whether such persons have 

passed other examinations (such as the 

Series 52 or Series 7 examinations).95

Consistent with the proposed rule 

change, NAMA does not believe that the 

MSRB should grandfather individuals 

who have passed such examinations.96

NAMA suggests, however, that the 

MSRB continue to evaluate the 

feasibility and wisdom of supplemental 

or targeted subject matter 

examinations.97

The MSRB does not believe that a 

supplemental or targeted subject area 

examination approach is appropriate.98

The MSRB believes it has a 

demonstrated commitment to seeking 

ways to improve regulatory efficiency 

generally and would be open to 

assessing alternative approaches to the 

assessment of professional 

qualifications once the municipal 

advisor regulatory framework is fully 

implemented.99

5. Sanchez Letter and NAMA Letter No. 

2 

Sanchez expressed concern that 

Amendment No. 1 will effectively create 

an exemption for municipal securities 

representatives who engage in financial 

advisory and consultant services for 

issuers in connection with the issuance 

of municipal securities (the ‘‘subject 

activity’’) from having to pass the 

Municipal Advisor Representative 

Qualification Examination to qualify as 

municipal advisor representatives.100

Similarly, NAMA expressed concern 

that Amendment No. 1 would provide 

municipal securities representatives 

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101See NAMA Letter No. 2 at 1. 

102 Id. at 1–2. 

103See MSRB Response Letter No. 2 at 2. 

104 Id. 

105 Id. 

106 Id. 

107 Id. at 2–3. 

108 Id. at 3. 

109 15 U.S.C. 78o–4(b)(2)(A). 

110 Id. 

111 15 U.S.C. 78o–4(b)(2)(L)(iii). 

112 15 U.S.C. 78o–4(b)(2)(L)(iv). 

113 15 U.S.C. 78c(f). 

who engage in the subject activity an 

exemption from having to pass the 

Municipal Advisor Representative 

Qualification Examination because the 

subject activity would be considered 

municipal securities representative 

activity.101 NAMA also stated that 

Amendment No. 1 expands the 

definition of municipal advisory 

activity, as provided by the Act and 

Commission rules, because it appears to 

allow dealers and bank dealers to 

engage in municipal advisory activity 

without proper registration.102

The MSRB responded by clarifying 

that Amendment No. 1 would not have 

the effect of limiting, and was not 

intended to limit, the applicability of 

the municipal advisor regulatory 

regime, including MSRB rules governing 

the municipal advisory activities of 

municipal advisors, or to alter the 

definition of municipal advisory 

activities.103 The MSRB noted that the 

determination of whether an individual 

is engaged in municipal advisory 

activities is based on the scope of the 

individual’s activities, and not the 

individual’s status.104 The MSRB stated 

that due to such principle, a dealer and 

its associated persons could 

simultaneously be subject to MSRB 

rules applicable to dealers and MSRB 

rules applicable to municipal 

advisors.105

The MSRB stated that Amendment 

No. 1 would retain the current language 

in the MSRB professional qualification 

rules to prevent any confusion regarding 

the application of MSRB rules governing 

dealers to the financial advisory 

activities of municipal securities 

representatives while MSRB rules 

governing municipal advisors are 

developed and implemented and until 

the MSRB makes any future 

determinations regarding the 

application of such rules.106 The MSRB 

further stated that any individual 

engaged in or supervising municipal 

advisory activities must comply with 

the professional qualification 

requirements for municipal advisor 

representatives, which will include at a 

future date the taking and passing of the 

Municipal Advisor Representative 

Qualification Examination.107 The 

MSRB also represented that 

Amendment No. 1 has no bearing on the 

definition of municipal advisory 

activities.108

IV. Discussion and Commission 

Findings 

The Commission has carefully 

considered the proposed rule change, as 

modified by the Amendments, as well 

as the comments received, and the 

responses by the MSRB to such 

comments. The Commission finds that 

the proposed rule change is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to the MSRB. 

In particular, the Commission finds 

that the proposed rule change is 

consistent with Section 15B(b)(2)(A) of 

the Act, which provides that the 

MSRB’s rules shall provide that no 

municipal securities broker or 

municipal securities dealer shall effect 

any transaction in, or induce or attempt 

to induce the purchase or sale of, any 

municipal security, and no broker, 

dealer, municipal securities dealer, or 

municipal advisor shall provide advice 

to or on behalf of a municipal entity or 

obligated person with respect to 

municipal financial products or the 

issuance of municipal securities, unless 

. . . such municipal securities broker or 

municipal securities dealer and every 

natural person associated with such 

municipal securities broker or 

municipal securities dealer meet such 

standards of training, experience, 

competence, and such other 

qualifications as the Board finds 

necessary or appropriate in the public 

interest or for the protection of investors 

and municipal entities or obligated 

persons.109 Section 15B(b)(2)(A) of the 

Act also provides that, in connection 

with the definition and application of 

such standards, the MSRB may 

appropriately classify municipal 

advisors and their associated persons, 

specify that all or any portion of such 

standards shall be applicable to any 

such class, and require persons in any 

such class to pass an examination 

regarding such standards of 

competence.110 The Commission 

believes that the proposed rule change 

is consistent with Section 15B(b)(2)(A) 

of the Act because the proposed rule 

change requires individuals who engage 

in or supervise municipal advisory 

activities to pass a professional 

qualification examination which is an 

established means for determining the 

basic competency of individuals in a 

particular class. The Commission 

believes that requiring prospective 

municipal advisor representatives to 

pass a basic qualification examination 

will protect investors, municipal 

entities, and obligated persons by 

ensuring such representatives have a 

basic understanding of the role of a 

municipal advisor representative and 

the rules and regulations governing such 

individuals. 

Additionally, Section 15B(b)(2)(L)(iii) 

of the Act provides that the MSRB’s 

rules shall provide professional 

standards with respect to municipal 

advisors.111 The Commission believes 

that the proposed rule change is 

consistent with Section 15B(b)(2)(L)(iii) 

of the Act because it would establish 

professional standards for those 

individuals engaged in or supervising 

municipal advisory activities by 

requiring such individuals to 

demonstrate a basic competency 

regarding the role of municipal advisor 

representatives and the rules and 

regulations governing the conduct of 

such persons. 

Section 15B(b)(2)(L)(iv) of the Act 

requires that MSRB rules not impose a 

regulatory burden on small municipal 

advisors that is not necessary or 

appropriate in the public interest and 

for the protection of investors, 

municipal entities, and obligated 

persons, provided that there is robust 

protection of investors against fraud.112

The Commission believes that the 

proposed rule change is consistent with 

Section 15B(b)(2)(L)(iv) of the Act. 

While the proposed rule change would 

affect all municipal advisors, including 

small municipal advisors, it is a 

necessary and appropriate regulatory 

burden in order to establish the baseline 

competence of those individuals 

engaged in municipal advisory 

activities. Establishing a baseline 

competence is necessary for the 

protection of investors, municipal 

entities, and obligated persons. The 

Commission also believes such baseline 

competence is in the public interest 

because it promotes compliance with 

the rules and regulations governing the 

conduct of municipal advisors. 

In approving the proposed rule 

change, the Commission has considered 

the proposed rule change’s impact on 

efficiency, competition, and capital 

formation.113 The Commission believes 

that the proposed rule change includes 

accommodations that help promote 

efficiency. Specifically, the MSRB has 

provided a one-year grace period for 

passing the examination. As noted by 

the MSRB, the grace period provides 

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Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices 11711 

114See supra note 6. 

115See supra note 9. 

116See supra note 6. 

117See supra note 9. 

118 Id. 

119See supra note 7. 

120See NAMA Letter No. 2 at 1–2. 

121See MSRB Response Letter No. 2 at 2. 

122 Id. 

municipal advisor representatives with 

sufficient time to study and take the 

examination without causing an undue 

disruption to the business of the 

municipal advisor. The Commission 

does not believe that the proposed rule 

change would impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act since it would apply 

equally to all municipal advisor 

representatives who engage in 

municipal advisory activities. 

Furthermore, the Commission believes 

that the potential burdens created by the 

proposed rule change are to be likely 

outweighed by the benefits of 

establishing baseline professional 

qualification standards and promoting 

compliance with the rules and 

regulations governing the conduct of 

municipal advisors. The Commission 

has reviewed the record for the 

proposed rule change and notes that the 

record does not contain any information 

to indicate that the proposed rule 

change would have a negative effect on 

capital formation. 

As noted above, the Commission 

received five comment letters on the 

proposed rule change and two comment 

letters on Amendment No. 1. The 

Commission believes that the MSRB 

considered carefully and responded 

adequately to the comments and 

concerns regarding the proposed rule 

change and Amendment No. 1. For the 

reasons noted above, including those 

discussed in the Amendments and the 

MSRB Response Letters, the 

Commission believes that the proposed 

rule change, as amended by the 

Amendments, is consistent with the 

Act. 

V. Solicitation of Comments on the 

Amendments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the Amendments to 

the proposed rule change are 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 rule-comments@

sec.gov. Please include File Number SR– 

MSRB–2014–08 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–MSRB–2014–08. 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 Web site (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 Web site 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 MSRB. 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–MSRB– 

2014–08 and should be submitted on or 

before March 25, 2015. 

VI. Accelerated Approval of the 

Proposed Rule Change as Modified by 

the Amendments 

The Commission finds good cause for 

approving the proposed rule change, as 

amended by the Amendments, prior to 

the 30th day after the date of 

publication of notice in the Federal 

Register. Amendment No. 1 partially 

amends the text of the proposed rule 

change to revise Rules G–1(a)(ii)(B), G– 

3(a)(i)(A)(2), and G–3(b)(i)(B) by 

deleting the following clause: ‘‘Except to 

the extent a person must be qualified as 

a municipal advisor representative to 

perform such services.’’ 114 Amendment 

No. 2 partially amends Amendment No. 

1 to correct a technical error in a 

quotation of rule text.115

The MSRB believes Amendment No. 

1 will clarify and ensure that municipal 

securities representatives or principals 

who engage in the subject activity 

remain covered by applicable dealer 

regulations until such time as the MSRB 

may determine that such activities are 

appropriately covered by the developing 

municipal advisor regulatory 

framework.116 The MSRB believes 

Amendment No. 2 would make a mere 

technical correction.117 The MSRB does 

not believe Amendment No. 2 raises 

significant new issues or alters the 

substance of the proposed rule 

change.118

As previously noted, Sanchez and 

NAMA expressed concern that 

Amendment No. 1 will effectively 

provide an exemption for currently 

qualified municipal securities 

representative from having to take and 

pass the Municipal Advisor 

Representative Qualification 

Examination.119 NAMA also believes 

that the Amendment No. 1 expands the 

definition of municipal advisory activity 

because it appears to allow dealers and 

bank dealers to engage in municipal 

advisory activity without proper 

registration.120 The MSRB responded by 

clarifying that Amendment No. 1 would 

not have the effect of limiting, and was 

not intended to limit, the applicability 

of the municipal advisor regulatory 

regime, including MSRB rules governing 

the municipal advisory activities of 

municipal advisors, or to alter the 

definition of municipal advisory 

activities.121 According to the MSRB, 

Amendment No. 1 would retain the 

current language in the MSRB 

professional qualification rules to 

prevent any confusion regarding the 

application of MSRB rules governing 

dealers to the financial advisory 

activities of municipal securities 

representatives while MSRB rules 

governing municipal advisors are 

developed and implemented.122

The Commission believes that the 

revisions in Amendment No. 1 are being 

made to address the perception of a 

regulatory gap and are consistent with 

the purpose of the proposed rule 

change. The Commission believes that 

the revision in Amendment No. 2 is 

being made to correct a technical error. 

The Commission does not believe the 

revisions included in the Amendments 

raise significant new issues or alter the 

substance of the proposed rule change 

because the proposed rule change will 

retain the current rule language in Rules 

G–1(a)(ii)(B), G–3(a)(i)(A)(2), and G– 

3(b)(i)(B). Accordingly, the Commission 

finds good cause for approving the 

proposed rule change, as modified by 

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11712 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices 

123 15 U.S.C. 78s(b)(2). 

124 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6)(iii). 

5Exchange Rule 1.5(cc) defines ‘‘System’’ as ‘‘the 

electronic communications and trading facility 

designated by the Board through which securities 

orders of Users are consolidated for ranking, 

execution and, when applicable, routing away.’’ 

6The term ‘‘User’’ is defined as ‘‘any Member or 

Sponsored Participant who is authorized to obtain 

access to the System pursuant to Rule 11.3.’’ See 

Exchange Rule 1.5(ee). 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

the Amendments, on an accelerated 

basis, pursuant to Section 19(b)(2) of the 

Act. 

VII. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,123 that the 

proposed rule change (SR–MSRB–2014– 

08), as modified by the Amendments, 

be, and hereby is, approved. 

For the Commission, pursuant to delegated 

authority.124

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–04431 Filed 3–3–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74380; File No. SR–EDGA– 

2015–12] 

Self-Regulatory Organizations; EDGA 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Rule 11.11, 

Routing to Away Trading Centers, To 

Delete References to the ROLF 

Routing Option, Which Routed Orders 

to LavaFlow ECN 

February 26, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

23, 2015, EDGA Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGA’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange filed a proposal to 

amend Rule 11.11, Routing to Away 

Trading Centers, to delete references to 

the ROLF routing option, which routed 

orders to LavaFlow ECN. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at www.batstrading.com, at the 

principal office of the Exchange, 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Rule 11.11, Routing to Away Trading 

Centers, to delete references under 

subparagraphs (7) and (15) to the ROLF 

routing option, which routed to 

LavaFlow ECN. These changes are being 

proposed in response to LavaFlow ECN 

ceasing market operations on Friday, 

January 30, 2015. Under Rule 

11.11(g)(7), an order utilizing the ROLF 

routing option first checked the 

System 5 for available shares and was 

then routed to the LavaFlow ECN. If 

shares remained unexecuted after being 

routed, they were cancelled, unless 

otherwise instructed by the User.6 In 

addition, under Rule 11.11(g)(15), a 

User was able to couple the Post to 

Away option and ROLF routing option. 

The grouping of the Post to Away and 

ROLF routing options instructed the 

System to route and post the order on 

LavaFlow ECN. As of February 2, 2015, 

the Exchange, via BATS Trading, the 

Exchange’s affiliated routing brokerdealer, was no longer able to route 

orders to LavaFlow ECN because it 

ceased operations. As a result, the 

Exchange no longer offers the ROLF 

routing option nor permit [sic] it to be 

coupled with a Post to Away routing 

option. Therefore, the Exchange 

proposes to delete the ROLF routing 

option under Rule 11.11(g)(7) as well as 

a reference to the ROLF routing option 

under Rule 11.11(g)(15). 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 8

in particular, in that it is designed to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. The Exchange does not 

believe that this proposal will permit 

unfair discrimination among customers, 

brokers, or dealers because the ROLF 

routing option will no longer be 

available to all Users. The proposed 

change is in response to LavaFlow ECN 

ceasing market operations on Friday, 

January 30, 2015. As of February 2, 

2015, the Exchange, via BATS Trading, 

was no longer able to route orders to 

LavaFlow ECN and, therefore, proposes 

to delete references to the ROLF routing 

option under Rules 11.11(g)(7) and (15). 

The proposal is intended to make the 

Exchange’s rules clearer and less 

confusing for investors by eliminating a 

routing option that is no longer 

available; thereby removing 

impediments to and perfecting the 

mechanism of a free and open market 

and a national market system, and, in 

general, protecting investors and the 

public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposal will impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. The proposed rule 

change is not designed to address any 

competitive issues but rather avoid 

investor confusion by eliminating a 

routing option that is no longer made 

available by the Exchange. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

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