Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices 1741 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58998 

(Nov. 21, 2008), 73 FR 72540 (Nov. 28, 2008) 

(‘‘Commission’s Notice’’). 

4See letter from Jeffrey A. Schuh, Vice President, 

Chief Compliance Officer, Wells Fargo Brokerage 

Services, LLC (‘‘WFBS’’), dated December 18, 2008; 

letter from Leslie M. Norwood, Managing Director 

and Associate General Counsel, Securities Industry 

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

dated December 19, 2008; and letter from Michael 

Decker and Mike Nicholas, Co-Chief Executive 

Officers, Regional Bond Dealers Association 

(‘‘RBDA’’), dated December 29, 2008. 

5 In Amendment No. 1, the MSRB responded to 

the three comment letters and, in response to the 

comment letters, postponed the effective date of the 

proposed amendments to Rule G–34 that relate to 

Variable Rate Demand Obligations from January 30, 

2009 to April 1, 2009. The proposed January 30, 

2009 effective date for the proposed amendments to 

Rule G–34 that relate to Auction Rate Securities 

remains unchanged. This is a technical amendment 

and is not subject to notice and comment. 

6See supra note 4. 

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 inspection and copying in 

the Commission’s Public Reference 

Room on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of such 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–ISE– 

2008–101 and should be submitted on 

or before February 3, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–413 Filed 1–12–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59212, File No. SR–MSRB– 

2008–07] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Order Granting Approval of 

Proposed Rule Change as Modified by 

Amendment No. 1 Relating to MSRB 

Rule G–34, CUSIP Numbers and New 

Issue Requirements, to Establish a 

Transparency System for Municipal 

Auction Rate Securities and Municipal 

Variable Rate Demand Obligations 

January 7, 2009. 

On November 18, 2008, the Municipal 

Securities Rulemaking Board (‘‘MSRB’’), 

filed with the Securities and Exchange 

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

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 to MSRB Rule G– 

34, CUSIP Numbers and New Issue 

Requirements, to establish a 

transparency system for municipal 

auction rate securities and municipal 

variable rate demand obligations. The 

proposed rule change was published for 

comment in the Federal Register on 

November 28, 2008.3 The Commission 

received three comment letters about 

the proposed rule change.4 On January 

2, 2009, the MSRB filed Amendment 

No. 1 to the proposed rule change.5 This 

order approves the proposed rule 

change as modified by Amendment No. 

1. 

The proposed rule change would 

establish a transparency system for 

municipal Auction Rate Securities 

(‘‘ARS’’) and municipal Variable Rate 

Demand Obligations (‘‘VRDO’’). The 

proposed rule change would: (i) 

Implement an electronic system that 

would collect and disseminate ARS and 

VRDO information (the ‘‘Short-term 

Obligation Rate Transparency System 

Proposal’’); (ii) provide free public 

access to information disseminated from 

the Short-term Obligation Rate 

Transparency (‘‘SHORT’’) System 

through the MSRB’s Electronic 

Municipal Market Access (EMMA) 

system (the ‘‘EMMA short-term 

obligation rate transparency service’’); 

and (iii) amend Rule G–34, on CUSIP 

numbers and new issue requirements, to 

require brokers, dealers and municipal 

securities dealers (collectively 

‘‘dealers’’) to report, or ensure the 

reporting of, interest rate and 

descriptive information to the SHORT 

System about ARS and VRDO following 

an ARS auction or VRDO interest rate 

reset. A full description of the proposal 

is contained in the Commission’s 

Notice. 

As previously noted, the Commission 

received three comment letters relating 

to the proposed rule change.6 The 

commenters generally supported the 

concept of the proposal, but raised 

concerns about the timing of its 

implementation and certain data points 

required to be collected. WFBS 

commented only with respect to the 

proposed effective date of the proposal. 

WFBS requested that the 

implementation date of the proposal be 

extended to four months from the date 

of publication of the final rule so that 

changes needed to support the SHORT 

proposal could be designed, thoroughly 

tested and implemented prior to the 

proposed implementation date. 

SIFMA supported the concept of 

collection and display of auction rate 

reset and remarketing rate reset 

information, and focused its comments 

on the timing of implementation and 

certain data points proposed to be 

collected. SIFMA stated that its 

members feel strongly that January 30, 

2009 is an unrealistically short 

timeframe for implementing the new 

regulatory requirement. SIFMA noted 

that this year has been a historic year for 

technological and operational issues 

due to the market dislocation, and that 

this as well as other issues have resulted 

in many urgent technology and 

operation projects queued at broker 

dealer firms. SIFMA requested that the 

proposal be delayed until the later of 

April 1, 2009 or 90 days after the final 

rule is approved by the SEC. 

SIFMA also recommended that 

maximum and minimum VRDO rates 

not be required by the SHORT system. 

SIFMA stated that the terms of VRDO 

securities, by and large, have been 

negotiated on a bespoke basis for each 

transaction, that maximum rate 

formulas are not standardized, and that 

the administrative burden of calculating 

and reporting the maximum rate for 

every reset period is in excess of the 

theoretical benefits it provides. SIFMA 

also found no evidence of minimum 

rates in any VRDO transaction and 

stated that this is a superfluous field 

which should be eliminated. 

SIFMA stated that the broker dealers 

regulated by the MSRB do not have 

control over all of the ARS data points 

being requested in the proposal because 

broker dealers merely receive the 

auction information from the auction 

agent. Therefore SIFMA believes that 

there should be an acknowledgement in 

Rule G–34(c)(i) that the broker dealer is 

only responsible for forwarding the 

information it has received from the 

auction agent and not be responsible for 

the accuracy of that data. 

RBDA stated in its letter that they 

support the implementation of the 

proposal as early as is practical, but 

believe the intended effective date of 

January 30, 2009 will not give market 

participants sufficient time to 

implement and thoroughly test 

automated systems that will facilitate 

compliance with rules associated with 

the new system. RBDA requested that 

the effective date for full 

1742 Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices 

7 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition 

and capital formation. 15 U.S.C. 78c(f). 

8 15 U.S.C. 78o–4(b)(2)(C). 

9 Id. 

implementation of the proposal be 

moved to April 1, 2009. 

In Amendment No. 1, the MSRB 

responded to the three comment letters 

and, in response to the comment letters, 

postponed the effective date of the 

proposed amendments to Rule G–34 

that relate to Variable Rate Demand 

Obligations from January 30, 2009 to 

April 1, 2009. The proposed January 30, 

2009 effective date for the proposed 

amendments to Rule G–34 that relate to 

Auction Rate Securities remains 

unchanged. 

The MSRB noted in response to the 

comments from SIFMA with respect to 

the data points to be collected that the 

SHORT System has been designed to 

accept reports of VRDO in which the 

minimum rate is unspecified by 

allowing a dealer to not include a value 

for the minimum rate. SIFMA also 

stated that some VRDO maximum rates 

are not stated in official documents for 

the VRDO or are set pursuant to a 

formula for which some VRDO 

maximum rates are not able to be 

calculated on the day that an interest 

rate reset occurs. The MSRB stated that 

the purpose of the requirement in the 

proposed amendments to Rule G–34 to 

report the current maximum rate is to 

improve the availability of important 

characteristics of a VRDO that have been 

set by drafters of official documents for 

VRDO. Therefore, dealers would be 

required to report under the proposed 

amendments to Rule G–34 VRDO 

maximum rates that are stated in official 

documents either as absolute values or 

that are able to be calculated pursuant 

to formulas on the day of an interest rate 

reset. For VRDO maximum rates that are 

not able to be calculated on the day an 

interest rate reset occurs, the SHORT 

System has been designed to accept a 

value of ‘‘not calculable.’’ In addition, 

the SHORT System also has been 

designed to accept reports of VRDO in 

which the maximum rate is unspecified 

by allowing a dealer to not include a 

value for the maximum rate. 

The MSRB acknowledged that many 

of the items of information about ARS 

that would be required to be reported to 

the MSRB under the proposed 

amendments to Rule G–34 are produced 

by ARS auction agents and that dealers 

may not always be able to verify the 

accuracy of such information. 

Accordingly, the MSRB stated that it has 

designed the SHORT System to accept 

submissions of information directly 

from ARS auction agents and has 

incorporated into the proposed 

amendments to Rule G–34 that dealers 

‘‘may rely on the accuracy of such 

information if the [dealer] makes a good 

faith and reasonable effort to cause the 

Auction Agent to correct any 

inaccuracies known to the [dealer].’’ In 

the event that an ARS auction agent 

does not submit information directly to 

the SHORT System but instead a dealer 

reports to the SHORT System 

information it receives from the ARS 

auction agent, the reporting dealer 

would have a similar responsibility for 

correcting any inaccuracies known to 

the dealer in the data provided to it by 

an ARS auction agent. Therefore, so 

long as the dealer reports the 

information about the auction as 

provided by the ARS auction agent and 

fulfills its responsibility to correct 

known inaccuracies, and the dealer does 

not itself introduce any inaccuracies to 

the data submitted, the dealer would be 

entitled to the same reliance as in the 

case of a direct submission to the 

SHORT System by the ARS auction 

agent. The Commission believes that the 

MSRB has adequately addressed the 

concerns raised by SIFMA about the 

collection of data points for VRDO and 

ARS. 

The MSRB filed Amendment No. 1 in 

response to concerns raised by all three 

commenters about the effective date of 

the proposal. The proposed January 30, 

2009 effective date for the proposed 

amendments to Rule G–34 that relate to 

Auction Rate Securities remains 

unchanged. While the MSRB 

acknowledged that some dealers may 

need additional time to perform and test 

system changes to report data to the 

MSRB using an automated system, the 

MSRB believes that dealers will be able 

to report information about ARS to the 

MSRB manually using the SHORT 

System Web User Interface if those 

system changes are not able to be fully 

implemented by January 30, 2009, 

particularly since the number of ARS 

issues is relatively small. In addition, 

since ARS are primarily a retail product, 

the MSRB believes it is important to 

provide transparency of ARS as early as 

practicable. Accordingly, the MSRB 

does not believe that a change to the 

proposed January 30, 2009 effective date 

for ARS is warranted. The Commission 

agrees that a change to the proposed 

January 30, 2009 effective date for ARS 

is not warranted because the 

dislocations in the ARS market 

necessitate the improvement of price 

transparency for ARS as soon as 

possible. 

Amendment No. 1 postpones the 

effective date of the proposed 

amendments to Rule G–34 that relate to 

Variable Rate Demand Obligations from 

January 30, 2009 to April 1, 2009. While 

the SHORT System allows data to be 

reported manually using the SHORT 

System Web User Interface, the MSRB 

agrees with commenters that manual 

submission of data for VRDO would be 

impractical in many cases due to the 

high number of VRDO securities and the 

frequency with which VRDO interest 

rates reset. Therefore, the MSRB 

believes that a revised effective date of 

April 1, 2009 would allow additional 

time for dealers to implement 

automated systems to submit data about 

VRDO to the SHORT System and should 

address commenters concerns. The 

Commission believes that this extension 

provides a reasonable accommodation 

to dealers. 

The Commission has carefully 

considered the proposed rule change, 

the comment letters received, and the 

MSRB’s response to the comment letters 

and finds that the proposed rule change 

is consistent with the requirements of 

the Act and the rules and regulations 

thereunder applicable to the MSRB7

and, in particular, the requirements of 

Section 15B(b)(2)(C) of the Act 8 and the 

rules and regulations thereunder. 

Section 15B(b)(2)(C) of the Act requires, 

among other things, that the MSRB’s 

rules be designed to prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in municipal 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market in municipal securities, 

and, in general, to protect investors and 

the public interest.9 In particular, the 

Commission finds that the proposed 

rule change is consistent with the Act 

because it would serve as an additional 

mechanism by which the MSRB works 

toward removing impediments to and 

helping to perfect the mechanisms of a 

free and open market in municipal 

securities by providing a centralized 

venue for free public access to 

information about ARS and VRDO. The 

proposed rule change would provide 

greater access to information about ARS 

and VRDO to all participants in the 

municipal securities market on an equal 

basis thereby removing potential 

barriers to obtaining such information 

and will allow the municipal securities 

industry to produce more accurate trade 

reporting and transparency. These 

factors serve to promote the statutory 

Federal Register / Vol. 74, No. 8 / Tuesday, January 13, 2009 / Notices 1743 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59014 

(November 25, 2008), 73 FR 73358. 

4See Nasdaq Rule 4350(i)(1)(A). 

5See Nasdaq Rules 4350(i)(1)(A) and 4360. 

6See proposed Nasdaq Rule 4360(k). 

7Section 102 of the Sarbanes Oxley Act, 15 U.S.C. 

7212. 

8 Id. 

9See http://www.nasdaq.com/about/ 

Listing_Agreement.pdf. 

10 15 U.S.C. 78f(b)(5). 11 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

12For a detailed discussion of the reasons that 

LPs differ from other issuers and may be 

appropriately excluded from certain shareholder 

approval rules, see Securities Exchange Act Release 

No. 55796 (May 22, 2007), 72 FR 29566 (SR–NYSE– 

2007–28) (approving NYSE’s proposal to exempt 

LPs from certain of its shareholder approval rules, 

excluding its equity compensation requirement). 

13See id., 72 FR at 29567. 

mandate of the MSRB to protect 

investors and the public interest. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–MSRB–2008– 

07), as modified by Amendment No. 1, 

be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–441 Filed 1–12–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59203; File No. SR– 

NASDAQ–2008–084] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Order 

Approving Proposed Rule Change to 

Require Limited Partnerships to Obtain 

Shareholder Approval for the Use of 

Equity Compensation and Make Other 

Clarifying Changes to the Listing 

Requirements for Limited Partnerships 

January 6, 2009. 

I. Introduction 

On November 18, 2008, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘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 to 

require limited partnerships to obtain 

shareholder approval for the use of 

equity compensation and to make other 

clarifying changes to the listing 

requirements for limited partnerships. 

The proposed rule change was 

published for comment in the Federal 

Register on December 2, 2008.3 The 

Commission received no comments on 

the proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

Nasdaq’s current listing requirements 

provide that issuers must obtain 

shareholder approval for a variety of 

corporate actions, including the 

issuance of equity compensation.4

However, these requirements do not 

currently apply to Limited Partnerships 

(‘‘LPs’’).5 Nasdaq is proposing to expand 

the requirement to obtain shareholder 

approval for equity compensation to 

entities that are LPs. As such, the 

proposed rule would provide that each 

issuer that is a limited partnership must 

obtain shareholder approval when a 

stock option or purchase plan is to be 

established or materially amended or 

other equity compensation arrangement 

is to be made or materially amended, 

pursuant to which stock may be 

acquired by officers, directors, 

employees, or consultants, as would be 

required under Nasdaq Rule 

4350(i)(1)(A) and IM–43540–5.6

In addition, Nasdaq proposes to make 

two other changes to the listing 

requirements for LPs. Specifically, the 

Exchange proposes to amend the rules 

applicable to LPs to require that: (1) the 

auditor of a listed LP must be registered 

as a public accounting firm with the 

Public Company Accounting Oversight 

Board (‘‘PCAOB’’), as provided for in 

the Sarbanes-Oxley Act of 2002; 7 and 

(2) an LP must notify Nasdaq of any 

material non-compliance with the 

qualitative listing requirements for LPs 

in Rule 4360. Nasdaq states that when 

it adopted these requirements for other 

companies in 2003 in response to 

requirements imposed by the SarbanesOxley Act, Nasdaq inadvertently 

excluded LPs from these requirements. 

The Exchange notes, however, that these 

requirements are already applicable to 

LPs. Specifically, with respect to the 

proposed auditor registration 

requirement, it is unlawful for an 

auditor to participate in the preparation 

or issuance of an audit report with 

respect to any listed company, 

including an LP, unless it is registered 

with the PCAOB.8 With respect to the 

proposed notification requirement, each 

listed company is required to sign a 

listing agreement prior to listing on 

Nasdaq in which the company has 

agreed to promptly notify Nasdaq in 

writing of any corporate action or other 

event which will cause the company to 

cease to be in compliance with Nasdaq 

listing requirements.9 As such, Nasdaq 

asserts that these changes are simply 

clarifying changes designed to highlight 

the requirements and facilitate 

understanding and compliance of the 

rules by LPs. 

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange and, in particular, 

with Section 6(b)(5) of the Act,10 which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, 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, and 

are not designed to permit unfair 

discrimination between issuers.11

The Commission notes the 

importance of shareholder approval 

rules, as such rules provide 

shareholders with a voice in 

transactions that are material to, and 

may have an effect on, their respective 

investments. With respect to equity 

compensation plans, shareholder 

approval rules also help to protect 

investors against the potential dilutive 

effect of such plans. The Commission 

acknowledges that treating LPs 

differently with respect to certain 

limited types of shareholder approval 

rules may be appropriate given the 

structure and use of LPs and the 

expectations of investors in such 

entities.12 However, as the Commission 

has indicated previously, it believes that 

the rationale for treating an LP 

differently from other types of issuers 

with respect to shareholder input on 

equity compensation is less 

compelling.13 Accordingly, the 

Commission believes that it is 

consistent with the protection of 

investors and the public interest to 

require LPs to obtain shareholder 

approval for the issuance of equity 

compensation, as it will ensure that 

investors in LP securities have a check 

on the potential dilution that may result 

from the issuance of equity-based 

awards. Further, by requiring LPs to 

obtain shareholder approval for stock