6088 Federal Register / Vol. 81, No. 23 / Thursday, February 4, 2016 / Notices 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEARCA–2016–22 and should be 

submitted on or before February 25, 

2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–02063 Filed 2–3–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold an Open Meeting 

on Monday, February 8, 2016, at 1:00 

p.m., in the Auditorium (L–002) at the 

Commission’s headquarters building, to 

hear oral argument in an appeal from an 

initial decision of an administrative law 

judge by the Respondent, Bernerd 

Young (‘‘Young’’), former chief 

compliance officer of Stanford Group 

Company (‘‘SGC’’). The law judge found 

that Young was a cause of violations by 

SGC of the antifraud provisions of 

Section 206(2) of the Investment 

Advisers Act of 1940 through false and 

misleading statements and omissions in 

marketing materials for ‘‘certificates of 

deposit’’ issued by Stanford 

International Bank Ltd., an affiliate of 

SGC. In addition, the law judge found 

that Young violated Section 17(a) of the 

Securities Act of 1933 and Section 10(b) 

of the Securities Exchange Act of 1934 

and Rule 10b–5 thereunder in 

connection with statements designed to 

‘‘attack’’ concerns raised about the 

certificates of deposit and to ‘‘forestall 

redemptions and continue sales.’’ The 

law judge further found that Young 

aided and abetted and caused violations 

of Exchange Act Section 10(b) and Rule 

10b–5, Exchange Act Section 15(c)(1), 

and Advisers Act Sections 206(1) and 

(2) in connection with these 

misrepresentations and omissions. 

Based on her findings, the law judge 

issued a cease-and-desist order against 

Young; barred him from associating 

with a broker, dealer, investment 

adviser, municipal securities dealer, 

municipal advisor, transfer agent, or 

nationally recognized statistical rating 

organization; and prohibited him from 

serving or acting in certain capacities 

with respect to an investment company. 

The law judge also ordered Young to 

pay $591,992.46 in disgorgement, with 

prejudgment interest, and assessed a 

third-tier civil penalty of $260,000. 

Young appealed the law judge’s 

findings of violation and the sanctions 

imposed. The issues likely to be 

considered at oral argument include, 

among other things, whether Young 

violated the antifraud provisions as 

alleged and, if so, the extent to which 

he should be sanctioned for those 

violations. 

For further information, please 

contact the Office of the Secretary at 

(202) 551–5400. 

Dated: February 1, 2016. 

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–02221 Filed 2–2–16; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–76999; File No. SR–MSRB– 

2016–01] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing of a Proposed 

Rule Change Consisting of Proposed 

Amendments to Rule A–3, on 

Membership on the Board 

January 29, 2016. 

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

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 notice is hereby 

given that on January 15, 2016, the 

Municipal Securities Rulemaking Board 

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

Securities and Exchange Commission 

(the ‘‘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 

proposed amendments to Rule A–3, on 

membership on the Board, to lengthen 

the term of Board member service, 

change the number and size of Board 

classes, limit the number of consecutive 

terms a Board member can serve, 

eliminate the requirement that there be 

at least one municipal advisor 

representative per class that is not 

associated with a dealer (‘‘non-dealer 

municipal advisor’’), delete an obsolete 

transition provision and provide a 

technical update to the name of a Board 

committee (collectively, the ‘‘proposed 

rule change’’). The MSRB requests that 

the proposed rule change be effective on 

the date of Commission approval. 

The text of the proposed rule change 

is available on the MSRB’s Web site at 

www.msrb.org/Rules-andInterpretations/SEC-Filings/2016- 

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 MSRB is the self-regulatory 

organization (‘‘SRO’’) created by 

Congress to establish regulation for the 

$3.7 trillion municipal securities 

market, including rules governing the 

municipal securities activities of dealers 

and the municipal advisory activities of 

municipal advisors. The MSRB’s 

mission is to protect municipal entities, 

obligated persons, investors and the 

public interest, and to promote a fair 

and efficient municipal securities 

market. The Board is comprised of 21 


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3See MSRB Rule A–3(a). 

4EMMA® is a registered trademark of the MSRB. 

5See 15 U.S.C. 78o–4(b)(1). Rule A–3 further 

establishes the Board’s composition. 

6See 15 U.S.C. 78o–4(b)(1); MSRB Rule A–3(a)(i)– 

(ii). 

7See 15 U.S.C. 78o–4(b)(2)(B)(i). 

8See 15 U.S.C. 78o–4(b)(1); MSRB Rule A–3(a). 

9The Act provides that ‘‘[t]he members of the 

Board shall serve as members for a term of 3 years 

or for such other terms as specified by rules of the 

Board,’’ and that the rules of the Board ‘‘specify the 

length or lengths of terms members shall serve.’’ 15 

U.S.C. 78o–4 (b)(1), (b)(2)(B)(ii). 

10See MSRB Rule A–3(b)(i). 

11 Id. 

12MSRB Notice 2015–08 (Jun. 11, 2015) (‘‘First 

Request for Comment’’). 

13See infra note 28. 

14MSRB Notice 2015–18 (Oct. 5, 2015) (‘‘Second 

Request for Comment’’). 

15See infra note 29. 

16The current, standard three-year term of Board 

member service is significantly shorter than the 

average tenure of over eight years that studies have 

shown for members of other boards. See Spencer 

Stuart Board Index 2014, 5, available at https://

www.spencerstuart.com/∼/media/pdf%20files/

research%20and%20insight%20pdfs/

ssbi2014web14nov2014.pdf%20target; Governance 

Minutes by the Society of Corporate Secretaries and 

Governance Professionals—Director Tenure 

(February 26, 2014), available at http://

main.governanceprofessionals.org/

governanceprofessionals/memberresources/

resources/viewdocument/

?DocumentKey=37b09de5-7404-4eab-bc70- 

10741cbf7138 (stating that average board member 

tenure is eight to ten years and that board members 

typically experience a three to four year learning 

curve) (‘‘Governance Minutes’’). Although this 

research focuses on corporate boards, the MSRB 

believes the learning curve and evolution of an 

individual director’s participation on and 

contributions to a corporate board are analogous to 

the experience of MSRB Board members as they 

gain more tenure. 

17See Governance Minutes, supra note 16. 

18See, e.g., Nikos Vafeas, Length of Board Tenure 

and Outside Director Independence, 30 J. of Bus. 

Fin. & Acct. 1043 (2003); Lucian Arye Bebchuck, 

Jesse M. Fried, and David I. Walker, Managerial 

Power and Rent Extraction in the Design of 

Executive Compensation, 69 U. of Chi. L. Rev. 751 

(2002). 

19For example, the MSRB began its current 

rulemaking initiative for Rule G–42, to establish 

core standards and duties for municipal advisors, 

in the fall of 2013, and will not be fully 

implemented until June of 2016. The MSRB’s 

initiative for Rule G–18, to establish the first bestexecution rule for transactions in municipal 

securities, began as early as the spring of 2013 and 

will continue to be in an implementation period 

until March of 2016. 

members 3 who, collectively, govern the 

MSRB to carry out its mission primarily 

by regulating dealers and municipal 

advisors, providing market transparency 

through its Electronic Municipal Market 

Access (EMMA®) Web site 4 and 

conducting market leadership, outreach 

and education. The MSRB believes that 

increasing the term length for Board 

membership from three years to four 

years will improve the Board’s ability to 

fulfill this purpose. 

Many general, and some more 

detailed, aspects of the Board’s 

composition are set forth in the 

Exchange Act.5 It categorizes the 

members of the Board into two broad 

groups: Individuals who must be 

associated with a broker, dealer or 

municipal securities dealer (‘‘dealer’’) or 

municipal advisor (collectively, 

‘‘Regulated Representatives’’), and 

individuals who must be independent 

of any dealer or municipal advisor 

(‘‘Public Representatives’’).6 The Act 

then specifies that the number of Public 

Representatives must at all times exceed 

the number of Regulated 

Representatives,7 and sets minimum 

requirements for certain types of 

individuals to serve in the two groups.8

At the same time, Congress delegated 

authority to the MSRB to determine 

many aspects of Board composition by 

rule, including such important aspects 

as the size of the Board and the length 

of the term of Board member service.9

Currently, the Board is divided into 

three seven-member classes that serve 

staggered, three-year terms.10 Under this 

framework, total Board tenure typically 

is no more than three years because 

Board members may only serve 

consecutive terms under two limited 

scenarios: (1) By invitation from, and 

due to special circumstances as 

determined by, the Board; or (2) having 

filled a vacancy and, therefore, having 

served only a partial term.11

In June 2015, the MSRB published a 

request for comment on several Board 

governance matters, including whether 

the MSRB should consider, at a 

conceptual level, proposing 

amendments to modify the length of 

Board member service.12 In response, 

the MSRB received nine comment 

letters that specifically addressed that 

issue.13 Most of the commenters 

generally supported the MSRB’s 

consideration of modifying the length of 

Board member service, but they offered 

varying perspectives and approaches to 

the modification. 

The MSRB carefully considered all of 

the comments received in response to 

the First Request for Comment and 

determined to publish a second request 

for comment on draft amendments to 

lengthen the term of Board member 

service from three years to four years.14

In response to the Second Request for 

Comment, the MSRB received five 

comment letters, all of which supported 

the increase.15 After carefully 

considering all of the comments 

received in response to both requests for 

comment, the MSRB determined to file 

this proposed rule change to increase 

Board member term length from three 

years to four years. 

The optimal term length for members 

of an organization depends to a great 

extent upon the particular 

characteristics of the organization, 

including the nature of its mission and 

its activities. It is necessarily a balance 

among numerous competing interests, 

such as the interests in continuity, 

institutional knowledge and 

membership experience, on the one 

hand, and the interest in the addition of 

new perspectives, on the other. To date, 

the MSRB has aimed to achieve this 

balance using a Board member term of 

three years, but it now believes that the 

desired balance could be better achieved 

using an incrementally longer Board 

member term of four years. 

Based on its experience and the views 

repeatedly expressed by former Board 

members, the MSRB believes that 

members are capable of making 

significantly increasing contributions 

with each year that they become more 

fully acclimated to the role and work of 

the MSRB.16 The existence of such a 

multi-year ‘‘learning curve’’ is 

consistent with views expressed in a 

survey conducted by the Society of 

Corporate Secretaries and Governance 

Professionals of board members across a 

range of industries.17 A number of 

studies suggest that longer board 

member tenures—to a point—are 

associated with superior governance.18

Overall, based on its experience and 

expertise regarding its mission and 

activities, the MSRB believes that 

having members serve on the Board for 

a fourth year would improve the 

continuity and institutional knowledge 

of the Board from year to year, as well 

as its overall efficiency and 

effectiveness due to the collective value 

of retaining several members who 

possess additional knowledge and 

experience from their service as MSRB 

Board members. 

Greater continuity and institutional 

knowledge is very important for the 

MSRB rulemaking process. This 

process, particularly for rules that are 

complex or address unique problems, 

frequently spans multiple years from 

conception to full implementation.19

Even for rulemaking initiatives that can 

be completed in relatively less time, 

Board members have noted frequently 

that they are often able to engage more 

fully and effectively in the process after 

they have gained experience with the 

organization and have deeper 

knowledge of other, related rulemaking 

activities. 

The MSRB believes that the proposed 

rule change would ensure greater 

continuity and institutional knowledge 

from year to year, particularly through 


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20See supra notes 6–8. 

21See infra Section C, Increase in Term Length— 

Limits. 

22See MSRB Rule A–3(b)(i). 

23The MSRB’s fiscal year commences on October 

1 of a given year and ends on September 30 of the 

following year. 

24See supra notes 3 and 6–8. 

25See Public Law 111–203, 124 Stat. 1376; 

Exchange Act Rel. No. 65424 (Sept. 28, 2011), 76 

FR 61407 (Oct. 4, 2011) (SR–MSRB–2011–11) 

(approving the MSRB’s establishment of a Board 

structure of 21 Board members divided into three 

classes, each class being comprised of seven 

members who would serve staggered three-year 

terms). 

26 In the Second Request for Comment, the MSRB 

included draft amendments to MSRB Rule A–3(h)(i) 

to include the transition plan. Since that plan is 

fully described herein and the inclusion of rule text 

that duplicates that description would become 

obsolete and eventually require a proposed rule 

change to be removed from the rulebook, the MSRB 

does not believe it should be included. 

the rulemaking process, and increase 

overall efficiency, while maintaining the 

benefits of having a significant number 

of new Board members join the 

organization each year. 

Proposed Amendments to Rule A–3 

The proposed rule change would 

lengthen the term of Board member 

service from three years to four years, 

and it would facilitate the new, longer 

term length by increasing the number of 

Board classes and adjusting their sizes. 

Additionally, the proposed rule change 

would limit the number of consecutive 

terms a Board member can serve to two, 

and would eliminate the requirement 

that there be at least one non-dealer 

municipal advisor per Board class. 

Finally, the proposed amendments 

would delete an obsolete provision from 

the rule. 

All of the amendments included in 

the proposed rule change are to Rule A– 

3(b)(i). First, they would increase the 

Board member term length from three 

years to four years and the number of 

Board classes from three to four—one 

class comprised of six members and 

three classes of five. The changes in the 

number of classes and their sizes would 

ensure that the MSRB nominates and 

elects new members every year, 

maintains classes that are as evenly 

distributed in size as possible, and has 

a Board composition that always 

satisfies the statutorily-required position 

allocations,20 while resulting in a 

consistent and manageable rate of 

turnover from year to year. As required 

by the Exchange Act and Rule A–3(a) 

and (b)(i), the classes would continue to 

be as evenly divided in number as 

possible between Public Representatives 

and Regulated Representatives, while 

also being majority public. 

Second, no Board member could serve 

more than two consecutive terms—eight 

years in total—which could only occur 

under the special circumstances 

exception. This added provision would 

ensure that the special circumstances 

exception is not overused, mitigate 

some commenters’ concerns of Board 

members becoming too dominant and 

unduly influential,21 assure appropriate 

turnover of Board membership and help 

maintain a robust pool of applicants for 

Board service. The MSRB believes this 

modification will reflect good corporate 

governance as applied to the particular 

characteristics of the MSRB. 

Third, the proposed rule change 

would eliminate the requirement that 

there be at least one non-dealer 

municipal advisor.22 Because the draft 

amendments would result in four 

classes, not eliminating this requirement 

would create an unintended obligation 

that the Board always include four nondealer municipal advisors, thus 

potentially diminishing representation 

of other regulated entities. The proposed 

rule change would not affect the 

existing requirement in Rule A– 

3(a)(ii)(3) that, for the Board as a whole, 

‘‘at least one, and not less than 30 

percent of the total number of 

[R]egulated [R]epresentatives, shall be 

associated with and representative of 

municipal advisors and shall not be 

associated with a broker, dealer or 

municipal securities dealer.’’ Therefore, 

nothing in this change would reduce the 

minimum required representation of 

municipal advisors nor would it 

prohibit the MSRB from deciding to 

include more than three non-dealer 

municipal advisors on the Board. All 

other provisions in Rule A–3(b)(i) 

would remain unchanged. 

To effectuate the changes in term 

length and the number and size of 

classes, the MSRB would implement a 

transition plan, under which each Board 

member, who was elected prior to, and 

whose term ends on or after the end of, 

the MSRB’s fiscal year 2016,23 could be 

considered for a term extension not 

exceeding one year. This process would 

occur over fiscal years 2017, 2018 and 

2019. The transition would proceed as 

follows: (1) For fiscal year 2017, one 

Public Representative from the Board 

class of 2016 (i.e., members who began 

a three-year term on October 1, 2013) 

would receive a one-year extension and 

six new members would join the Board; 

(2) for fiscal year 2018, one Public and 

two Regulated Representatives from the 

Board class of 2017 (i.e., members who 

began a three-year term on October 1, 

2014) each would receive a one-year 

extension and five new members would 

join the Board; and (3) for fiscal year 

2019, three Public and two Regulated 

Representatives from the Board class of 

2018 (i.e., members who began a threeyear term on October 1, 2015) each 

would receive a one-year extension and 

five new members would join the Board. 

The full Board would vote by ballot on 

all members eligible for term extensions 

to determine who receives them. The 

selection of Board members whose 

terms would be extended would be in 

compliance with the statutorily-required 

compositional requirements of the 

Board, and the Board would continue to 

consist of 21 members with a majority 

of Public Representatives.24 In fiscal 

year 2020, no further extensions would 

be required and five new members 

would join the Board, completing the 

transition to four classes. From that 

point forward, the Board would 

repeatedly nominate and elect classes in 

the sequence of six, five, five, and five 

members. While there are numerous 

possible combinations of the number of 

Board classes and the number of 

members in each class, the MSRB 

believes this specific combination 

would achieve the transition 

expeditiously and efficiently while 

minimizing any disruption from the 

changes. 

MSRB Rule A–3(h) currently 

describes the transition process the 

MSRB used to increase its Board size 

from 15 to 21 members during its fiscal 

years 2013 and 2014, and to be in 

compliance with new requirements 

established by the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act of 2010.25 The proposed rule change 

would delete this provision from Rule 

A–3 because that process has been 

completed and the provision is, 

therefore, obsolete.26

Finally, MSRB Rule A–3(g)(ii) makes 

reference to the ‘‘Nominating 

Committee,’’ which is now called the 

‘‘Nominating and Governance 

Committee.’’ Accordingly, the proposed 

rule change would update the reference 

to the current name of the committee. 

2. Statutory Basis 

The MSRB has adopted the proposed 

rule change pursuant to Section 

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

that the MSRB’s rules shall: 

establish fair procedures for the nomination 

and election of members of the Board and 

assure fair representation in such 

nominations and elections of [P]ublic 

[R]epresentatives, broker dealer 

representatives, bank representatives, and 

advisor representatives. Such rules— 

(i) shall provide that the number of [P]ublic 

[R]epresentatives of the Board shall at all 

times exceed the total number of [R]egulated 


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27See supra notes 5–8. 

28See letters from: Jerry Gold (‘‘Gold’’), dated July 

17, 2015; Dustin McDonald, Director, Federal 

Liaison Center, Government Finance Officers 

Association (‘‘GFOA’’), dated July 20, 2015; Dorothy 

Donohue, Deputy General Counsel—Securities 

Regulation, Investment Company Institute (‘‘ICI’’), 

dated July 13, 2015; Bob Lamb (‘‘Lamb’’), President, 

Lamont Financial Services Corporation, dated July 

7, 2015; Terri Heaton, President, National 

Association of Municipal Advisors (‘‘NAMA’’), 

dated July 13, 2015; Lisa S. Good, Executive 

Director, National Federation of Municipal Analysts 

(‘‘NFMA’’), dated July 13, 2015; Benjamin S. 

Thompson (‘‘Thompson’’), Managing Principal and 

Chief Executive Officer, Samson Capital Advisors, 

dated July 7, 2015; Rick A. Fleming, Investor 

Advocate, SEC (‘‘SEC Investor Advocate’’), dated 

July 13, 2015; and Michael Decker, Managing 

Director, Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), dated July 13, 2015. Lamb 

and Thompson are former Board members. 

29See letters from: Michael Nicholas, Chief 

Executive Officer, Bond Dealers of America (BDA), 

dated November 19, 2015; Stephen Heaney 

(‘‘Heaney’’), dated November 10, 2015; NAMA, 

dated November 19, 2015; SEC Investor Advocate, 

dated October 29, 2015; and SIFMA, dated 

November 19, 2015. Heaney is a former Board 

member, who served a four-year term under a 

previous transition period between October 1, 2009, 

and September 30, 2013. 

30 In response to the First Request for Comment, 

Thompson believed that a longer Board member 

term could allow the Board to leverage accumulated 

knowledge more effectively than the current threeyear term length. Gold was generally opposed to the 

lengthening of Board member service, and GFOA 

stated that the current single three-year terms 

ensure consistent turnover and the introduction of 

new perspectives on the Board. Neither Gold nor 

GFOA commented in response to the Second 

Request for Comment, which contained the specific 

draft amendments to increase the term length from 

three years to four years. 

31See MSRB Rule A–3(a)(i) (defining a Public 

Representative as an individual ‘‘independent of 

any municipal securities broker, municipal 

securities dealer, or municipal advisor’’). 

32See MSRB Rule A–3(a)(ii) (defining a Regulated 

Representative as an individual ‘‘associated with a 

broker, dealer, municipal securities dealer, or 

municipal advisor’’). 

33The SEC Investor Advocate made the 

comparison to the term lengths of members of the 

Financial Industry Regulatory Authority (‘‘FINRA’’), 

the Public Company Accounting and Oversight 

Board (‘‘PCAOB’’), the SEC, and the SEC’s Investor 

Advisory Committee. 

[R]epresentatives and that the membership 

shall at all times be as evenly divided in 

number as possible between [P]ublic 

[R]epresentatives and [R]egulated 

[R]epresentatives; 

(ii) shall specify the length or lengths of 

terms members shall serve; 

(iii) may increase the number of members 

which shall constitute the whole Board, 

provided that such number is an odd 

number; and 

(iv) shall establish requirements regarding 

the independence of public representatives. 

Specifically, the MSRB believes the 

increase of the term length from three to 

four years, the change in the number 

and size of Board classes from three 

classes of seven members to one class of 

six and three classes of five, and the 

elimination of the requirement that 

there be one non-dealer municipal 

advisor per class are consistent with the 

Exchange Act in that the composition of 

the Board would continue to satisfy all 

of the statutory requirements.27 In 

particular, the number of Public 

Representatives would continue to 

exceed the total number of Regulated 

Representatives and the classes would 

continue to be as evenly divided in 

number as possible between Public and 

Regulated Representatives. Further, the 

proposed rule change specifies the 

length of term that Board members 

would serve—four years, which, for the 

reasons discussed earlier, the MSRB 

believes will improve the effectiveness 

and efficiency of the Board. 

The MSRB also believes the limitation 

of consecutive terms to two, totaling a 

maximum of eight years of consecutive 

service, is consistent with the Exchange 

Act in that it specifies the length of term 

that Board members can serve when the 

MSRB invokes the special 

circumstances exception. 

Further, the MSRB believes the 

proposed deletion of the transition 

process described in MSRB Rule A–3(h) 

is consistent with the Exchange Act 

because removing the obsolete provision 

would improve the clarity and 

readability of the rule. The MSRB also 

believes the proposed update to the 

reference to the ‘‘Nominating and 

Governance Committee’’ in MSRB Rule 

A–3(g)(ii) is consistent with the Act 

because it promotes the accuracy of the 

rule in regard to a reference to a 

component of the Board’s governance 

structure. 

Finally, none of the amendments in 

the proposed rule change alters the 

number of members that constitutes the 

whole Board or the requirements 

regarding the independence of Public 

Representatives. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

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

requires that MSRB rules not be 

designed to impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. The MSRB does not 

believe that the proposed rule change 

would impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act because it is 

concerned solely with the 

administration of the SRO. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The MSRB received nine comment 

letters specifically addressing the issue 

of whether to modify the length of 

Board member service in the First 

Request for Comment 28 and five 

comment letters in response to the 

Second Request for Comment.29 The 

comment letters are summarized below 

by topic. 

Increase in Term Length—General 

As noted above, all of the comments 

in response to the Second Request for 

Comment supported increasing the 

length of Board member service from 

three years to four years.30 Notably, the 

SEC Investor Advocate agreed with the 

MSRB that lengthening the term would 

improve continuity and institutional 

knowledge of the Board from year to 

year, while retaining the benefits of the 

regular addition of new members, and 

that the amendments proposed are a 

reasonable approach to achieving that 

goal. More specifically, he noted that 

the increased term length would give 

Board members, particularly Public 

Representatives,31 more time to develop 

the institutional knowledge and 

experience required for fully engaged 

and effective oversight of the MSRB, 

which he believes would be in the best 

interest of investors because it may 

lessen what he considered to be the 

Board’s natural dependence upon 

Regulated Representatives,32 who he 

presumed have greater experience on 

certain issues. To this point, Heaney, a 

former Board member who served for 

four years due to the Board’s transition 

from 15 to 21 members, believes the 

MSRB would benefit significantly from 

the added stability and continuity, as he 

believes his extra year enabled him to 

contribute more than he would have 

otherwise been able to in a three-year 

term. BDA believes that a four-year term 

is an acceptable balance and that having 

an extra year to serve on the Board 

would promote continuity of knowledge 

and ensure appropriate overlap among 

those working on rule proposals and 

other changes that affect how the 

municipal securities market operates. 

Finally, the SEC Investor Advocate 

believes the proposed term length of 

four years is appropriate when 

compared to the structure of similar 

organizations with a mission to protect 

investors, all with board member terms 

in the range of three to five years.33

Increase in Term Length—Limits 

SIFMA supported the increase in term 

length from three to four years and 

believes the change would improve 

continuity and institutional knowledge 

of the Board from year to year. However, 


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34See MSRB Rule A–3(b)(i) (‘‘A member may not 

serve consecutive terms, unless special 

circumstances warrant that the member be 

nominated for a successive term or because the 

member served only a partial term as a result of 

filling a vacancy pursuant to section (d) of this 

rule.’’). 

35 In response to the First Request for Comment, 

SIFMA stated that there should be a lifetime cap of 

four years of Board service, limiting any member to 

one term only. 

36See Exchange Act Release No. 63764 (Jan. 25, 

2011), 76 FR 5417 (Jan. 31, 2011) (SR–MSRB–2010– 

17) (approving amendments to MSRB Rule A–3, 

including the special circumstances exception). 

37The MSRB notes that no other commenters 

raised this issue. 38See 15 U.S.C. 78o–4(b)(1). 

39See supra note 18. 

40The MSRB notes that, in response to the First 

Request for Comment, the SEC Investor Advocate 

and Lamb supported consecutive three-year terms 

without any qualification. 

SIFMA is concerned that serving more 

than one term could create an 

environment in which one or more 

Board members with multiple terms of 

service could become too dominant in 

Board deliberations and have undue 

influence, particularly considering that 

the Board has a majority of Public 

Representatives, who SIFMA suggested 

may not have significant market or 

industry experience. Accordingly, 

SIFMA urged the Board to consider 

further specifying or limiting the 

circumstances under which a Board 

member may serve more than four years 

by: (1) More explicitly defining the 

special circumstances exception 

allowing consecutive terms; 34 (2) 

imposing a maximum lifetime limit on 

Board service; 35 or (3) specifying that 

when a Board member, who has already 

served a full term is retained or recalled 

to fill a sudden vacancy, that the 

member’s extended term be temporary 

for only as long as necessary to recruit 

a qualified, permanent new member to 

fill the vacancy. 

First, the MSRB does not believe it 

should more explicitly define the 

special circumstances exception, which 

the Commission approved in January 

2011.36 In its filing, the MSRB noted a 

Board member possessing special 

expertise needed by the Board that is 

not possessed by other Board members 

or generally by persons in the pool of 

potential candidates for Board 

membership as an example of how the 

exception would be applied. Given that 

the Commission found the current 

provision to be consistent with the 

Exchange Act, and that the MSRB has 

only applied it twice for the purpose of 

maintaining the special expertise of a 

member, with the use for that purpose 

being consistent with the MSRB’s 

explanation in the filing, the MSRB does 

not believe any additional specificity is 

needed in the rule.37

Second, the MSRB does not believe it 

is appropriate to impose a maximum 

lifetime limit on Board service, as it 

would limit the pool of applicants to 

serve on the Board from year to year. 

The pool of applicants from which the 

MSRB can consider and select new 

Board members is already limited by the 

statutory requirement that each Board 

member be ‘‘knowledgeable of matters 

related to the municipal securities 

markets,’’ 38 and, as recognized by the 

SEC Investor Advocate in response to 

the First Request for Comment, it can be 

a challenge to find talented and 

qualified people who are willing to 

devote time and energy to serve on the 

Board. Given those constraints, a 

lifetime cap, particularly one of only 

four years (i.e., one term) as SIFMA has 

suggested, may hinder the MSRB’s 

ability to select from a robust pool of 

applicants. This problem could be 

exacerbated over time as additional 

Board members reach the end of their 

service and lose future eligibility under 

such a cap. The MSRB believes that 

former Board members may be highly 

qualified to serve on the Board with the 

benefit of their prior service, and they 

should not be precluded from 

consideration because of it. 

Additionally, several organizations with 

analogous investor-protection missions 

have no maximum lifetime limit on 

member service (e.g., FINRA governors, 

PCAOB members, SEC commissioners, 

and the SEC Investor Advisory 

Committee members). In light of all of 

the above, the MSRB is not including a 

lifetime cap on service in the proposed 

amendments as suggested by SIFMA. 

Finally, the MSRB does not believe it 

should specify that, when a Board 

member, who has already served a full 

term is retained or recalled to fill a 

sudden vacancy, the member’s extended 

term be temporary for only as long as 

necessary to recruit a qualified, 

permanent new member to fill the 

vacancy. Since a Board member can 

only be retained under the special 

circumstances exception, the first part 

of SIFMA’s suggestion is more of a 

critique of that exception and/or the 

MSRB’s use of it. As noted above, 

however, the special circumstances 

exception has been approved by the 

Commission. Further, depending on the 

nature and timing of a vacancy on the 

Board, it may be more efficient for the 

MSRB to recall a former Board member. 

In particular, for vacancies that occur in 

the middle of a fiscal year or in the 

middle to end of a vacating Board 

member’s term, the amount of time and 

resources required to find, select and 

onboard a new member typically would 

be significantly greater than the time 

and resources required to do the same 

for a former Board member. This 

disparity in efficiency would be even 

greater when compared to a two-part 

process in which a former Board 

member is temporarily seated and, after 

a short period, replaced by a new Board 

member. Additionally, the temporary 

status of the former Board member 

could potentially limit his or her 

effectiveness on the Board. Accordingly, 

the MSRB believes it is in the best 

interest of the organization to continue 

to have the flexibility to select from 

among former Board members, as well 

as from among all other sources, to fill 

a vacancy for the remainder of a 

vacating Board member’s term. 

While the MSRB does not support 

specifying or limiting the circumstances 

under which a Board member may serve 

more than four years in any of the ways 

SIFMA suggested, the proposed rule 

change would limit the number of 

consecutive terms a Board member can 

serve to two, which could only occur 

when the MSRB invokes the special 

circumstances exception, to address the 

general concern among commenters 

about unduly long tenures. There is 

empirical evidence to suggest very long 

board tenures are associated with 

weaker corporate governance and less 

favorable organizational performance.39

Additionally, in response to the First 

Request for Comment, several 

commenters expressed concerns similar 

to SIFMA’s. Specifically, GFOA 

opposed two consecutive three-year 

terms, NFMA was concerned that a sixyear or longer term would limit the 

opportunity to bring ‘‘fresh ideas’’ to the 

Board, and ICI stated that it would 

support consecutive three-year terms if 

there was no longer a special 

circumstances exception that could 

create a term greater than six years.40

To address these concerns, the MSRB 

believes that Board members should be 

limited to two consecutive terms when 

the special circumstances exception is 

invoked. By doing this, under the 

proposed rule change, no Board member 

could serve more than eight years 

consecutively. This added provision 

would ensure that the special 

circumstances exception is not 

overused, mitigate the concern of Board 

members becoming too dominant and 

unduly influential, assure appropriate 

turnover of Board membership and help 

maintain a robust pool of applicants for 

Board service. As noted, the MSRB 

believes this modification reflects good 

corporate governance as applied to the 

particular characteristics of the MSRB. 


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Federal Register / Vol. 81, No. 23 / Thursday, February 4, 2016 / Notices 6093 

Increase in Term Length—Training 

However, BDA encouraged the MSRB 

to consider instituting a robust, 

formalized training program for all 

incoming Board members in their first 

year of service to maximize the benefits 

of the proposed fourth year of service. 

Similarly, in a comment letter in 

response to the First Request for 

Comment, NAMA, which ‘‘does not 

object’’ to the increase in term length, 

suggested that the MSRB could devote 

extensive staff time and other resources 

to expedite the learning curve for Board 

members. These comments address 

internal MSRB matters and do not 

suggest any revision to the language of 

the amendments in the proposed rule 

change. Additionally, the MSRB already 

allocates significant resources to 

educating new Board members as part of 

a robust and dedicated orientation 

process that begins prior to the 

commencement of their terms and 

focuses on organizational and other 

substantive matters, including, but not 

limited to, rulemaking and other large 

initiatives. The MSRB also already 

routinely revises and improves this 

process with the benefit of each 

successive experience orienting new 

Board members. 

Number and Size of Board Classes 

In response to the Second Request for 

Comment, none of the commenters 

specifically addressed the proposed 

change from three classes of seven 

Board members to one class of six 

members and three classes of five. In 

response to the First Request for 

Comment, SIFMA suggested the same 

structure. The MSRB continues to 

believe the proposed rule change is 

appropriate and, in light of the absence 

of any concern among the commenters, 

is not making any revision to the 

proposal in this respect. 

Elimination of the Requirement That 

There Be at Least One Non-Dealer 

Municipal Advisor Representative per 

Board Class 

In response to the Second Request for 

Comment, only BDA commented on the 

proposed elimination of the requirement 

that there be at least one non-dealer 

municipal advisor representative per 

Board class. BDA supported this 

adjustment because it is its preference to 

ensure the number of dealer-affiliated 

regulated entities on the Board is as 

robust as possible. Given that no 

commenter opposed the change and that 

it would neither reduce the 

representation of municipal advisors 

nor preclude the MSRB from deciding to 

include more than three non-dealer 

municipal advisor representatives on 

the Board, the MSRB is not making any 

change to the proposal in this regard. 

Transition Plan 

BDA supported the transition plan to 

the new term lengths proposed by the 

MSRB in the Second Request for 

Comment. In particular, it supported the 

part of the plan under which a special 

nominating committee comprised only 

of Board members not being considered 

for extensions would nominate the 

Board members who would receive oneyear extensions to be voted on by the 

full Board. BDA believes that approach 

to be fair in that members on the special 

committee providing nominations for 

term extensions would not be eligible 

for a longer term, and that it would 

reduce any potential for self-dealing. 

SIFMA supported the plan because no 

existing Board member would serve for 

more than four years under the 

transition plan. 

After considering this part of the plan 

further, the MSRB believes it is a better 

approach to have the full Board vote by 

ballot on all members eligible for 

extensions. First, given that 18 of the 21 

Board members would be eligible for an 

extension, it would be difficult for the 

MSRB to constitute a special committee 

that is a fair representation of the entire 

Board. Additionally, despite the change 

in the process, the ultimate authority of 

the full Board to determine who would 

receive an extension is unchanged— 

under the special committee nomination 

process, the Board could vote down 

every nomination until the member, 

whom the Board would support for an 

extended term, was nominated. Finally, 

the MSRB believes that any concerns 

BDA might have with the potential for 

conflicts of interest and/or self-dealing 

under the new process are mitigated 

because the size of the Board—21 

members—and the large number of 

members eligible for an extension make 

it more difficult for any one member to 

inappropriately affect the outcome of 

the election. 

Miscellaneous 

In response to both requests for 

comment, NAMA stated that the MSRB 

should consider returning the size of the 

Board to 15 members. Additionally, 

NAMA suggested that, if there are term 

extensions for Board members, the rule 

amendments should address term 

lengths for leadership positions and the 

point in a Board member’s term at 

which he or she becomes eligible for 

such positions. In response to the First 

Request for Comment, SIFMA suggested 

that making a Board member eligible to 

serve as vice chair in the third year of 

a four-year term, and as chair in the 

fourth year, would strengthen the 

leadership of the Board, as those 

individuals would be oriented fully to 

MSRB issues and processes at those 

points in their tenures. Lastly, 

Thompson believed the MSRB should 

consider reviewing the single-year term 

of the chair. Lamb believed the singleyear term of the chair should remain 

unchanged. 

The recommendations regarding 

Board size, and term lengths and 

eligibility for leadership positions on 

the Board, are beyond the scope of the 

issues presented in both requests for 

comment. Therefore, the MSRB is not 

considering such matters at this time. 

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–2016–01 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–2016–01. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
6094 Federal Register / Vol. 81, No. 23 / Thursday, February 4, 2016 / Notices 

41 17 CFR 200.30–3(a)(12). 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the MSRB. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–MSRB– 

2016–01 and should be submitted on or 

before February 25, 2016. 

For the Commission, pursuant to delegated 

authority.41

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–02062 Filed 2–3–16; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Reporting and Recordkeeping 

Requirements Under OMB Review 

AGENCY: Small Business Administration. 

ACTION: 30-Day Notice. 

SUMMARY: The Small Business 

Administration (SBA) is publishing this 

notice to comply with requirements of 

the Paperwork Reduction Act (PRA) (44 

U.S.C. Chapter 35), which requires 

agencies to submit proposed reporting 

and recordkeeping requirements to 

OMB for review and approval, and to 

publish a notice in the Federal Register 

notifying the public that the agency has 

made such a submission. This notice 

also allows an additional 30 days for 

public comments. 

DATES: Submit comments on or before 

March 7, 2016. 

ADDRESSES: Comments should refer to 

the information collection by name and/ 

or OMB Control Number and should be 

sent to: Agency Clearance Officer, Curtis 

Rich, Small Business Administration, 

409 3rd Street SW., 5th Floor, 

Washington, DC 20416; and SBA Desk 

Officer, Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, New 

Executive Office Building, Washington, 

DC 20503. 

FOR FURTHER INFORMATION CONTACT: 

Curtis Rich, Agency Clearance Officer, 

(202) 205–7030 curtis.rich@sba.gov. 

Copies: A copy of the Form OMB 83– 

1, supporting statement, and other 

documents submitted to OMB for 

review may be obtained from the 

Agency Clearance Officer. 

SUPPLEMENTARY INFORMATION: Form 857 

is used by SBA examiners to obtain 

information about financing provided 

by small business investment 

companies (SBICs). This information, 

which is collected directly from the 

financed small business, provides 

independent confirmation of 

information reported to SBA by SBICs, 

as well as additional information not 

reported by SBICs. 

Solicitation of Public Comments 

Title: Small Business Investment 

Companies. 

Description of Respondents: Small 

Business Investment Companies. 

Form Number: SBA Form 857. 

Estimated Annual Responses: 2,250. 

Estimated Annual Hour Burden: 

2,250. 

Curtis B. Rich, 

Management Analyst. 

[FR Doc. 2016–02202 Filed 2–3–16; 8:45 am] 

BILLING CODE 8025–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #14603 and #14604] 

Missouri Disaster #MO–00078 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Notice. 

SUMMARY: This is a Notice of the 

Presidential declaration of a major 

disaster for the State of MISSOURI 

(FEMA–4250–DR), dated 01/21/2016. 

Incident: Severe Storms, Tornadoes, 

Straight-line Winds & Flooding. 

Incident Period: 12/23/2015 through 

01/09/2016. 

Effective Date: 01/21/2016. 

Physical Loan Application Deadline 

Date: 03/21/2016. 

Economic Injury (EIDL) Loan 

Application Deadline Date: 10/21/2016. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street SW., Suite 6050, 

Washington, DC 20416. 

SUPPLEMENTARY INFORMATION: Notice is 

hereby given that as a result of the 

President’s major disaster declaration on 

01/21/2016, applications for disaster 

loans may be filed at the address listed 

above or other locally announced 

locations. 

The following areas have been 

determined to be adversely affected by 

the disaster: 

Primary Counties (Physical Damage 

and Economic Injury Loans) 

BARRY, BARTON, CAMDEN, CAPE 

GIRARDEAU, COLE, CRAWFORD, 

FRANKLIN, GASCONADE, GREENE, 

HICKORY, JASPER, JEFFERSON, 

LACLEDE, LAWRENCE, LINCOLN, 

MARIES, MCDONALD, MORGAN, 

NEWTON, OSAGE, PHELPS, POLK, 

PULASKI, SAINT CHARLES, SAINT 

FRANCOIS, SAINT LOUIS, SAINTE 

GENEVIEVE, SCOTT, STONE, 

TANEY, TEXAS, WEBSTER, 

WRIGHT. 

Contiguous Counties (Economic Injury 

Loans Only) 

MISSOURI: BENTON, BOLLINGER, 

BOONE, CALLAWAY, CEDAR, 

CHRISTIAN, COOPER, DADE, 

DALLAS, DENT, DOUGLAS, 

HOWELL, IRON, MADISON, MILLER, 

MISSISSIPPI, MONITEAU, 

MONTGOMERY, NEW MADRID, 

OZARK, PERRY, PETTIS, PIKE, 

SAINT CLAIR, SAINT LOUIS CITY, 

SHANNON, STODDARD, VERNON, 

WARREN, WASHINGTON. 

ARKANSAS: BENTON, BOONE, 

CARROLL, MARION. 

ILLINOIS: ALEXANDER, CALHOUN, 

JERSEY, MADISON, MONROE, 

RANDOLPH, SAINT CLAIR, UNION. 

KANSAS: CHEROKEE, CRAWFORD. 

OKLAHOMA: DELAWARE, OTTAWA. 

The Interest Rates are: 

For Physical Damage 

Percent 

Homeowners with Credit Available 

Elsewhere ................................. 3.625 

Homeowners without Credit Available Elsewhere ......................... 1.813 

Businesses with Credit Available 

Elsewhere ................................. 6.000 

Businesses without Credit Available Elsewhere ......................... 4.000 

Non-Profit Organizations with 

Credit Available Elsewhere ....... 2.625 

Non-Profit Organizations without 

Credit Available Elsewhere ....... 2.625 


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