Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34501

2 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b–4.

statements may be examined at the

places specified in Item IV below. The

Board has prepared summaries, set forth

in Sections (A), (B), and (C) below, for

the most significant aspects of such

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Regulatory Element is a three and

one-half hour computer-based training

program that previously had only been

administered to registered persons at the

location of an outside vendor. Rule G–

3(h)(i)(A)(1) requires that each

registered person, who is not exempt

from the rule, complete the Regulatory

Element on the occurrence of his or her

second registration anniversary and

every three years thereafter. On each

occasion, the training must be

completed within 120 days after the

registered person’s anniversary date. A

registered person who has not

completed the Regulatory Element

within the prescribed time periods is

deemed to be inactive until the

Regulatory Element has been fulfilled,

and may not conduct, or be

compensated for, activities requiring a

securities registration.

The Securities Industry/Regulatory

Council on Continuing Education

(‘‘Council’’) is responsible for the

oversight of the continuing education

program for the securities industry. The

Council’s duties include recommending

and helping to develop specific content

and questions for the Regulatory

Element, and minimum core curricula

for the Firm Element. The Council is

comprised of 14 representatives from a

broad cross section of broker/dealers

and six self-regulatory organizations,

including the MSRB. The Council,

working with representatives from the

North American Securities

Administrators Association, and with

the knowledge of the Council’s

Securities and Exchange Commission

liaisons, has developed a model under

which brokers, dealers and municipal

securities dealers may deliver the

Regulatory Element computer-based

training on firm premises. The model

requires that the broker, dealer or

municipal securities dealer meet certain

conditions for in-firm delivery relating

to computer hardware and to the

security of the training delivery

environment. The proposed rule change

encapsulates the delivery requirements

as specified by the Council. Brokers,

dealers and municipal securities dealers

of any size may take advantage of the infirm delivery procedures.

2. Statutory Basis

The Board believes the proposed rule

change is consistent with section

15B(b)(2)(C) of the Securities Exchange

Act of 1934 (‘‘Act’’), which provides

that the Board’s rules shall:

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 in

municipal securities, and, in general, to

protect investors and the public interest.

The Board believes that the proposed

rule change is consistent with the Act in

that it will facilitate registered persons

satisfying their obligations to meet the

Regulatory Element of the continuing

education requirement.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Board 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 brokers, dealers and

municipal securities dealer.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding, or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve such proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested people are invited to

submit written data, views, and

arguments concerning the foregoing.

People making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. 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 inspection and copying in

the Commission’s Public Reference

Room. Copies of the filing will also be

available for inspection and copying at

the Board’s principal offices. All

submissions should refer to File No.

SR–MSRB–2001–04 and should be

submitted by July 19, 2001.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.2

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–16256 Filed 6–27–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44459; File No. SR–MSRB–

2001–02]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Municipal Securities Rulemaking

Board Relating to Interpretation of

Rule G–37, on Political Contributions

and Prohibitions on Municipal

Securities Business, and Rule G–38,

on Consultants

June 20, 2001.

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

Securities Exchange Act of 1934 (‘‘Act’’)

and Rule 19b–4 thereunder,1 notice is

hereby given that on June 7, 2001, the

Municipal Securities Rulemaking Board

(‘‘MSRB’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change (File No. SR–

MSRB–2001–02) as described in Items,

I, II, and III below, which Items have

been prepared by the MSRB. 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 MSRB has filed with the

Commission a proposed rule change

consisting of a notice of interpretation

concerning rules G–37, on political

contributions and prohibitions on

34502 Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices

2Questions regarding the scope of the term

‘‘person associated with a broker or dealer’’ under

Section 3(a)(18) of the Exchange Act or ‘‘person

associated with a municipal securities dealer’’

under Section 3(a)(32) of the Exchange Act should

be addressed to staff of the Securities and Exchange

Commission.

3The definition of municipal finance professional

in rule G–37 is not dependent upon whether the

associated person has received payment in

exchange for the solicitation of municipal securities

business.

4Securities Exchange Act Release No. 40014 (May

20, 1998), 63 FR 29282 (May 28, 1998).

municipal securities business, and G–

38, on consultants. The text of the

proposed rule change is set forth below.

The new text is italicized and

underlined.

Question and Answer Notice: Rules G–37

and G–38

Bank Affiliates: Individuals as

Municipal Finance Professionals or

Consultants

Q: In a Question and Answer Notice

relating to rule G–38 dated May 20, 1998, the

MSRB discussed a scenario in which a bank

and its employees communicate with an

issuer on behalf of an affiliated broker, dealer

or municipal securities dealer (a ‘‘dealer’’) to

obtain municipal securities business for that

dealer in return for certain ‘‘credits.’’ These

credits, which do not involve any direct or

indirect cash payments from the dealer to the

bank or its employees, are used for internal

purposes to identify the source of business

referrals. The MSRB observed that, even if

there is no immediate transfer of funds or

anything of value to an affiliate or individual

employed by the affiliate, the referral credits

would still be considered payment for

purposes of rule G–38 if such credits

eventually (e.g., at the end of the fiscal year)

result in compensation to the affiliate or

individual employed by the affiliate for

referring municipal securities business to the

dealer. The MSRB concluded that if the

dealer or any other person eventually gives

anything of value (e.g., makes a ‘‘payment’’)

to the affiliate or individual based, even in

part, on the referral, then the affiliate or

individual is a consultant for purposes of

rule G–38. Does this mean that in all cases

where a bank’s employee refers municipal

securities business to an affiliated dealer,

such bank employee is necessarily a

consultant under rule G–38 rather than a

municipal finance professional of the dealer

under rule G–37?

A: No. The purpose of the Question and

Answer Notice was to illustrate that the term

‘‘payment’’ as used in rule G–38 is not

limited to cash payments but also includes

anything of value, such as referral credits,

that ultimately results in cash or non-cash

compensation to the bank employee. The

MSRB was not providing guidance as to

whether such bank employee should be

considered a consultant rather than a

municipal finance professional of the dealer.

As the MSRB noted in footnote 1 to the

Question and Answer Notice, municipal

finance professionals are excluded from the

definition of consultant. If a dealer has an

arrangement whereby referral credits are give

to an employee of a bank affiliate in

exchange for a referral of municipal

securities business, the dealer should first

determine whether the bank employee is a

municipal finance professional of the dealer.

As a threshold question, the dealer must

determine whether such bank employee is a

person associated with the dealer within the

meaning of the Securities Exchange Act of

1934, as amended the ‘‘Exchange Act’’).2 If

the bank employee is an associated person of

the dealer and has solicited municipal

securities business on behalf of the dealer,

the employee would be a municipal finance

professional of the dealer subject to the

provisions of rule G–37, regardless of whether

such employee has received a referral credit

or any other payment.3 Such employee, as a

municipal finance professional of the dealer,

is excluded from being a consultant of the

dealer under rule G–38. If the bank employee

is not an associated person of the dealer and

has received such referral credits as a result

of a solicitation of municipal securities

business for the dealer, the employee would

be a consultant of the dealer subject to the

provisions of rule G–38.

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

MSRB 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 texts of these

statements may be examined at the

places specified in Item IV below. The

MSRB has prepared summaries, set

forth in Sections A, B, and C below, of

the most significant aspects of such

statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

(a) Since adoption of rules G–37 and

G–38, the MSRB has received numerous

inquiries concerning the application of

these rules. In order to assist the

municipal securities industry in

understanding and complying with the

provisions of the rules, the MSRB has

published a series of interpretive

notices, which set forth, in questionand-answer format, general guidance on

rules G–37 and G–38.

On May 20, 1998, the Commission

approved an interpretive notice of the

MSRB relating to rule G–38.4 This

question-and-answer notice provided

guidance regarding the meaning of the

term payment under rule G–38 in the

context of the granting of referral credits

to an employee of a bank in exchange

for the referral of municipal securities

business to a dealer affiliated with the

bank. The MSRB made clear that, even

if there is not immediate transfer of

funds or anything of value to an affiliate

of a dealer or an individual employed

by such affiliate, the referral credits

would still be considered payment for

purposes of rule G–38 if the credits

eventually result in compensation to the

affiliate or individual for referring

municipal securities business to the

dealer.

The MSRB recently has learned that

some members of the municipal

securities industry may have

misunderstood the guidance provided

by this prior question-and-answer

notice. Some industry participants

appear to believe that the MSRB has

determined that an employee of a bank

that refers municipal securities business

to a dealer affiliated with such bank

would necessarily be considered a

consultant of the dealer under rule G–

38 rather than a municipal finance

professional of the dealer under rule G–

37. This was not the intent of the prior

interpretation, which focused solely on

whether referral credits could be

considered payment for purposes of rule

G–38. The interpretation did not seek to

analyze the further factors that must be

considered in determining whether an

individual should be considered a

municipal finance professional or a

consultant. As a result, the MSRB has

determined that it is necessary to

provide clarification of the prior

question-and-answer notice and to

provide further guidance on the factors

to be considered in determining

whether an employee of an affiliate of

a dealer that makes a referral of

municipal securities business to the

dealer is a consultant under rule G–38

or a municipal finance professional

under rule G–37.

(b) The MSRB believes that the

proposed rule change is consistent with

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

requires 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.

The MSRB believes that the proposed

rule change is consistent with the Act in

that it provides guidance to dealers in

complying with existing MSRB rules.

Federal Register / Vol. 66, No. 125 / Thursday, June 28, 2001 / Notices 34503

5 15 U.S.C. 78s(b)(3)(A)(i).

6 17 C.F.R. 240.19b–4(f).

7 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The MSRB does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purposes of the Act since it would apply

equally to all dealers.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The MSRB has designated this

proposed rule change as constituting a

stated policy, practice, or interpretation

with respect to the meaning,

administration, or enforcement of an

existing MSRB rule under section

19(b)(3)(A)(i) of the Act,5 and

subparagraph (f) of Rule 19b–4,

thereunder.6 At any time within 60 days

of the filing of this proposed rule

change, the Commission may summarily

abrogate this rule change if it appears to

the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

V. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 20549–0609. 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 inspection and copying in

the Commission’s Public Reference

Room. Copies of the filing will also be

available for inspection and copying at

the MSRB’s principal offices. All

submissions should refer to File No.

SR–MSRB–2001–02 and should be

submitted by July 19, 2001.

For the Commission, by the Division of

Market Regulations, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–16257 Filed 6–27–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44465; File No. SR–NYSE–

2001–15]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc.

Amending NYSE Rules 104 and 1100

Relating to Trading of ETFs

June 22, 2001.

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

Securities Exchange Act of 1934

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

notice is hereby given that on June 15,

2001, the New York Stock Exchange,

Inc. (‘‘NYSE’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

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

the proposed rule change as described

in Items I, II and III below, which Items

have been prepared by the Exchange.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change consists of

an amendment to NYSE Rule 104 to

facilitate trading in Exchange Traded

Funds (‘‘ETFs’’), and amendments to

Rule 1100 to clarify that rules relating

to Investment Company Units apply to

such securities traded on the basis of

unlisted trading privileges (‘‘UTP’’), and

to authorize the Exchange to close

trading in an ETF at 4:05 p.m. when

trading in a related futures contract has

closed at that time on the last trading

day of the month. Text of the proposed

rule change follows. Additions are

italicized; deletions are bracketed.

Dealings by Specialists

Rule 104

No specialist shall effect on the Exchange

purchases or sales of any security in which

such specialist is registered, for any account

in which he, his member organization or any

other member, allied member, or approved

person, (unless an exemption with respect to

such approved person is in effect pursuant to

Rule 98) in such organization or officer or

employee thereof is directly or indirectly

interested, unless such dealings are

reasonably necessary to permit such

specialist to maintain a fair and orderly

market, or to act as odd-lot dealer in such

security.

.10 Regular Specialists

* * * * *

(7) The requirement to obtain Floor Official

approval for transactions for a specialist’s

own account contained in subparagraphs

(5)(i)(A), (B) and (6)(i)(A) above shall not

apply to transactions effected for the purpose

of bringing the price of an investment

company unit (the ‘‘unit’’), as that term is

defined in Section 703.16 of the Listed

Company Manual, into parity with the value

of the index on which the unit is based, [or]

with the net asset value of the securities

comprising the unit[.], or with a futures

contract on the value of the index on which

the unit is based. Nevertheless such

transactions must be effected in a manner

that is consistent with the maintenance of a

fair and orderly market and with the other

requirements of this rule and the

supplementary material herein.

Rule 1100

Scope

(a) The provisions of this Rule 1100 apply

only to ‘‘Investment Company Units’’, as

defined and used in Para. 703.16 of the

Listed Company Manual. This term shall also

mean and apply to securities which fit within

said definition but are admitted to dealings

by the Exchange on an unlisted trading

privileges basis. Except to the extent that

specific provisions in this Rule govern, or

unless the context otherwise requires, the

provisions of the Constitution, all other

Exchange Rules and policies shall be

applicable to the trading of Investment

Company Units on the Exchange. Pursuant to

Exchange Rule 3 (‘‘Security’’), Investment

Company Units are included within the

definition of ‘‘security’’ or ‘‘securities’’ as

those terms are used in the Constitution and

Rules of the Exchange.

* * * * *

Hours of Trading

(e) Any series of Investment Company

Units so designated by the Exchange may be

traded on the Exchange until 4:15 p.m. each

business day. The Exchange may close

trading at an early time to coincide with the

close of trading in a related futures contract

on the last business day of the month, or any

other day when trading in a related futures

contract closes earlier than 4:15 p.m.

* * * * *

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