28084 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Under MSRB Rule D–15, on the term 

sophisticated municipal market professional, ‘‘[t]he 

term ‘sophisticated municipal market professional’ 

or ‘SMMP’ is generally defined by three essential 

requirements: the nature of the customer; a 

determination of sophistication by the broker, 

dealer or municipal securities dealer [ ]; and an 

affirmation by the customer; as specified [therein].’’ 

See MSRB Rule D–15. See also related discussion 

under Background and Purpose of the Institutional 

SMMP Amendment—Background on MSRB Rule D– 

15 and SMMP Affirmation Requirements near note 

37 infra. 

4 17 CFR 240.15l–1; see also Exchange Act 

Release No. 86031 (June 5, 2019), 84 FR 33318 (July 

12, 2019) (File No. S7–07–18) (‘‘Regulation Best 

Interest Adopting Release’’). 

5Consistent with MSRB Rule D–8, on the term 

bank dealer, the term ‘‘bank dealer’’ as used herein 

means ‘‘a municipal securities dealer which is a 

bank or a separately identifiable department or 

division of a bank as defined in rule G–1 of the 

Board.’’ Such references in this proposed rule shall 

be collectively to ‘‘Bank Dealers’’ or individually to 

a ‘‘Bank Dealer.’’ See also MSRB Rule D–11, on the 

term associated persons (indicating that the term 

bank dealer as used in MSRB rules shall generally 

refer to the associated persons of a bank dealer 

unless the context otherwise requires or a rule of 

the Board otherwise specifically provides). 

6The term ‘‘Institutional SMMP’’ is used here as 

defined below under the discussion Background 

and Purpose of the Institutional SMMP 

Amendment. The Institutional SMMP definition 

used herein would not encompass any natural 

person customers who qualify as ‘‘retail customers’’ 

under the definitions of Regulation Best Interest, 

such as certain natural persons with significant 

total assets, who might otherwise meet the status 

requirements of an SMMP. See note 20 infra and 

related discussion under Background and Purpose 

of the Institutional SMMP Amendment. 

7This one-year minimum timeframe is roughly 

equivalent to the timeframe provided by the 

Commission when it adopted Regulation Best 

Interest. See Regulation Best Interest Adopting 

Release, 84 FR at 33318, 33400 (setting an effective 

date of September 10, 2019 and a compliance date 

of June 30, 2020). 

8The term ‘‘Broker-Dealer’’ is used here as 

defined below under the following discussion 

Background on the Commission’s Regulation Best 

Interest. 

submissions should refer to File 

Number SR–NYSEARCA–2022–25 and 

should be submitted on or before May 

31, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–09956 Filed 5–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94850; File No. SR–MSRB– 

2022–02] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing of a Proposed 

Rule Change Consisting of 

Amendments to MSRB Rule G–19 

Regarding Regulation Best Interest for 

Certain Municipal Securities Activities 

of Bank Dealers and MSRB Rule G–48 

Regarding Quantitative Suitability for 

Institutional Sophisticated Municipal 

Market Professionals 

May 4, 2022. 

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

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on April 29, 2022, the Municipal 

Securities Rulemaking Board (‘‘MSRB or 

‘‘Board’’) 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 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 filed with the Commission 

a proposed rule change consisting of 

amendments to: (i) MSRB Rule G–19, on 

suitability of recommendations and 

transactions, and (ii) MSRB Rule G–48, 

on transactions with sophisticated 

municipal market professionals 

(‘‘SMMPs’’) 3 (collectively, the 

‘‘proposed rule change’’). The proposed 

rule change would align MSRB Rule G– 

19 to the Commission’s Rule 15l–1 

under the Exchange Act (‘‘Regulation 

Best Interest’’) 4 for certain municipal 

securities activities of bank dealers 5

(the ‘‘Best Interest Amendments’’). In 

addition, the proposed rule change 

would amend MSRB Rule G–48 to 

modify the quantitative suitability 

obligation of brokers, dealers, and 

municipal securities dealers 

(collectively, ‘‘dealers’’ and, 

individually, each a ‘‘dealer’’) by 

eliminating the quantitative suitability 

obligation for recommendations in 

circumstances where a dealer does not 

have actual control or de facto control 

over the account of an Institutional 

SMMP (the ‘‘Institutional SMMP 

Amendment’’).6

Subject to Commission approval, the 

respective compliance dates for the 

amendments to MSRB rules included in 

the proposed rule change will be 

announced in a regulatory notice 

published by the MSRB on its website 

within 30 days of the publication of the 

Commission’s approval order in the 

Federal Register. Such compliance date 

for the Best Interest Amendments will 

be no earlier than one year from the 

MSRB’s publication of the regulatory 

notice announcing it.7 Such compliance 

date for the Institutional SMMP 

Amendment will be no earlier than 30 

days from the MSRB’s publication of the 

regulatory notice announcing it. 

The text of the proposed rule change 

is available on the MSRB’s website at 

www.msrb.org/Rules-andInterpretations/SEC-Filings/2022- 

Filings.aspx, at the MSRB’s principal 

office, 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 

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 text 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 

1. Purpose 

The proposed rule change consists of 

the Best Interest Amendments to MSRB 

Rule G–19 and the proposed 

Institutional SMMP Amendment to 

MSRB Rule G–48 for the respective 

purposes further described below. 

Background and Purpose of the Best 

Interest Amendments 

The proposed Best Interest 

Amendments would amend MSRB Rule 

G–19 to extend the obligations of 

Regulation Best Interest to Bank Dealers 

when making recommendations to retail 

customers of municipal securities 

transactions or investment strategies 

involving municipal securities 

(collectively, ‘‘retail municipal 

recommendations’’ and, individually, 

each a ‘‘retail municipal 

recommendation’’). The Best Interest 

Amendments are intended to improve 

investor protection in the municipal 

securities market by ensuring that retail 

customers are afforded investor 

protections under Regulation Best 

Interest, regardless of whether a retail 

municipal recommendation received by 

a retail customer is made by a BrokerDealer or a Bank Dealer.8


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Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28085 

9See, generally, Regulation Best Interest 

Adopting Release (citation at note 4 supra). In 

response, on May 1, 2020, the MSRB filed a 

proposed rule change with the Commission to 

harmonize Regulation Best Interest with certain 

MSRB rules applicable to related municipal 

securities activities of Broker-Dealers. See Exchange 

Act Release No. 88828 (May 6, 2020), 85 FR 28082, 

File No. SR–MSRB–2020–02 (hereinafter, the 

‘‘Broker-Dealer Harmonization Filing’’), available at 

https://msrb.org/-/media/Files/SEC-Filings/2020/ 

MSRB-2020-02-Notice.ashx?. The Commission 

approved these proposed amendments on June 25, 

2020. See Exchange Act Release No. 89154 (June 25, 

2020), 85 FR 39613 (July 1, 2020), File No. SR– 

MSRB–2020–02, available at https://msrb.org/-/ 

media/Files/SEC-Filings/2020/MSRB-2020-02- 

Federal-Register.ashx?. 

10 17 CFR 240.15l–1(b)(1) (‘‘Retail customer 

means a natural person, or the legal representative 

of such natural person, who (i) [r]eceives a 

recommendation of any securities transaction or 

investment strategy involving securities from a 

broker, dealer, or a natural person who is an 

associated person of a broker or dealer; and (ii) 

[u]ses the recommendation primarily for personal, 

family, or household purposes.’’) For discussion of 

what it means for a retail customer to ‘‘use’’ a 

recommendation, see the SEC staff’s Frequently 

Asked Questions on Regulation Best Interest, 

available at https://www.sec.gov/tm/faq-regulationbest-interest. 

11Regulation Best Interest Adopting Release, 84 

FR at 33319. 

12 17 CFR 240.15l–1(a)(1). Regulation Best Interest 

provides that this general obligation is satisfied 

only if a Broker-Dealer complies with four 

component obligations: (i) An obligation to make 

certain prescribed disclosures, before or at the time 

of the recommendation, about the recommendation 

and the relationship between the retail customer 

and the Broker-Dealer (the ‘‘Disclosure Obligation’’) 

(see 17 CFR 240.15l–1(a)(2)(i)); (ii) an obligation to 

exercise reasonable diligence, care, and skill in 

making a recommendation (the ‘‘Care Obligation’’) 

(see 17 CFR 240.15l–1(a)(2)(ii)); (iii) an obligation to 

establish, maintain, and enforce written policies 

and procedures reasonably designed to address 

conflicts of interest (the ‘‘Conflict-of-Interest 

Obligation’’) (see 17 CFR 240.15l–1(a)(2)(iii)); and 

(iv) an obligation to establish, maintain, and enforce 

written policies and procedures reasonably 

designed to achieve compliance with Regulation 

Best Interest (the ‘‘Compliance Obligation’’) (see 17 

CFR 240.15l–1(a)(2)(iv)). 

13See Broker-Dealer Harmonization Filing, 85 FR 

at 28083, n. 5 (discussing how Bank Dealers are not 

subject to Regulation Best Interest by the terms of 

the SEC’s rules and indicating the Board’s intent to 

issue a request for comment regarding extending the 

requirements of Regulation Best Interest to Bank 

Dealers). Notably, all Bank Dealer 

recommendations, including retail municipal 

recommendations, are presently subject to the 

longstanding suitability obligations provided by 

MSRB rules, including MSRB Rule G–19 and, when 

applicable, MSRB Rule G–48. 

14 17 CFR 240.15l–1(a)(2)(i). 

15 17 CFR 240.15l–1(a)(2)(ii). 

16 17 CFR 240.15l–1(a)(2)(iii). 

17 17 CFR 240.15l–1(a)(2)(iv). 

18For example, if the applicable legal charter of 

a Bank Dealer only permits a Bank Dealer to 

conduct municipal securities activities or, in fact, 

a Bank Dealer’s business model is limited to 

municipal securities activities, then the Bank Dealer 

generally would be required to accurately disclose 

the fact that it only engages in transactions 

involving municipal securities and, therefore, will 

only make recommendations to a retail customer 

regarding transactions involving municipal 

securities. See also note 19 infra (discussing the 

Compliance Obligation pursuant to the Best Interest 

Amendments for Bank Dealers who do not engage 

in any retail municipal recommendations). 

Background on the Commission’s 

Regulation Best Interest 

On June 5, 2019, the SEC adopted 

Regulation Best Interest, which 

established a new standard of conduct 

for broker-dealers, and the natural 

persons who are associated persons of 

such broker-dealers (collectively, 

‘‘Broker-Dealers’’ and, individually, 

each a ‘‘Broker-Dealer’’), when making a 

recommendation to a retail customer of 

any securities transaction or investment 

strategy involving securities.9 As 

defined in Regulation Best Interest, the 

term ‘‘retail customer’’ generally refers 

to any natural person, or the legal 

representative of such person, who 

receives and uses a recommendation 

from a Broker-Dealer primarily for 

personal, family, or household 

purposes.10 Regulation Best Interest 

enhanced the Broker-Dealer standard of 

conduct beyond existing suitability 

obligations, such as those required by 

MSRB Rule G–19, on suitability, for 

such retail customers and aligned the 

applicable standard of conduct with the 

reasonable expectations of retail 

customers.11 In this regard, Regulation 

Best Interest imposes the following 

‘‘general obligation’’ on Broker-Dealers, 

stating a broker, dealer, or a natural 

person who is an associated person of 

a broker or dealer, when making a 

recommendation of any securities 

transaction or investment strategy 

involving securities (including account 

recommendations) to a retail customer, 

shall act in the best interest of the retail 

customer at the time the 

recommendation is made, without 

placing the financial or other interest of 

the broker, dealer, or natural person 

who is an associated person of a broker 

or dealer making the recommendation 

ahead of the interest of the retail 

customer.12

Discussion of Regulation Best Interest’s 

Current Applicability to Bank Dealers 

By its terms, Regulation Best Interest 

does not apply to retail municipal 

recommendations made by Bank 

Dealers, because Bank Dealers in 

exempted securities have an exception 

from Broker-Dealer status under the Act 

and Regulation Best Interest applies 

only to Broker-Dealers. As a result, Bank 

Dealers presently are not required to 

comply with Regulation Best Interest 

and, therefore, retail investors may not 

benefit from its enhanced standard of 

conduct when receiving 

recommendations from Bank Dealers.13

Application of Regulation Best Interest 

to Bank Dealers 

The proposed Best Interest 

Amendments would amend MSRB Rule 

G–19 to require a Bank Dealer to comply 

with Regulation Best Interest to the 

same extent as if it were a Broker-Dealer 

when making a retail municipal 

recommendation. Consequently, a Bank 

Dealer would have to act in the best 

interest of the retail customer at the time 

a retail municipal recommendation is 

made, without placing the financial or 

other interests of the Bank Dealer ahead 

of the interest of the retail customer. 

Correspondingly, the Bank Dealer 

would have to comply with the 

Commission’s component obligations of 

Regulation Best Interest to the same 

extent as if it were a Broker-Dealer, 

including Regulation Best Interest’s 

Disclosure Obligation,14 Care 

Obligation,15 Conflict-of-Interest 

Obligation,16 and Compliance 

Obligation.17 Under the proposed Best 

Interest Amendments, the component 

obligations of Regulation Best Interest 

would apply to those municipal 

securities activities associated with a 

retail municipal recommendation 

within the overall context of a Bank 

Dealer business model. The MSRB 

believes that any SEC guidance with 

respect to the understanding and 

application of Regulation Best Interest 

would be equally applicable to Bank 

Dealers. 

Application of the Disclosure Obligation 

to Bank Dealers 

Consistent with Regulation Best 

Interest’s Disclosure Obligation, the 

proposed Best Interest Amendments 

would require a Bank Dealer, prior to or 

at the time of the retail municipal 

recommendation, to provide to its retail 

customer, in writing, full and fair 

disclosure of: (a) All material facts 

relating to the scope and terms of the 

relationship with the retail customer, 

including: (i) That the Bank Dealer is 

acting as a municipal securities dealer 

with respect to the retail municipal 

recommendation; (ii) The material fees 

and costs that apply to the retail 

customer’s transactions, holdings, and 

accounts; and (iii) The type and scope 

of services provided to the retail 

customer, including any material 

limitations on the securities or 

investment strategies involving 

securities that may be recommended to 

the retail customer; 18 and (b) All 

material facts relating to conflicts of 

interest that are associated with the 

retail municipal recommendation. 


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28086 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

19 If a Bank Dealer’s business model is such that 

it and its associated persons are not permitted to 

make any retail municipal recommendations, then 

a Bank Dealer may opt not to establish policies and 

procedures outlining the affirmative regulatory 

obligations pursuant to the Disclosure Obligation, 

Care Obligation, and Conflict of Interest Obligation. 

However, it would be prudent for a Bank Dealer to 

have policies and procedures that make clear that, 

prior to permitting the making of any such retail 

municipal recommendations, the Bank Dealer 

would need to establish policies and procedures 

reasonably designed to ensure compliance with the 

Best Interest Amendments to MSRB Rule G–19. 

20See supra note 10 for the applicable definition 

of ‘‘retail customer’’ and related citation. Any 

customer meeting such definition of retail customer 

pursuant to Regulation Best Interest would not be 

considered an Institutional SMMP for the purposes 

of the proposed Institutional SMMP Amendment 

and its modification to MSRB Rule G–48. For 

purposes of MSRB rules, such a customer meeting 

the definition of a ‘‘retail customer’’ would receive 

the protections afforded by Regulation Best Interest. 

21See Broker-Dealer Harmonization Filing, 85 FR 

at 28082, n. 4. The MSRB notes that it has had a 

long held prohibition against ‘‘churning,’’ and the 

MSRB formally ‘‘recast’’ this prohibition as 

quantitative suitability through an amendment to 

MSRB Rule G–19 approved by the SEC in 2014. See 

Exchange Act Release No. 71665 (Mar. 7, 2014), 79 

Application of the Care Obligation to 

Bank Dealers 

Consistent with Regulation Best 

Interest’s Care Obligation, the proposed 

Best Interest Amendments would 

require a Bank Dealer to exercise 

reasonable diligence, care, and skill to: 

(a) Understand the potential risks, 

rewards, and costs associated with any 

retail municipal recommendation, and 

have a reasonable basis to believe that 

a retail municipal recommendation 

could be in the best interest of at least 

some retail customers; (b) Have a 

reasonable basis to believe that the retail 

municipal recommendation is in the 

best interest of a particular retail 

customer, based on that retail 

customer’s investment profile and the 

potential risks, rewards, and costs 

associated with the recommendation, 

and does not place the financial or other 

interest of the Bank Dealer ahead of the 

interest of the retail customer; (c) Have 

a reasonable basis to believe that a series 

of retail municipal recommendations, 

even if in the retail customer’s best 

interest when viewed in isolation, is not 

excessive and is in the retail customer’s 

best interest when taken together in 

light of the retail customer’s investment 

profile and does not place the financial 

or other interest of the Bank Dealer 

ahead of the interest of the retail 

customer. 

Application of the Conflict-of-Interest 

Obligation to Bank Dealers 

Consistent with Regulation Best 

Interest’s Conflict-of-Interest Obligation, 

the proposed Best Interest Amendments 

would require a Bank Dealer to 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to: (a) Identify and at a 

minimum disclose, in accordance with 

its Disclosure Obligation, or eliminate, 

all conflicts of interest associated with 

such retail municipal recommendations; 

(b) Identify and mitigate any conflicts of 

interest associated with such retail 

municipal recommendations that create 

an incentive for a natural person who is 

an associated person of the Bank Dealer 

to place the interests of the Bank Dealer 

or such associated person ahead of the 

interest of the retail customer; (c)(i) 

Identify and disclose any material 

limitations placed on the securities or 

investment strategies involving 

securities that may be recommended to 

a retail customer and any conflicts of 

interest associated with such 

limitations, in accordance with its 

Disclosure Obligation, and (ii) Prevent 

such limitations and associated conflicts 

of interest from causing the Bank Dealer 

to make retail municipal 

recommendations that place the interest 

of the Bank Dealer ahead of the interest 

of the retail customer; and (d) Identify 

and eliminate any sales contests, sales 

quotas, bonuses, and non-cash 

compensation that are based on the 

sales of specific municipal securities or 

specific types of municipal securities 

within a limited period of time. 

Application of the Compliance 

Obligation to Bank Dealers 

Consistent with Regulation Best 

Interest’s Compliance Obligation, the 

proposed Best Interest Amendments 

would require a Bank Dealer to 

establish, maintain, and enforce written 

policies and procedures reasonably 

designed to achieve compliance with 

Regulation Best Interest.19

Purpose and Intent of the Best Interest 

Amendments 

The MSRB is proposing the Best 

Interest Amendments to MSRB Rule G– 

19 for purposes of enhancing the 

standard of investor protection in the 

municipal securities market and 

enhancing fairness and efficiency in the 

municipal securities market by 

promoting regulatory parity among Bank 

Dealers and Broker-Dealers. Specific to 

enhancing the standard of investor 

protection, the MSRB believes that all 

retail customers receiving a retail 

municipal recommendation should 

benefit from the enhanced investor 

protections afforded by Regulation Best 

Interest, regardless of whether such a 

retail customer is a customer of a 

Broker-Dealer or a Bank Dealer. 

Currently, retail customers of Bank 

Dealers are not afforded the protections 

of Regulation Best Interest when 

receiving a retail municipal 

recommendation from a Bank Dealer. 

The proposed Best Interest 

Amendments would require a Bank 

Dealer to comply with the enhanced 

standard of conduct required by 

Regulation Best Interest and, thereby, 

improve overall investor protection in 

the municipal securities market. 

Specific to promoting regulatory 

parity, the MSRB believes that the 

proposed Best Interest Amendments 

would establish a uniform regulatory 

standard in the municipal securities 

market by requiring the same standard 

of conduct for Bank Dealers and BrokerDealers when making retail municipal 

recommendations. This uniform 

standard would enhance the fairness 

and efficiency of the municipal 

securities market by ensuring Bank 

Dealers have regulatory obligations and 

burdens when engaging in retail 

municipal recommendations that are 

equivalent to the regulatory obligations 

and burdens of Broker-Dealers when 

engaging in the same municipal 

securities activities. This uniformity 

would better ensure that Bank Dealers 

do not have a competitive advantage in 

the municipal securities market by 

operation of a less burdensome 

regulatory standard of conduct and, 

thereby, mitigate the potential for 

regulatory arbitrage. 

Background and Purpose of the 

Institutional SMMP Amendment 

The proposed Institutional SMMP 

Amendment would amend MSRB Rule 

G–48 to modify the current obligation to 

perform a quantitative suitability 

analysis for recommendations where the 

dealer does not have actual control or de 

facto control over the account of an 

SMMP who is not a retail customer 

under Regulation Best Interest 

(collectively, ‘‘Institutional SMMPs’’ 

and, individually, each an ‘‘Institutional 

SMMP’’).20

Similar to the reduced customerspecific suitability obligations currently 

afforded to Institutional SMMPs under 

MSRB Rule G–48(c), the MSRB believes 

that dealers transacting with 

Institutional SMMPs should have 

similarly reduced quantitativesuitability obligations in instances 

where the dealer does not have actual 

control or de facto control over the 

account of an Institutional SMMP. This 

modification would effectively revert 

the quantitative suitability standard for 

Institutional SMMPs back to the 

longstanding standard that was in place 

under MSRB rules prior to June 30, 

2020.21 The proposed Institutional 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28087 

FR 2432 (Mar. 13, 2014), File No. SR–MSRB–2013– 

07 (discussing the then-existing MSRB prohibition 

on churning and a proposed rule change to recast 

this prohibition using the phrase ‘‘quantitative 

suitability’’), available at http://www.msrb.org/∼/

media/Files/SEC-Filings/2013/MSRB-2013-07-FedReg-Approval.ashx?la=en&hash=AEDA0B5509630E

25473E9F6F3A3F9C34. 

22See MSRB Rule G–48(c). See also related 

discussion infra under Background and Purpose of 

the Institutional SMMP Amendment—Background 

on MSRB Rule D–15 and SMMP Affirmation 

Requirements. 

23See the Broker-Dealer Harmonization Filing, 85 

FR at 28084. The Broker-Dealer Harmonization 

Filing amended MSRB Rule G–19 to provide that 

the rule does not apply to recommendations subject 

to Regulation Best Interest. 

24MSRB Rule G–19, Supplementary Material 

.05(c). 

25 Id. 

26 In other words, as of June 30, 2020, if the 

obligations of MSRB Rule G–19 attach to a dealer’s 

recommendation, then the investor protections 

regarding quantitative suitability apply regardless of 

whether the dealer making the recommendation 

exercises any actual control or de facto control over 

the customer’s account. The Broker-Dealer 

Harmonization Filing amended this language of 

Supplementary Material .05(c) to eliminate such 

control requirements, effectively extending the 

requirements of quantitative suitability to any 

customer account. See Broker-Dealer 

Harmonization Filing, 85 FR at 28084. June 30, 

2020 was the compliance date for the amendments 

enacted by the Broker-Dealer Harmonization Filing. 

See Broker-Dealer Harmonization Filing, 85 FR at 

28082, n. 4. Pursuant to the Broker-Dealer 

Harmonization Filing, the MSRB also notes that this 

quantitative suitability obligation applies uniformly 

to any dealer (i.e., the same regulatory obligations 

apply to both Broker-Dealers and Bank Dealers). 

27See MSRB Rule D–15(c) (requiring Institutional 

SMMPs to ‘‘affirmatively indicate,’’ among other 

things, that it is exercising independent judgment 

in evaluating (A) the recommendations of the dealer 

and (B) the quality of execution of the customer’s 

transactions by the dealer). 

28See discussion under Background and Purpose 

of the Institutional SMMP Amendment— 

Background on MSRB Rule D–15 and SMMP 

Affirmation Requirements near note 37 infra 

(discussing the definition of Sophisticated 

Municipal Market Participant under MSRB Rule D– 

15). 

29MSRB Rule G–48(a) (‘‘The broker, dealer, or 

municipal securities dealer shall not have any 

obligation under Rule G–47 to ensure disclosure of 

material information that is reasonably accessible to 

the market.’’) 

30MSRB Rule G–48(b). 

31MSRB Rule G–48(d) (‘‘The broker, dealer, or 

municipal securities dealer disseminating an 

SMMP’s ‘quotation’ as defined in Rule G–13, which 

is labeled as such, shall apply the same standards 

regarding quotations described in Rule G–13(b) as 

if such quotations were made by another broker, 

dealer, or municipal securities dealer.’’) 

32MSRB Rule G–48(e) (‘‘The broker, dealer, or 

municipal securities dealer shall not have any 

obligation under Rule G–18 to use reasonable 

diligence to ascertain the best market for the subject 

security and buy or sell in that market so that the 

resultant price to the SMMP is as favorable as 

possible under prevailing market conditions.’’) 

33MSRB Rule G–48(c). 

34See, e.g., Exchange Act Release No. 67064 (May 

25, 2012), 77 FR 32704 (June 1, 2012), File No. SR– 

MSRB–2012–05 (May 25, 2012) (approving an 

MSRB proposed rule change to relax certain 

qualifications for a dealer to afford a customer 

SMMP status in light of market developments 

regarding the increased availability of municipal 

securities market information and the desire of 

certain institutional customers to access alternative 

trading systems). 

35 Id. The amendments to MSRB Rule G–48 

enacted by the Broker-Dealer Harmonization Filing 

carved out recommendations to customers that are 

subject to Regulation Best Interest from the rule’s 

modified standards. See Broker-Dealer 

Harmonization Filing, 85 FR at 28084–85. 

36MSRB Rule G–48(c). 

SMMP Amendment is intended to 

improve the efficiency of the municipal 

securities market without eroding 

investor protection by aligning the 

compliance burden associated with 

certain recommendations made by 

dealers to the reasonable expectations 

and capabilities of Institutional 

SMMPs—who by their nature are more 

sophisticated, non-natural-person 

customers and must affirmatively 

indicate their capacity to (i) exercise 

independent judgment and (ii) access 

material information.22

Background on MSRB Rule G–19’s 

Quantitative Suitability Requirements 

MSRB Rule G–19 sets the MSRB’s 

baseline investor protection standards 

regarding the suitability of 

recommendations made by dealers to 

their customers of purchases, sales, or 

exchanges of municipal securities that 

are not subject to Regulation Best 

Interest. Among other requirements, 

Supplementary Material .05 of MSRB 

Rule G–19 enumerates three 

components of a dealer’s suitability 

analysis when recommending a 

transaction or investment strategy 

involving a municipal security or 

municipal securities to a non-retail 

customer (i.e., a recommendation that is 

not subject to Regulation Best 

Interest).23 As further defined in the text 

of the rule, MSRB Rule G–19 provides 

that a dealer’s suitability obligation is 

composed of (i) reasonable-basis 

suitability, (ii) customer-specific 

suitability, and (iii) quantitative 

suitability. Most relevant to the 

proposed Institutional SMMP 

Amendment of this proposed rule 

change, quantitative suitability requires 

a dealer to have a reasonable basis for 

believing that a series of recommended 

transactions, even if suitable when 

viewed in isolation, are not excessive 

and unsuitable for the customer when 

taken together in light of the customer’s 

investment profile, as delineated in 

MSRB Rule G–19.24 No single test 

defines excessive activity, but factors 

such as the turnover rate, the cost-equity 

ratio, and the use of in-and-out trading 

in a customer’s account may provide a 

basis for a finding that a dealer has 

violated the quantitative suitability 

obligation.25

Pursuant to the amendments 

effectuated by the Broker-Dealer 

Harmonization Filing, discussed above 

and effective as of June 30, 2020, the 

quantitative suitability obligation of 

MSRB Rule G–19 no longer incorporates 

an element of control in relation to a 

customer’s account.26As a result, 

dealers are currently obligated to 

conduct a quantitative suitability 

analysis under MSRB Rule G–19 when 

making recommendations to 

Institutional SMMPs, even in instances 

where the dealer does not have actual 

control or de facto control over the 

account. The obligation applies 

notwithstanding the fact that 

Institutional SMMPs self-identify under 

MSRB Rule G–48 and MSRB Rule D–15 

as having the willingness and requisite 

investment sophistication to, for 

example, independently evaluate the 

recommendations of a dealer and the 

quality of a dealer’s execution, as 

further discussed below.27

Background on MSRB Rule G–48 and 

Modified Regulatory Obligations 

MSRB Rule G–48 provides for 

modified dealer regulatory obligations 

under MSRB rules when dealing with 

certain customers that meet the 

definition of a Sophisticated Municipal 

Market Participant 28 (i.e., an SMMP). 

More specifically, when transacting 

with an SMMP customer, Rule G–48 

modifies aspects of a dealer’s baseline 

regulatory obligations in terms of: (i) 

Time of trade disclosures,29 (ii) 

transaction pricing,30 (iii) bona fide 

quotations,31 (iv) best execution,32 and 

(vi) suitability.33 The modified 

regulatory obligations afforded to 

SMMPs under MSRB rules are intended 

to account for the distinct capabilities of 

certain sophisticated, non-retail 

customers and the varied types of 

dealer-customer relationships occurring 

in the municipal securities market.34

Most relevant to the proposed 

Institutional SMMP Amendment, Rule 

G–48(c) currently modifies the 

suitability requirements of MSRB Rule 

G–19 by eliminating the requirement for 

dealers to conduct a customer-specific 

suitability analysis for 

recommendations made to an 

Institutional SMMP.35 The operative 

provision of MSRB Rule G–48 provides 

that, ‘‘[w]hen making a recommendation 

subject to Rule G–19 and not Regulation 

Best Interest, Rule 15l–1 under the Act, 

a broker, dealer, or municipal securities 

dealer shall not have any obligation 

under Rule G–19 to perform a customerspecific suitability analysis.’’ 36 This 


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37See Exchange Act Release No. 71665 (Mar. 7, 

2014), 79 FR 14321 (Mar. 13, 2014), File No. SR– 

MSRB–2013–07 (Sept. 17, 2013) (codifying the 

relaxed customer-specific suitability obligation for 

recommendations made to SMMPs in MSRB Rule 

G–48 and the actual control or de facto control 

requirement, thereafter eliminated in 2020 as 

described herein, for the applicability of 

quantitative suitability to recommendations made 

to customers in MSRB Rule G–19). 

38MSRB Rule D–15(a). A customer is only eligible 

to be treated as an SMMP if the customer is: (i) A 

bank, savings and loan association, insurance 

company, or registered investment company, (ii) a 

registered investment advisor, or (iii) a person or 

entity with total assets of at least $50 million. 

39MSRB Rule D–15(b). A customer is only 

eligible to be treated as an SMMP if the dealer has 

developed a reasonable basis to believe that the 

customer is capable of evaluating investment risks 

and market value independently, both in general 

and with regard to particular transactions and 

investment strategies in municipal securities. In 

addition, Supplementary Material .01 of MSRB Rule 

D–15 states that, as part of the reasonable-basis 

analysis, the dealer should consider the amount and 

type of municipal securities owned or under 

management by the customer. 

40MSRB Rule D–15(c). 

41See MSRB Rule D–15(c)(1) (‘‘The customer 

must affirmatively indicate that it: (1) is exercising 

independent judgment in evaluating: (A) the 

recommendations of the dealer; (B) the quality of 

execution of the customer’s transactions by the 

dealer; and (C) the transaction price for nonrecommended secondary market agency 

transactions as to which (i) the dealer’s services 

have been explicitly limited to providing 

anonymity, communication, order matching and/or 

clearance functions and (ii) the dealer does not 

exercise discretion as to how or when the 

transactions are executed . . .’’). 

42See MSRB Rule D–15(c)(2) (‘‘The customer 

must affirmatively indicate that it . . . (2) has 

timely access to material information that is 

available publicly through established industry 

sources as defined in Rule G–47(b)(i) and (ii).’’) 

43See MSRB Rule D–15(b) and Rule D–15 

Supplementary Material .01. 

44Where a dealer exercises actual control or de 

facto control over an Institutional SMMP’s account, 

the dealer would still be required to perform a 

quantitative suitability analysis in accordance with 

Supplementary Material .05 of MSRB Rule G–19. 

Relatedly, if an Institutional SMMP limitedly 

provides its customer affirmation on a trade-bytrade basis, then the dealer would be required to 

comply with all aspects of MSRB Rule G–19, 

including both the quantitative suitability 

requirement and the customer-specific suitability 

requirement, for those recommendations for which 

the Institutional SMMP did not provide the 

applicable customer affirmation. See 

Supplementary Material .02 of MSRB Rule D–15 

(discussing trade-by-trade affirmations). 

45See supra note 21 and related discussion. 

relaxed customer-specific suitability 

obligation is generally aligned with the 

‘‘independent judgment’’ affirmations a 

customer seeking SMMP status makes 

under MSRB Rule D–15. The proposed 

Institutional SMMP Amendment would 

likewise relax the quantitative 

suitability obligation for similar reasons, 

as further described in the following 

sections.37

Background on MSRB Rule D–15 and 

SMMP Affirmation Requirements 

MSRB Rule G–48 incorporates the 

definition of SMMP under MSRB Rule 

D–15 for purposes of defining which 

customers do (or do not) qualify as an 

SMMP for purposes of Rule G–48 and, 

therefore, MSRB Rule D–15 establishes 

the scope of potential customers who 

might qualify for MSRB Rule G–48’s 

modified obligations. The SMMP 

definition of MSRB Rule D–15 

enumerates three definitional 

components, which separately address: 

(i) The minimum qualifying traits and 

characteristics of an SMMP customer; 38

(ii) that a dealer must develop a 

reasonable basis for determining 

whether a customer has the requisite 

level of expertise and sophistication to 

be deemed an SMMP customer (the 

‘‘SMMP Reasonable Basis 

Determination’’); 39 and (iii) what 

affirmations a customer must 

communicate to the dealer regarding its 

own investment judgment and access to 

information in order to be appropriately 

deemed an SMMP customer (the 

‘‘SMMP Customer Affirmations’’).40 In 

terms of the SMMP Customer 

Affirmations, MSRB Rule D–15(c) 

provides that the customer must 

affirmatively indicate to the dealer that 

(i) it is exercising independent judgment 

in evaluating the recommendations of 

the dealer; the quality of execution of 

the customer’s transactions by the 

dealer; and the transaction price for 

non-recommended secondary market 

agency transactions as to which the 

dealer’s services have been explicitly 

limited to providing anonymity, 

communication, order matching and/or 

clearance functions and the dealer does 

not exercise discretion as to how or 

when the transactions are executed; 41

and (ii) it has timely access to material 

information that is available publicly 

through established industry sources as 

defined in MSRB Rule G–47(b)(i) and 

MSRB Rule G–47(b)(ii) (i.e., ‘‘material 

information’’ from ‘‘established industry 

sources,’’ such as EMMA website 

information and rating agency 

reports).42

Thus, an institutional customer who 

self-identifies as an SMMP has freely 

affirmed to a dealer its willingness to be 

treated as a sophisticated customer with 

the capacity and resources to exercise 

its own independent judgment. In this 

way, the SMMP Customer Affirmations 

are designed to ensure that any 

customer treated as an SMMP has 

affirmatively and knowingly provided 

the grounds on which a dealer may 

afford such SMMP customer lesser 

protections under certain MSRB rules. 

As an additional investor protection 

safeguard beyond the requirement for 

SMMP Customer Affirmations, the 

SMMP Reasonable Basis Determination 

also requires a dealer to have a 

reasonable basis to believe that an 

SMMP customer is capable of evaluating 

investment risks and market value 

independently, both in general and with 

regard to particular transactions and 

investment strategies in municipal 

securities.43 In this way, the SMMP 

Reasonable Basis Determination further 

ensures that an Institutional SMMP does 

in fact possess a more sophisticated 

understanding of the municipal 

securities market. Importantly, the 

proposed Institutional SMMP 

Amendment would not alter the SMMP 

Customer Affirmations, the SMMP 

Reasonable Basis Determination, nor 

any of the other definitional elements of 

MSRB Rule D–15. 

Purpose and Intent of the Institutional 

SMMP Amendment to MSRB Rule G–48 

The proposed Institutional SMMP 

Amendment would amend MSRB Rule 

G–48 to modify the quantitative 

suitability obligations of dealers when 

effecting transactions for their 

Institutional SMMPs. The proposed 

Institutional SMMP Amendment would 

require a dealer to conduct a 

quantitative suitability analysis only in 

situations where the dealer has actual 

control or de facto control over an 

Institutional SMMP’s account.44 As 

stated above, the proposed amendments 

to MSRB Rule G–48 would narrowly 

reinstate the scope of suitability 

protections afforded to Institutional 

SMMPs in effect prior to the 

amendments effectuated by the BrokerDealer Harmonization Filing and so 

should be a familiar regulatory concept 

to dealers and Institutional SMMPs 

alike.45 More importantly, because each 

Institutional SMMP must self-identify as 

an SMMP by making the SMMP 

Customer Affirmations, as well as must 

fulfill the requirements associated with 

a dealer’s SMMP Reasonable Basis 

Determination, the MSRB believes that 

the proposed Institutional SMMP 

Amendment will ease a regulatory 

burden on dealers that effectively 

replicates the sort of analysis an 

Institutional SMMP is willing and 

capable of performing itself. As a result, 

the proposed Institutional SMMP 

Amendment would align the 

compliance burden associated with 

certain recommendations made by 

dealers to the reasonable expectations 

and capabilities of Institutional SMMPs. 

While the investor protection benefits 

associated with requiring dealers to 

perform a potentially duplicative 

suitability analysis can be appropriate 


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46For example, the MSRB believes that the 

obligation to perform quantitative suitability 

analyses under MSRB rules remains appropriate, 

regardless of the potential for such duplication, in 

circumstances of recommendations made to retail 

customers; non-retail, institutional customers who 

fail to meet the characteristics of an SMMP; and/ 

or non-retail customers who have declined to make 

the affirmations necessary to be appropriately 

deemed an SMMP. 

47 15 U.S.C. 78o–4(b)(2). 

48 Id. 

49 15 U.S.C. 78o–4(b)(2)(C). 

50 Id. 

51 Id. 

52 Id. 

53Regulation Best Interest Adopting Release, 84 

FR at 33318. 

54Regulation Best Interest Adopting Release, 84 

FR at 33321. 

55Regulation Best Interest Adopting Release, 84 

FR at 33462 (‘‘The possibility that Regulation Best 

Interest may increase the efficiency of the 

recommendations provided by the associated 

persons of the broker-dealer may enhance the 

attractiveness of broker-dealer services for those 

investors who currently do not invest through 

broker-dealers . . . If retail customers are more 

Continued 

in other circumstances,46 the MSRB 

believes that the compliance burden 

associated with performing a 

quantitative suitability analysis on 

recommendations made to Institutional 

SMMPs outweighs the potential 

marginal investor protection benefits. In 

this way, the proposed Institutional 

SMMP Amendment would promote 

efficiency in the municipal securities 

market by eliminating a regulatory 

burden on dealers that generally 

provides a duplicative or unneeded 

analyses in supplement of an 

Institutional SMMPs’ own independent 

and informed judgment, and, 

consequently, the proposed Institutional 

SMMP Amendment would allow 

dealers to redirect the resources 

associated with this regulatory burden 

to other more productive market 

activities. 

2. Statutory Basis 

The MSRB believes that the proposed 

rule change is consistent with Section 

15B(b)(2) of the Act,47 which provides 

that the Board shall propose and adopt 

rules to effect the purposes of this title 

with respect to transactions in 

municipal securities effected by brokers, 

dealers, and municipal securities 

dealers and advice provided to or on 

behalf of municipal entities or obligated 

persons by brokers, dealers, municipal 

securities dealers, and municipal 

advisors with respect to municipal 

financial products, the issuance of 

municipal securities, and solicitations 

of municipal entities or obligated 

persons undertaken by brokers, dealers, 

municipal securities dealers, and 

municipal advisors.48

Section 15B(b)(2)(C) of the Act 49

provides that the MSRB’s rules shall 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 and municipal financial 

products, to remove impediments to and 

perfect the mechanism of a free and 

open market in municipal securities and 

municipal financial products, and, in 

general, to protect investors, municipal 

entities, obligated persons, and the 

public interest.50 The MSRB believes 

the proposed rule change is consistent 

with Section 15B(b)(2)(C) of the Act 51

for the following reasons. 

Statutory Basis for the Best Interest 

Amendments 

The proposed Best Interest 

Amendments are consistent with 

Section 15B(b)(2)(C) of the Act 52

because the amendments would: Foster 

cooperation and coordination with 

regulators; prevent fraudulent and 

manipulative acts and practices; protect 

investors; remove impediments to and 

perfect the mechanism of a free and 

open market in municipal securities; 

and promote capital formation in the 

municipal securities market. 

Fostering Cooperation and Coordination 

With Regulators 

The proposed Best Interest 

Amendments would foster cooperation 

and coordination with regulators by 

more tightly aligning the suitability 

obligations of MSRB Rule G–19 with the 

suitability obligations of Regulation Best 

Interest. By providing a uniform 

standard for all types of dealers, this 

alignment of the regulatory scheme 

applicable to retail municipal 

recommendations will foster greater 

cooperation and coordination among the 

MSRB and the SEC, as well as greater 

cooperation and coordination among the 

authorities that examine Broker-Dealers 

and Bank Dealers for compliance with 

MSRB rules. 

Protecting Investors and Preventing 

Fraudulent and Manipulative Act and 

Practices 

The proposed Best Interest 

Amendments would protect investors 

and prevent fraudulent and 

manipulative acts and practices by 

extending the enhanced standards of 

conduct required by Regulation Best 

Interest to the retail municipal 

recommendations of Bank Dealers. As 

noted by the Commission in the 

adopting release for Regulation Best 

Interest, Regulation Best Interest 

enhances the broker-dealer standard of 

conduct beyond existing suitability 

obligations, and aligns the standard of 

conduct with retail customers’ 

reasonable expectations by requiring 

broker-dealers, among other things, to: 

Act in the best interest of the retail 

customer at the time the 

recommendation is made, without 

placing the financial or other interest of 

the broker-dealer ahead of the interests 

of the retail customer; and address 

conflicts of interest by establishing, 

maintaining, and enforcing policies and 

procedures reasonably designed to 

identify and fully and fairly disclose 

material facts about conflicts of interest, 

and in instances where we have 

determined that disclosure is 

insufficient to reasonably address the 

conflict, to mitigate or, in certain 

instances, eliminate the conflict.53

In addition, the Commission stated 

the enhancements contained in 

Regulation Best Interest are designed to 

improve investor protection by 

enhancing the quality of broker-dealer 

recommendations to retail customers 

and reducing the potential harm to retail 

customers that may be caused by 

conflicts of interest.54 For the same 

reasons, the MSRB believes that 

extending Regulation Best Interest to the 

retail municipal recommendations of 

Bank Dealers would prevent potential 

fraudulent and manipulative acts and 

practices and promote the protection of 

the retail customers of Bank Dealers. 

Removing Impediments and Perfecting 

the Mechanisms of a Free and Open 

Market 

The proposed Best Interest 

Amendments would remove 

impediments to and perfect the 

mechanism of a free and open market in 

municipal securities by applying a 

uniform regulatory standard for retail 

municipal recommendations that would 

promote parity regarding the regulatory 

obligations of Broker-Dealers and Bank 

Dealers and, thereby, reduce potential 

confusion among market participants as 

to which standard of conduct applies. 

Promoting Capital Formation 

The proposed Best Interest 

Amendments would not have a 

deleterious effect on capital formation 

in the municipal securities market and 

would have the potential to improve 

capital formation for the following 

reasons. Similar to the Commission’s 

reasoning in its adoption of Regulation 

Best Interest,55 the enhanced obligations 


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willing to participate in the securities markets 

through broker-dealers, Regulation Best Interest 

would have a positive effect on capital formation.’’) 

56 15 U.S.C. 78o–4(b)(2)(C). 

57See, e.g., Harry Gliksman, 54 SEC. 471, 475 

(1999) (upholding a NASD finding that a registered 

representative violated his suitability obligations by 

recommending frequent and short-term securities 

transactions even though the registered 

representative did not have written discretionary 

authority). 

58See related discussion supra under Background 

and Purpose of the Institutional SMMP 

Amendment—Background on MSRB Rule D–15 and 

SMMP Affirmation Requirements. See also MSRB 

Rule D–15(c)(1)–(2). 

59 15 U.S.C. 78o–4(b)(2)(C). 

60 Id. 

61See Policy on the Use of Economic Analysis in 

MSRB Rulemaking, available at http://msrb.org/ 

Rules-and-Interpretations/Economic-AnalysisPolicy.aspx. In evaluating whether there was a 

burden on competition, the Board was guided by its 

principles that required the Board to consider costs 

and benefits of a rule change, its impact on capital 

formation and the main reasonable alternative 

regulatory approach. 

of Regulation Best Interest may increase 

the efficiency of retail municipal 

recommendations and increase the 

attractiveness of Bank Dealer services 

for those retail customers who do not 

invest with a Bank Dealer because 

recommendations made by bank dealers 

are not currently subject to the 

additional standards of investor 

protection afforded by Regulation Best 

Interest. Additionally, by adopting a 

uniform regulatory standard for retail 

municipal recommendations across all 

dealers (i.e., across Bank Dealers and 

Broker-Dealers), the overall 

attractiveness of the municipal 

securities activities of dealers may 

improve. Consequently, if more retail 

customers are more willing to 

participate in municipal securities 

activities, then the proposed Best 

Interest Amendments would promote 

capital formation in the municipal 

securities market. 

Statutory Basis for the Institutional 

SMMP Amendment 

The proposed Institutional SMMP 

Amendment is consistent with Section 

15B(b)(2)(C) 56 of the Act because the 

amendment would facilitate 

transactions in municipal securities and 

remove impediments to and perfect the 

mechanism of a free and open market in 

municipal securities, while not 

compromising investor protection. 

The proposed Institutional SMMP 

Amendment would facilitate 

transactions in municipal securities and 

remove impediments to and perfect the 

mechanism of a free and open market in 

municipal securities by reducing a 

compliance burden on dealers. The 

modification of a dealer’s suitability 

obligations to eliminate the current 

requirement to perform a quantitative 

suitability analysis for 

recommendations in circumstances 

where the dealer does not have actual 

control or de facto control over an 

Institutional SMMP’s account will 

eliminate what could potentially be 

duplicative analyses undertaken by 

dealers on behalf of Institutional 

SMMPs—analyses which Institutional 

SMMPs have already affirmed their 

capacity and expertise to conduct for 

themselves, and which the Institutional 

SMMPs presumably have taken upon 

themselves to perform. In this regard, 

the proposed Institutional SMMP 

Amendment will remove an 

impediment to the mechanisms of a free 

and open market in municipal securities 

and promote greater efficiency. By 

eliminating this regulatory burden, the 

proposed Institutional SMMP 

Amendment would allow dealers to 

redirect the resources associated with 

this regulatory burden to other more 

productive market activities. As a 

separate, but related benefit, the MSRB 

believes that the Institutional SMMP 

Amendment would allow dealers to 

more efficiently serve those Institutional 

SMMPs who may be seeking relatively 

greater transaction activity and/or are 

more comfortable taking on the risks 

associated with more frequent 

transaction activity. 

The MSRB believes that the proposed 

Institutional SMMP Amendment to 

MSRB Rule G–48 will not compromise 

investor protections. The MSRB believes 

that allowing dealers to make 

recommendations to their Institutional 

SMMP customers without the burden of 

performing a quantitative suitability 

analysis is consistent with the SMMP 

Customer Affirmations and dealers’ 

SMMP Reasonable Basis Determination. 

More specifically, the SMMP Customer 

Affirmations ensure that an Institutional 

SMMP itself believes that it has the 

requisite knowledge and judgment to be 

afforded SMMP status; and, as an 

additional safeguard to investor 

protection, the SMMP Reasonable Basis 

Determination separately ensures that 

the dealer also has a reasonable basis to 

conclude that an Institutional SMMP 

has the knowledge and sophistication to 

be treated as a SMMP based on 

supplemental factors beyond just the 

SMMP Customer Affirmations. If either 

definitional prong is not met, a dealer is 

not permitted to afford an institutional 

customer the status of a SMMP. 

Therefore, the MSRB believes that the 

proposed Institutional SMMP 

Amendment is generally consistent with 

an Institutional SMMP’s more 

sophisticated understanding of (i) the 

commercial nature of its relationship 

with a dealer and (ii) the lesser 

regulatory standards of conduct 

governing the SMMP-dealer 

relationship. 

In addition, the proposed Institutional 

SMMP Amendment would incorporate 

the concepts of actual control or de facto 

control. Reinstating these control 

elements would help address potential 

scenarios in which the ability of an 

Institutional SMMP to exercise 

independent judgment is undermined or 

circumvented, such as when a dealer 

may not have formal discretionary 

authority over an Institutional SMMP’s 

account, but nevertheless exercises de 

facto control over the account to, for 

example, engage in churning activity in 

clear contravention of an Institutional 

SMMP’s investment interests.57 The 

MSRB believes that incorporating the 

actual control or de facto control 

elements maintains baseline investor 

protections for Institutional SMMPs in 

such scenarios of greater dealer 

impropriety or intentional wrongdoing. 

The MSRB also notes that new 

institutional customers, who otherwise 

would qualify as SMMPs but desire the 

additional investor protections afforded 

by quantitative suitability under MSRB 

Rule G–19, can decline to provide the 

required affirmations under MSRB Rule 

D–15.58 Similarly, existing Institutional 

SMMPs could withdraw their SMMP 

status and obtain the suitability 

protections afforded by MSRB Rule G– 

19. This ability to self-identify as an 

Institutional SMMP will ensure that 

those institutional customers who desire 

additional investor protection can 

secure them under MSRB rules, and 

thus, require the dealers to undertake a 

quantitative suitability analysis. 

Accordingly, the MSRB believes that 

the proposed Institutional SMMP 

Amendment would maintain essential 

safeguards for investor protection and, 

overall, not compromise investor 

protections inconsistent with Section 

15B(b)(2)(C) 59 of the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Section 15B(b)(2)(C) of the Act 60

requires that MSRB rules not be 

designed to impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. The 

MSRB considered the economic impact 

associated with the proposed rule 

change, including a comparison to 

reasonable alternative regulatory 

approaches, relative to the baseline.61

The MSRB believes the proposed rule 

changes would relieve a burden on 

competition and do not impose any 


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62Regulation Best Interest applies to ‘‘a broker, 

dealer or a natural person who is an associated 

person of a broker or dealer,’’ which does not apply 

Bank Dealers. See 17 CFR 240.15l–1(a)(1). 

63The SEC describes this reduction in agency 

cost, in the Regulation Best Interest Adopting 

Release, as ‘‘the difference between the net benefit 

to the retail customer from accepting a less than 

efficient recommendation about a securities 

transaction or investment strategy, where the 

associated person or Broker-Dealer puts its interests 

ahead of the interests of the retail customer, and the 

net benefit the retail customer might expect from a 

similar securities transaction or investment strategy 

that is efficient for him or her.’’ See Regulation Best 

Interest Adopting Release, 84 FR at 33403. 

64See Regulation Best Interest Adopting Release, 

84 FR at 33403. 

65 Id. The MSRB is not aware of any postimplementation study or other analysis that 

provides data on the costs and benefits of adopting 

Regulation Best Interest. 

66See Regulation Best Interest Adopting Release, 

84 FR at 33434. 

67 Id. 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. 

Necessity of Rule Change 

Best Interest Amendments 

As previously mentioned, the retail 

municipal recommendations made by 

Bank Dealers currently are outside the 

scope of Regulation Best Interest,62 and 

the municipal securities activities of 

Bank Dealers continue to be subject to 

the existing investor protection 

obligations of MSRB rules, including 

MSRB Rule G–19. The proposed Best 

Interest Amendments to MSRB Rule G– 

19 would require each Bank Dealer to 

comply with the requirements of 

Regulation Best Interest to the same 

extent as a Broker-Dealer must. The 

proposed Best Interest Amendments are 

necessary because they would increase 

investor protection in the municipal 

securities market by creating regulatory 

uniformity in the market between the 

municipal securities activities of Bank 

Dealers and those of Broker-Dealers, 

each of whom may provide retail 

municipal recommendations. Similar to 

the Broker-Dealer Harmonization Filing 

for Broker-Dealers in 2020, the MSRB 

believes another benefit of the proposed 

Best Interest Amendments is that the 

amendments would reduce agency costs 

and information asymmetry between 

Bank Dealers and retail customers.63

The MSRB addresses reasonable 

alternatives where applicable when 

considering the costs, benefits, and 

impact of a proposed amendment. The 

MSRB believes the only reasonable 

alternative for evaluation is the option 

of leaving in place the current 

regulatory state in which a Bank 

Dealer’s retail municipal 

recommendations are not subject to the 

requirements of Regulation Best Interest, 

while a Broker-Dealer’s retail municipal 

recommendations are subject to the full 

requirements of Regulation Best Interest, 

even though the activities of both 

groups of dealers are similar. As shown 

below, the MSRB believes that 

maintaining the status quo would 

preserve a regulatory imbalance and 

therefore competitive imbalance in this 

regard between Bank Dealers and 

Broker-Dealers engaged in the same 

activity, as well as deprive certain retail 

customers of the investor protections 

afforded by Regulation Best Interest. In 

this way, maintaining the status quo 

would maintain a discrepancy in the 

investor protections afforded to the 

retail customers receiving retail 

municipal recommendations from Bank 

Dealers as compared to the investor 

protections afforded to retail customers 

receiving retail municipal 

recommendations from Broker-Dealers 

and, thereby, maintain a competitive 

imbalance in terms of the compliance 

burdens of Bank Dealers versus BrokerDealers. 

Institutional SMMP Amendment 

The purpose of amending MSRB Rule 

G–48 is to reinstate the requirement that 

a dealer have actual control or de facto 

control with respect to Institutional 

SMMP accounts to trigger a dealer’s 

quantitative suitability obligation. A 

prior rule provision, applying the 

quantitative suitability obligation only 

when a dealer had actual control or de 

facto control over the account, was 

removed as part of the Broker-Dealer 

Harmonization Filing; and, as a result, 

dealers currently have an obligation to 

conduct a quantitative suitability 

analysis for transactions with 

Institutional SMMP customers whether 

or not the dealer has actual control or 

de facto control over the Institutional 

SMMP’s account. The proposed 

Institutional SMMP Amendment to 

MSRB Rule G–48 will clarify that the 

quantitative suitability requirement of 

MSRB Rule G–19 is only applicable to 

natural person SMMPs but not to 

Institutional SMMPs. Since the 

proposed Institutional SMMP 

Amendment reinstates a previous 

requirement in the MSRB’s suitability 

rule, the MSRB considered the 

alternative of placing the reinstated 

requirement in MSRB Rule G–19 for all 

institutional entities but decided that 

MSRB Rule G–48 is a more appropriate 

place to incorporate the reinstated 

standard, as Institutional SMMPs are by 

their nature sophisticated entities that 

have freely affirmed and self-identified 

their capacity to independently evaluate 

dealers’ recommendations. 

Benefits, Costs and Effect on 

Competition 

Best Interest Amendments 

The proposed Best Interest 

Amendments to MSRB Rule G–19 

would help create a uniform standard of 

investor protection for retail municipal 

recommendations. The proposed Best 

Interest Amendments to MSRB Rule G– 

19 would obligate a Bank Dealer to 

comply with Regulation Best Interest to 

the same extent as a Broker-Dealer 

making retail municipal 

recommendations. In this regard, the 

MSRB believes the effects of the 

proposed Best Interest Amendments 

would be similar and comparable to the 

effects resulting from when BrokerDealers were first required to comply 

with Regulation Best Interest, though at 

a much smaller scale concerning only 

retail municipal recommendations.64

Therefore, the MSRB believes that the 

SEC’s estimates of the burdens on 

competition and benefits of applying 

Regulation Best Interest to BrokerDealers is a reasonable reference point 

for analyzing burdens on competition 

and benefits of applying Regulation Best 

Interest to Bank Dealers’ retail 

municipal recommendations. The 

MSRB therefore built upon the findings 

of the SEC’s multiyear in-depth analysis 

for its analysis of the proposed Best 

Interest Amendments. 

Notably, in the Regulation Best 

Interest Adopting Release, the SEC 

emphasized that it is ‘‘difficult to 

quantify such benefits and costs with 

meaningful precision’’ for BrokerDealers and, particularly over long time 

periods, the quantification may be 

insufficiently precise and inherently 

speculative,65 mainly due to the 

following factors, among others, (i) a 

lack of data on the extent to which 

Broker-Dealers with different business 

practices engage in disclosure and 

conflict mitigation activities to comply 

with existing requirements, and 

therefore how costly it would be to 

comply with the proposed 

requirements; 66 (ii) Regulation Best 

Interest provides Broker-Dealers 

flexibility in how to comply with the 

obligations and, as a result, there could 

be multiple ways in which BrokerDealers will satisfy their obligations; 67

and (iii) Regulation Best Interest may 

affect Broker-Dealers differently 

depending on their business model (e.g., 

full-service Broker-Dealer, Broker-Dealer 

that uses independent contractors, 


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68 Id. 69 Id. 70The MSRB sought public comment to solicit 

data to use in a quantitative analysis relating to the 

proposed changes in its Request for Comments. 

While commenters did provide some specifics on 

the scope of Bank Dealers’ activities that would be 

subject to the proposed Best Interest Amendments, 

the MSRB did not receive any quantitative estimate 

of the impact of the proposed Best Interest 

Amendments on Bank Dealers. In addition, the 

MSRB is not aware of any post-implementation 

study that provides data on the costs and benefits 

of adopting Regulation Best Interest. 

71The MSRB does not have access to reliable data 

to determine the precise number of Bank Dealers 

who provide (or may provide) recommendations to 

investors who meet the definition of a retail 

customer. To develop a reasonable proxy, the MSRB 

analyzed market data to determine the number of 

retail-sized trades (par value at $100,000 or less in 

this case). In the absence of more specific data 

about a trade, total par size of $100,000 or less is 

commonly used in the municipal securities market 

as an indicator of a retail activity. Data were 

obtained from the MSRB’s Real-Time Transaction 

Reporting System (RTRS) and the MSRB’s 

registration database. 

72These figures are provided by an MSRB 

analysis with data obtained from MSRB’s Real-Time 

Transaction Reporting System (RTRS) combined 

with existing registration data. 

73For example, one commenter, the Capital 

Markets Group of Commerce Bank (‘‘CMG’’) based 

in Kansas City, MO, stated that ‘‘For CMG, retail 

customers comprise approximately 9% of CMG’s 

total open account customer base. Further, only a 

portion of these retail accounts actually executed 

transactions in the last 12 months, comprising 

approximately 3% of CMG’s total customers. . . .’’ 

See letter from Erik Swanson, Managing Director, 

and Joseph Reece, Chief Compliance Officer, 

Capital Markets Group of Commerce Bank 

(‘‘Commerce Bank’’), not dated (the ‘‘Commerce 

Bank Letter’’) in response to MSRB Notice 2021–06 

(March 4, 2021). 

insurance-affiliated Broker-Dealer) and 

size.68

The SEC further cautioned that the 

associated costs for each individual 

Broker-Dealer firm could not be 

anticipated because of the wide 

variation in size and scope of business 

practices across firms as well as the 

many unknown factors associated with 

the principles-based nature of the 

Regulation Best Interest.69 The MSRB 

believes the same difficulties and 

complexities experienced by the SEC in 

attempting to analyze the economic 

effects of applying Regulation Best 

Interest to Broker-Dealers also applies to 

the MSRB’s attempt to provide a 

meaningful quantitative estimate of the 

impact of the proposed Best Interest 

Amendments on Bank Dealers.70

While acknowledging these 

challenges, the MSRB attempted to 

determine the scope of activity that 

would be subject to the proposed Best 

Interest Amendments, which is 

summarized in Table 1 below. The 

summary table provides an estimate of 

the number of Bank Dealers likely to be 

affected by the proposed Best Interest 

Amendments. The Bank Dealers were 

included in that table based on their 

market share of retail-sized dealer-tocustomer trades in calendar year 2020 

(i.e., dealer-to-customer trades with a 

par value of $100,000 or less).71 Among 

the over 1,200 dealers registered with 

the MSRB, only 21 firms are registered 

as Bank Dealers. Those 21 Bank Dealers 

conducted only 1.6% of all retail-sized 

dealer-to-customer trades in municipal 

securities in 2020.72 Even among the 21 

Bank Dealers, nearly all of this activity 

was concentrated in a small number of 

firms, with the top seven most-active 

Bank Dealers conducting the vast 

majority of all retail-sized customer 

trades in 2020 (about 99.5%). The 

remaining number of registered Bank 

Dealers were significantly less active in 

executing retail-sized trades with 

customers during that same period, with 

six Bank Dealers not executing any 

retail-sized customer trades over the 

course of the entire year and the 

remaining eight Bank Dealers altogether 

averaging a little over one retail-sized 

customer trade per day. 

TABLE 1—MARKET SHARE OF MUNICIPAL SECURITIES RETAIL-SIZED CUSTOMER TRADES BY DEALERS JANUARY 2020– 

DECEMBER 2020 

Type of dealers 

Number of 

retail-sized 

customer 

trades 

Market share 

of retail-sized 

customer 

trades (%) 

Non-Bank Dealers ................................................................................................................................................... 3,865,880 98.4 

Top Seven Bank Dealers ........................................................................................................................................ 61,140 1.6 

All Fourteen Other Bank Dealers ............................................................................................................................ 325 0.0 

Source: MSRB analysis with data obtained from the MSRB’s Real-Time Transaction Reporting System (RTRS) and the MSRB’s registration 

database. 

In developing these numbers, the 

MSRB believes they are likely overly 

inclusive of potential retail activity, 

because there is a high probability the 

numbers capture more trades than 

would be subject to the requirements of 

the proposed Best Interest Amendments. 

Nevertheless, the MSRB believes the 

numbers are a reasonable estimate for 

the purpose of this economic analysis 

and are conservative to the extent that 

they are more likely to over-estimate the 

potential burden on Bank Dealers than 

underestimate it. In terms of the 

limitations of this data, dealer-tocustomer trades with a par value of 

$100,000 or less are not always 

conducted with investors who would 

meet the definition of a retail customer 

under Regulation Best Interest, as 

representatives acting on behalf of nonretail customers potentially execute 

trades with a par value of $100,000 or 

less (i.e., small institutional trades). 

Conversely, retail investors may execute 

trades above $100,000 par value (i.e., 

large retail trades); however, the MSRB 

believes large retail trades occur less 

frequently and, thus, do not fully offset 

the more frequent occurrences of sub- 

$100,000 par value non-retail trades.73

Additionally, the MSRB 

acknowledges that the number of trades 

is not a reasonable proxy for the number 

of retail municipal recommendations. 

That is, the fact that a Bank Dealer 

executes a trade with an investor who 

meets the definition of a retail customer 

under Regulation Best Interest does not 

necessarily mean that the Bank Dealer 

has made a ‘‘recommendation’’ to such 

retail customer for purposes of 

Regulation Best Interest. The Bank 

Dealer may have, for example, executed 

a non-recommended trade at the 

customer’s request. Hence, the MSRB 

believes that some unknown number of 

these retail-sized trades would not be 

subject to the proposed Best Interest 

Amendments (i.e., the trades would not 

be subject to Regulation Best Interest). 

Benefits 

The MSRB believes extending the 

requirements of Regulation Best Interest 

to Bank Dealers would reduce or 

eliminate a regulatory imbalance 

between Bank Dealers, on the one hand, 


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74As one potential example, where a Bank Dealer 

and a Broker-Dealer are both subsidiary entities of 

a common parent holding company, the MSRB is 

concerned that the parent holding company may 

attempt to take advantage of any regulatory 

imbalance by utilizing a regulatory arbitraging 

strategy to move retail customer accounts to the 

subsidiary with the lowest compliance standard, 

and, thus, Broker-Dealers may relocate retail 

customers accounts to affiliated Bank Dealers to 

avoid compliance with Regulation Best Interest. 

75For a detailed discussion of the economic 

theory behind agency costs, please refer to the 

Regulation Best Interest Adopting Release, 84 FR at 

33400–41. 

76Based on the MSRB’s estimate, there were 

approximately five million retail-sized customer 

trades in municipal securities in 2018, compared to 

6.8 million retail-sized customer trades in corporate 

bonds, 132.5 million retail-sized customer trades in 

treasury securities and 4.4 billion retail-sized 

customer trades in equities, which include 

exchange-traded funds. 

77The MSRB’s analysis focuses on four securities 

that have substantial retail customer trades: 

Municipal securities, corporate bonds, treasury 

securities and equities, which include exchangetraded funds. To be conservative, all other 

securities, such as stock options, federal agency 

securities, mortgage-backed securities, asset-backed 

securities, mutual funds, etc., are assumed to have 

no retail trades. For the initial cost, the MSRB 

assumes a cost saving of 65% when establishing 

policies and procedures for one security only, 

municipal bonds, as opposed to for four securities, 

accounting for some fixed costs when working on 

a single security product. For the ongoing cost, the 

MSRB estimated the number of retail-sized 

customer trades for municipal securities that are 

likely based on a Broker-Dealer’s recommendation 

relative to comparable retail-sized customer trades 

for corporate bonds, treasury securities and equities 

(including exchange-traded funds), and derived that 

the proportion for municipal securities would be 

less than one percent of the total. Conservatively, 

one percent is used for estimating the ongoing costs 

related to municipal securities. Data were obtained 

from the MSRB’s Real-Time Transaction Reporting 

System (RTRS), MSRB’s registration database, and 

SEC’s estimates of costs and benefits of applying 

Regulation Best Interest to Broker-Dealers. 

78See Regulation Best Interest Adopting Release, 

84 FR at 33318. 

and Broker-Dealers, on the other, as the 

terms of Regulation Best Interest do not 

currently apply to Bank Dealers. The 

proposed Best Interest Amendments 

would both close a regulatory gap and 

also mitigate certain market risks and 

inefficiencies associated with a 

potentially lower compliance 

standard.74 Therefore, the proposed Best 

Interest Amendments would protect 

retail customers seeking investment 

recommendations and transacting in 

municipal securities, regardless of 

whether they are customers of a BrokerDealer or a Bank Dealer. The MSRB 

believes retail customers receiving retail 

municipal recommendations should 

benefit from a uniform standard of 

enhanced investor protections, which 

would not be dependent upon the type 

of dealer entity making the retail 

municipal recommendation. 

As to the overall merit of the 

proposed new requirements, they are 

intended to reduce Bank-Dealer retail 

customer agency costs by lessening 

conflicts of interest that currently exist 

between Bank Dealers and retail 

customers and reduce information 

asymmetries limiting the ability of retail 

customers to assess the efficiency of 

recommendations from Bank Dealers.75

Costs 

If the proposed Best Interest 

Amendments were enacted, the MSRB 

believes Bank Dealers would experience 

initial costs associated with establishing 

the revised policies and procedures to 

comply with the requirements of 

Regulation Best Interest, as well as the 

costs of ongoing compliance. The initial 

setup costs likely would be 

proportionately higher for smaller and 

less active Bank Dealers with fewer 

retail municipal recommendations than 

for the larger and more active Bank 

Dealers with more retail municipal 

recommendations, while the ongoing 

costs would likely be proportionate with 

each Bank Dealer’s retail business 

activities. Additionally, Bank Dealers 

with an affiliated Broker-Dealer that is 

subject to Regulation Best Interest likely 

would not experience as much initial 

set-up costs as other Bank Dealers 

because they can leverage established 

policies and procedures from their 

Broker-Dealers affiliates presumably in 

compliance with Regulation Best 

Interest. 

The MSRB believes the average perfirm total costs (initial and ongoing) 

would be substantially lower for a Bank 

Dealer providing retail municipal 

recommendations that are only related 

to municipal securities, as compared to 

the overall costs associated with a 

Broker-Dealer providing 

recommendations to retail customers of 

securities transactions or investment 

strategies involving securities related to 

many different types of securities. On 

average, there are many more retailsized trades in other types of 

securities—for example, equities, 

corporate bonds, treasury and agency 

securities, options, convertible bonds, 

mutual funds, and exchange-traded 

funds—than in municipal securities 

alone.76 A Broker-Dealer subject to 

Regulation Best Interest incurs 

compliance costs any time it provides a 

recommendation to its retail customers 

on any security, while a Bank Dealer 

would only incur cost when it provides 

a retail municipal recommendation. As 

a result, the MSRB believes the average 

per-Bank Dealer total costs would not 

approach the per-Broker-Dealer level, as 

estimated by the SEC in relation to 

Regulation Best Interest. Table 2 

provides an illustration of potential 

costs to be expected for a Bank Dealer 

with an average number of retail-sized 

trades in municipal securities as a result 

of the proposed rule change. Using the 

SEC’s estimates of initial cost and 

ongoing cost for 2,766 Broker-Dealers, 

the MSRB estimated the portion of the 

costs attributable to municipal securities 

only for a Broker-Dealer with an average 

number of retail-sized trades in 

municipal securities, with the 

assumption that the same Broker-Dealer 

would incur only 35% of the initial cost 

and one percent of the ongoing cost if 

the Broker-Dealer only provided 

recommendations on municipal 

securities to retail customers.77 The 

MSRB then applied the cost estimates to 

an average Bank Dealer. 

TABLE 2—ESTIMATED INITIAL SETUP AND ONGOING COMPLIANCE COSTS FOR AN AVERAGE BANK DEALER

Initial cost Ongoing cost 

Number of 

retail-sized 

customer 

trades 

SEC Estimate 

Average Broker-Dealer (Non-Bank Dealer) ................................................................................. $2,153,290 $855,897 

Average Broker-Dealer Trading Municipal Bonds Only .............................................................. 753,651 8,559 5,523 

Apply SEC Estimate to Average Bank Dealer Trading Municipal Bonds ................................... 753,651 4,590 2,962 

Source: MSRB analysis with data obtained from the MSRB’s Real-Time Transaction Reporting System (RTRS), MSRB’s registration data and 

SEC’s estimates of costs and benefits of applying Regulation Best Interest to Broker-Dealers.78


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79Capital formation is defined by the SEC on 

their website ‘‘What we do,’’ available at https://

www.sec.gov/about/what-we-do#section2. It refers 

to companies and entrepreneurs accessing 

America’s capital markets to help them create jobs, 

develop innovations and technology, and provide 

financial opportunities for those who invest in 

them. Id. 

80See related discussion supra under Purpose 

and Intent of the Institutional SMMP Amendment 

to MSRB Rule G–48. 

Effect on Competition, Efficiency, and 

Capital Formation 79

The MSRB believes that, if the 

proposed Best Interest Amendments 

were adopted, there is a possibility 

some Bank Dealers that rarely execute 

retail-sized customer trades, assuming 

those trades represent retail municipal 

recommendations, may choose to forgo 

retail business entirely to avoid the 

costs of compliance with proposed Best 

Interest Amendments and Regulation 

Best Interest, or more narrowly, stop 

providing retail municipal 

recommendations to limit the costs of 

compliance. Therefore, some Bank 

Dealers may be impacted by the 

proposed Regulation Best Interest 

Amendments by deciding to forego 

retail municipal recommendations or 

retail customer business altogether, 

though the broader impact on 

competition in the municipal securities 

market is expected to be minor given 

these Bank Dealers’ relatively minor 

presence in executing retail-sized trades 

for municipal securities currently; 

accordingly, even if those Bank Dealers 

choose to relinquish their retail 

business, there should not be any 

significant reduction in the supply of 

services to retail investors. On the other 

hand, the MSRB does not expect a 

significant alteration to the competitive 

landscape from retail investors’ 

perspective if the proposed Best Interest 

Amendments were adopted, as retail 

investors rarely use Bank Dealers for 

retail trading. Moreover, for those retail 

investors who do choose Bank Dealers 

to conduct retail activities, their 

activities are concentrated in a small 

number of Bank Dealers who are less 

likely to withdraw from the retail 

business as a result of the burdens 

created by the proposed Best Interest 

Amendments. 

The MSRB believes requiring Bank 

Dealers to comply with the 

requirements of Regulation Best Interest, 

when making retail municipal 

recommendations, would improve 

market efficiency by imposing the same 

requirements on Bank Dealers when 

making such recommendations as on 

Broker-Dealers under Regulation Best 

Interest. The harmonization of MSRB 

rule requirements for Bank Dealers with 

SEC requirements for Broker-Dealers 

would create consistency for firms who 

have both Broker-Dealer and Bank 

Dealer subsidiaries, and, thus, would 

increase efficiency in terms of firms’ 

compliance burdens. It also may 

encourage competition for retail 

customers among Bank Dealers (and 

between Bank Dealers and BrokerDealers in some instances) to the extent 

that the disclosure of fees and conflicts 

of interest would increase transparency 

and facilitate more comparability across 

Bank Dealers and Broker-Dealers among 

retail investors, and, therefore, would 

further inform customers’ decisions of 

whether to utilize a Bank Dealer versus 

a Broker-Dealer for transactions in 

municipal securities. In addition, the 

MSRB believes investors should benefit 

from receiving the same type of 

information from Bank Dealers and 

Broker-Dealers in relation to an 

investment recommendation. Therefore, 

as stated above, because of the creation 

of consistent regulatory requirements 

across Bank Dealers and Broker-Dealers 

for their retail municipal 

recommendations and the greater 

competition fostered by this consistency 

among firms serving retail customers, 

the MSRB believes that the proposed 

Best Interest Amendments would 

facilitate capital formation. 

Institutional SMMP Amendment 

The MSRB proposal to amend MSRB 

Rule G–48 would reinstate a previously 

existing actual control or de facto 

control standard for Institutional SMMP 

accounts for purposes of dealers’ 

quantitative suitability obligations. 

Benefits 

The proposed Institutional SMMP 

Amendment to MSRB Rule G–48 would 

reduce the compliance burden for all 

dealers, including Bank Dealers and 

Broker-Dealers, by eliminating the 

requirements to undertake a quantitative 

suitability analysis for Institutional 

SMMPs when a dealer does not have 

actual control or de facto control over 

the customer’s accounts. The 

requirement is not necessary because of 

the sophistication and differing needs of 

Institutional SMMPs who have 

knowingly declined to have such 

requirements apply to them, as 

described herein. 

Costs 

The MSRB believes the proposed 

Institutional SMMP Amendment to 

MSRB Rule G–48 to modify the 

quantitative suitability obligation of a 

dealer in the limited circumstances 

provided under the proposed 

Institutional SMMP Amendment would 

have minimal costs associated, 

particularly since the intent was to 

reinstate an exemption from 

quantitative suitability previously 

enacted for all recommendations 

through MSRB Rule G–19. One potential 

one-time cost would be for all dealers, 

including Bank Dealers and BrokerDealers, to update their policies and 

procedures. Because of the recent 

existence of the same actual control or 

de facto control standard that would be 

reestablished by the proposed 

Institutional SMMP Amendment, the 

MSRB believes this one-time change 

should be familiar to firms and the cost 

of compliance implementation will be 

reduced in this regard. Moreover, to the 

degree that dealers are likely to 

reintroduce the same standards in their 

policies and procedures as previously 

existed, the cost of implementation 

would be minimized. 

In addition, one impetus of the 

Broker-Dealer Harmonization Filing was 

to harmonize the rule with Regulation 

Best Interest and FINRA Rule 2111 and 

to reduce inconsistency on suitability 

requirements between FINRA’s rules 

and MSRB’s rules. By amending MSRB 

Rule G–48 to provide a narrow 

exemption from the application of 

quantitative suitability, this rule would 

not be fully harmonized with FINRA 

Rule 2111, and, thus, would establish 

two standards for accounts across the 

corporate and municipal securities 

markets. The MSRB believes that this 

lack of harmonization is justified in this 

instance for all the reasons stated 

herein,80 including the fact that 

Institutional SMMPs are by their nature 

sophisticated entities that have affirmed 

and self-identified their capacity to 

independently evaluate dealers’ 

recommendations of municipal 

securities transactions. 

Effect on Competition, Efficiency, and 

Capital Formation 

The MSRB believes the proposed 

Institutional SMMP Amendment to 

MSRB Rule G–48 would improve the 

operational efficiency of the municipal 

securities market by reintroducing the 

element of actual control or de facto 

control with respect to Institutional 

SMMP accounts that would trigger a 

dealer’s quantitative suitability 

obligation, as dealers would have one 

fewer compliance burden. The MSRB 

does not expect that the proposed 

Institutional SMMP Amendment to 

MSRB Rule G–48 would harm 

competition in the municipal securities 

market, because the proposed 

Institutional SMMP Amendment would 

be applicable to all dealers and, 


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81MSRB Notice 2021–06 (March 4, 2021). 

82Letter from Justin M. Underwood, Executive 

Director, American Bankers Association (‘‘Bankers 

Association’’), dated June 2, 2021 (the ‘‘Bankers 

Association Letter’’); Letter from Christopher A. 

Iacovella, Chief Executive Officer, American 

Securities Association (‘‘Securities Association’’), 

dated May 27, 2021 (the ‘‘Securities Association 

Letter’’); the Commerce Bank Letter; Letter from 

Leslie M. Norwood, Managing Director and 

Associate General Counsel, Securities Industry and 

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

June 2, 2021 (the ‘‘SIFMA Bank Dealer Letter’’); and 

Letter from Leslie M. Norwood, Managing Director 

and Associate General Counsel, SIFMA, dated June 

2, 2021 (the ‘‘SIFMA SMMP Letter’’). 

83SIFMA Bank Dealer Letter at 2. 

84SIFMA Bank Dealer Letter at 1–2. 

85Securities Association Letter at 1. 

86 Id. at 1. 

87 Id. at 2. 

88Request for Comments at 7. 

89Bankers Association Letter at 2 

90 Id. 

91Commerce Bank Letter at 2. 

92Commerce Bank Letter at 3 (‘‘Assuming the 

amendments are approved as adopted and bank 

dealers begin to move away from providing services 

to retail customers, bank dealers that underwrite 

municipal bonds would need controls in place to 

ensure underwriting or related commitments are 

appropriate for any retail order periods required by 

an issuer. The potential impact may be a smaller 

number of underwriting firms available or willing 

to work with smaller issuers and public entities in 

the market, limiting the number of competitors 

available for either competitive or negotiated 

deals.’’) In addition to the reasons discussed below, 

the MSRB observes that analogous concerns 

regarding such dampening effects of Regulation 

Best Interest’s requirements on the competition for 

underwriting activities equally apply to BrokerDealers. Yet, the Commission ultimately found that 

Regulation Best Interest would not have a 

deleterious effect on capital formation. See, 

generally, Regulation Best Interest Adopting 

Release, 84 FR at 33461 et seq. 

93See, respectively, Bankers Association Letter at 

2 and Commerce Bank Letter at 2 (noting that retail 

accounts account for approximately 9% of their 

total open accounts and only a portion of these 

accounts transacted in the previous twelve months). 

therefore, any of the benefits and 

burdens created by the proposed 

Institutional SMMP Amendments 

would be evenly applied to all such 

firms transacting with Institutional 

SMMP customers and, thereby, avoid 

discriminatory impacts among dealer 

firms. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

On March 4, 2021, the Board 

published a request for comment 

seeking public feedback on requiring 

Bank Dealers to comply with Regulation 

Best Interest when making a retail 

municipal recommendation (the 

‘‘Request for Comments’’).81 The Board 

received five comments letters in 

response to the Request for Comments.82

Each of these will be addressed below. 

The comment letters addressing the 

proposed Best Interest Amendments 

will be discussed separately from the 

one comment letter addressing the 

proposed Institutional SMMP 

Amendment. 

Discussion of Comments Related to the 

Best Interest Amendments 

The MSRB received four comment 

letters addressing the proposed Best 

Interest Amendments in response to its 

Request for Comments. Comments 

submitted by SIFMA and the Securities 

Association were supportive of the 

proposed Best Interest Amendments, 

while the comments submitted by the 

Bankers Association and Commerce 

Bank expressed concerns about the 

proposed Best Interest Amendments, 

generally, in terms of the consequences 

of the potential compliance burden in 

relation to Bank Dealers’ limited retail 

customer activity, as further discussed 

below. 

Support for a Uniform Regulatory 

Standard 

SIFMA cited the goal of achieving 

regulatory parity among regulated 

entities as the reason for being in favor 

of the proposed rule change.83

Specifically, the SIFMA Bank Dealer 

Letter stated that ‘‘SIFMA supports the 

proposed amendment to extend 

Regulation Best Interest to bank dealers, 

as defined in the notice’’ and that ‘‘we 

believe that regulatory parity among 

regulated entities, which this 

amendment achieves, is a worthwhile 

goal.’’ 84 The Securities Association 

cited a reduction in regulatory 

confusion and establishing Regulation 

Best Interest as the standard for BrokerDealers and Bank Dealers as the reasons 

for being in favor of the proposed rule 

change.85 The Securities Association 

stated that adopting Regulation Best 

Interest for bank dealers will ‘‘reduce 

regulatory confusion for municipal 

dealers and further establish [Regulation 

Best Interest] as the national standard 

for broker-dealers and bank dealers.’’ 86

Further, the Securities Association 

stated that ‘‘[it] appreciates the work by 

the MSRB in the Proposal to align their 

rules with the SEC and Financial 

Industry Regulatory Authority’s 

(FINRA) when possible so that brokerdealers are not subjected to multiple 

standards.’’ 87 As discussed above, the 

Board agrees with the commenters that 

the proposed Best Interest Amendments 

would benefit the municipal securities 

market through more uniform regulatory 

standards. 

Concerns Regarding Bank Dealer’s 

Compliance Burden and Effects on 

Competition 

Among other topics in the Request for 

Comments, the Board sought public 

input on the potential burdens 

associated with the proposed Best 

Interest Amendments and, in particular, 

if requiring Bank Dealers to comply 

with Regulation Best Interest would 

disincentivize Bank Dealers from 

engaging in certain municipal securities 

activities with retail customers.88

Commerce Bank and the Bankers 

Association offered comments. The 

Bankers Association commented that, 

while its members have long supported 

the notion that financial professionals 

offering investment advice to retail 

customers should be subject to a best 

interest standard, the Bankers 

Association urged the Board to consider 

the compliance costs imposed by such 

a rule on Bank Dealers in relation to 

their limited amount of retail customer 

activity.89 The Bankers Association 

continued, stating that, ultimately, Bank 

Dealers in municipal securities do not 

have a significant retail customer base to 

warrant a new regulatory compliance 

regime in this manner.90

Echoing this concern regarding the 

potential compliance burden of the 

proposed Best Interest Amendments, 

Commerce Bank responded that they 

would assess the additional compliance 

costs that come with compliance with 

Regulation Best Interest and consider 

the elimination of providing 

recommendations for securities or 

strategies to retail customers.91

Commerce Bank also expressed concern 

that the compliance burden of the 

proposed Best Interest Amendments 

may cause it to eliminate or become 

uncompetitive in relation to certain 

underwriting activities, particularly for 

services provided to issuers utilizing 

retail order periods.92

While the Board believes that 

commenters’ concerns regarding the 

potential compliance burden for Bank 

Dealers associated with the proposed 

Best Interest Amendments are valid, the 

Board also believes that the potential 

investor protection benefits associated 

with the proposed Best Interest 

Amendments outweigh these potential 

compliance burdens for Bank Dealers. 

The Bankers Association Letter and the 

Commerce Bank Letter articulated 

concerns regarding the potential 

compliance burden associated with the 

proposed Best Interest Amendments,93

but these commenters did not 

specifically address why Bank Dealers 

face compliance burdens that are 

materially different from those faced by 


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28096 Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 

94See, generally, Regulation Best Interest 

Adopting Release, 84 FR at 33485 et seq (discussing 

impact on ‘‘Small Entities Subject to the Rule’’). 

95Regulation Best Interest Adopting Release, 84 

FR at 33323 (‘‘After careful consideration of the 

comments and additional information we have 

received, we believe that Regulation Best Interest, 

as modified, appropriately balances the concerns of 

the various commenters in a way that will best 

achieve the Commission’s important goals of 

enhancing retail investor protection and decision 

making, while preserving, to the extent possible, 

retail investor access (in terms of choice and cost) 

to differing types of investment services and 

products.’’) 

96See, generally, Regulation Best Interest 

Adopting Release, 84 FR at 33461 et seq. 

97Regulation Best Interest Adopting Release, 84 

FR at 33462. 

98 Id. 

99SIFMA SMMP Letter at 2. 100SIFMA SMMP Letter at 3. 

Broker-Dealers, who are already 

required to adhere to the enhanced 

suitability standards required by 

Regulation Best Interest. Consequently, 

the MSRB is unaware of any material 

distinctions between the municipal 

securities activities of Bank Dealers and 

Broker-Dealers that would persuade the 

MSRB to propose a non-uniform 

regulatory scheme of lesser investor 

protections for the retail municipal 

recommendations of Bank Dealers. 

Moreover, in developing the proposed 

Best Interest Amendments, the MSRB 

observed that Regulation Best Interest 

did not adopt de minimis thresholds or 

other standards to exclude smaller 

regulated entities with lesser amounts of 

retail customer activity from Regulation 

Best Interest’s baseline compliance 

burdens.94 Relatedly, the Commission 

concluded that the final version of its 

Regulation Best Interest appropriately 

balanced the concerns of various 

commenters from larger and smaller 

entities.95 Similar to the Commission’s 

determination, the MSRB believes that 

the proposed Best Interest Amendments 

are written to balance the interests of 

commenters, including the various 

types and sizes of dealer entities, to best 

achieve the important goals of 

enhancing retail investor protection and 

decision making, while preserving, to 

the extent possible, retail investor 

access (in terms of choice and cost) to 

differing types of municipal security 

investment services and municipal 

security products. 

Relatedly, the MSRB observes that the 

Commission determined that Regulation 

Best Interest would not have a 

deleterious effect on capital formation.96

More specifically, the Commission 

concluded that (i) the possibility that 

Regulation Best Interest may increase 

the efficiency of the recommendations 

provided by the associated persons of 

the broker-dealer may enhance the 

attractiveness of broker-dealer services 

for those investors who currently do not 

invest through broker-dealers,97 and (ii) 

if retail customers are more willing to 

participate in the securities markets 

through broker-dealers, Regulation Best 

Interest would have a positive effect on 

capital formation.98

For similar reasons, the MSRB 

believes that the proposed Best Interest 

Amendments would not hinder capital 

formation in the municipal securities 

market, as suggested by the Commerce 

Bank Letter, such as in instances where 

there is less underwriter competition for 

small municipal issuers or municipal 

issuers who seek to utilize retail order 

periods. To the degree that retail 

municipal recommendations are subject 

to a uniform regulatory standard across 

Bank Dealers and Broker-Dealers, the 

MSRB believes that the proposed Best 

Interest Amendments may increase the 

efficiency of retail municipal 

recommendations and enhance the 

attractiveness of dealer’s municipal 

security services. This uniform 

regulatory standard could draw more 

retail customers to the primary offering 

of municipal securities with retail order 

periods and, in this respect, 

incrementally reduce issuer borrowing 

costs. 

Discussion of Comments Related to the 

Institutional SMMP Amendment 

The Board did not seek separate 

comment on the proposed Institutional 

SMMP Amendment but did receive the 

SIFMA SMMP Letter as part of the 

Request for Comments, which was 

generally supportive of the proposed 

Institutional SMMP Amendment. 

SIFMA stated in the SMMP Letter that 

its members ‘‘feel strongly that the 

Quantitative Suitability Requirement in 

Rule G–19 should be clarified, and 

interpreted as applicable only to natural 

person SMMPs, but not to institutional 

SMMPs. Extending the Quantitative 

Suitability Requirement to all SMMPs 

would be unduly costly and 

burdensome.’’ 99 As discussed above, 

the Board agrees with the commenter 

that requiring a dealer to undertake a 

quantitative suitability analysis, when 

an institutional customer has already 

affirmatively opted out of receiving such 

an analysis, is an unnecessarily 

burdensome requirement to place on 

dealer’s recommendations to 

Institutional SMMPs. 

SIFMA cited the MSRB’s ‘‘history of 

treating SMMPs differently from nonSMMPs, based on a reasoned 

recognition of the differences between 

these two investor classes and the 

relative protections that should be 

afforded to both.’’ 100 The Board agrees 

that in limited circumstances it is 

appropriate for certain investor classes 

to be afforded different protections 

under MSRB rules, as different classes 

can have differing levels of 

sophistication, differing risk tolerances, 

and differing investment goals. As noted 

above, the SMMP concept and the 

modified regulatory obligations afforded 

to SMMPs under MSRB rules are 

intended to account for the distinct 

capabilities of certain self-identifying, 

sophisticated, non-retail customers, as 

well as the varied types of dealercustomer relationships occurring in the 

municipal securities markets. Thus, the 

MSRB believes it is appropriate to afford 

Institutional SMMPS more finely 

tailored protections, and that the 

proposed Institutional SMMP 

Amendment would not erode the 

overall protections afforded to 

Institutional SMMPs. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period of 

up to 90 days (i) as the Commission may 

designate 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 or disapprove 

such proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. 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. 

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–2022–02 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–2022–02. This file 


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Federal Register / Vol. 87, No. 90 / Tuesday, May 10, 2022 / Notices 28097 

101 17 CFR 200.30–3(a)(12). 

1Persons interested in submitting an OFA must 

first file a formal expression of intent to file an 

offer, indicating the type of financial assistance they 

wish to provide (i.e., subsidy or purchase) and 

demonstrating that they are preliminarily 

financially responsible. See 49 CFR 1152.27(c)(2)(i). 

2The Board will grant a stay if an informed 

decision on environmental issues (whether raised 

by a party or by the Board’s Office of Environmental 

Analysis (OEA) in its independent investigation) 

cannot be made before the exemption’s effective 

date. See Exemption of Out-of-Serv. Rail Lines, 5 

I.C.C.2d 377 (1989). Any request for a stay should 

be filed as soon as possible so that the Board may 

take appropriate action before the exemption’s 

effective date. 

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 website (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 website 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. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–MSRB–2022–02 and should 

be submitted on or before May 31, 2022. 

For the Commission, pursuant to delegated 

authority.101

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–09960 Filed 5–9–22; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice 11725] 

U.S. Advisory Commission on Public 

Diplomacy Notice of Meeting 

The U.S. Advisory Commission on 

Public Diplomacy (ACPD) will hold a 

virtual public meeting on Wednesday, 

June 1, 2022, from 12:00 p.m. until 1:15 

p.m., to preview the April 2022 special 

report, Exploring U.S. Public 

Diplomacy’s Domestic Dimensions: 

Purviews, Publics, and Policies, https:// 

www.state.gov/exploring-u-s-publicdiplomacys-domestic-dimensionspurviews-publics-and-policies-2022/. 

The meeting will feature a panel of city 

diplomacy professionals who will 

discuss the relationship between city 

diplomacy and domestic public 

diplomacy. 

This meeting is open to the public, 

including the media and members and 

staff of governmental and nongovernmental organizations. To obtain 

the web conference link and password, 

please register here: https://

www.eventbrite.com/e/domestic-publicdiplomacy-city-diplomacy-perspectivestickets-328956657217. To request 

reasonable accommodation, please 

email ACPD Program Assistant Kristy 

Zamary at ZamaryKK@state.gov. Please 

send any request for reasonable 

accommodation no later than May 20, 

2022. Requests received after that date 

will be considered but might not be 

possible to fulfill. Attendees should 

plan to enter the web conference 

waiting room by 11:50 a.m. to allow for 

a prompt start. 

Since 1948, the ACPD has been 

charged with appraising activities 

intended to understand, inform, and 

influence foreign publics and to 

increase the understanding of, and 

support for, these same activities. The 

ACPD conducts research that provides 

honest assessments of public diplomacy 

efforts, and disseminates findings 

through reports, white papers, and other 

publications. It also holds public 

symposiums that generate informed 

discussions on public diplomacy issues 

and events. The Commission reports to 

the President, Secretary of State, and 

Congress and is supported by the Office 

of the Under Secretary of State for 

Public Diplomacy and Public Affairs. 

For more information on the U.S. 

Advisory Commission on Public 

Diplomacy, please visit https://

www.state.gov/bureaus-offices/undersecretary-for-public-diplomacy-andpublic-affairs/united-states-advisorycommission-on-public-diplomacy/, or 

contact Executive Director Vivian S. 

Walker at WalkerVS@state.gov or Senior 

Advisor Deneyse Kirkpatrick at 

kirkpatrickda2@state.gov. 

Vivian S. Walker, 

Executive Director, U.S. Advisory 

Commission on Public Diplomacy, 

Department of State. 

[FR Doc. 2022–09993 Filed 5–9–22; 8:45 am] 

BILLING CODE 4710–45–P 

SURFACE TRANSPORTATION BOARD 

[Docket No. AB 391 (Sub–No. 11X)] 

Red River Valley & Western Railroad 

Company—Abandonment Exemption— 

Cass County, N.D. 

Red River Valley & Western Railroad 

Company (RRVW) has filed a verified 

notice of exemption under 49 CFR part 

1152 subpart F—Exemption 

Abandonments to abandon an 

approximately 2.29-mile rail line 

extending from milepost 9.36 to 

milepost 11.65 (at Horace, N.D.) in Cass 

County, N.D. (the Line). The Line 

traverses U.S. Postal Service Zip Code 

58047. 

RRVW has certified that: (1) No local 

traffic has moved over the Line for at 

least two years; (2) there is no overhead 

traffic on the Line that has been, or 

would need to be, rerouted as a result 

of the proposed abandonment; (3) no 

formal complaint filed by a user of rail 

service on the Line (or by state or local 

government on behalf of such user) 

regarding cessation of service over the 

Line either is pending with the Surface 

Transportation Board (Board) or has 

been decided in favor of a complainant 

within the two-year period; and (4) the 

requirements at 49 CFR 1105.7(b) and 

1105.8(c) (notice of environmental and 

historic reports), 49 CFR 1105.12 

(newspaper publication), and 49 CFR 

1152.50(d)(1) (notice to government 

agencies) have been met. 

As a condition to this exemption, any 

employee adversely affected by the 

abandonment shall be protected under 

Oregon Short Line Railroad— 

Abandonment Portion Goshen Branch 

Between Firth & Ammon, in Bingham & 

Bonneville Counties, Idaho, 360 I.C.C. 

91 (1979). To address whether this 

condition adequately protects affected 

employees, a petition for partial 

revocation under 49 U.S.C. 10502(d) 

must be filed. 

Provided no formal expression of 

intent to file an offer of financial 

assistance (OFA) has been received,1

this exemption will be effective on June 

9, 2022, unless stayed pending 

reconsideration. Petitions to stay that do 

not involve environmental issues,2

formal expressions of intent to file an 

OFA under 49 CFR 1152.27(c)(2), and 

interim trail use/rail banking requests 

under 49 CFR 1152.29 must be filed by 


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