[Federal Register Volume 75, Number 173 (Wednesday, September 8, 2010)]
[Notices]
[Pages 54673-54674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22414]



[[Page 54673]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62827; File No. SR-MSRB-2010-08]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Amendments to Rule A-3, on Membership on the 
Board To Comply With the Dodd-Frank Wall Street Reform and Consumer 
Protection Act

September 1, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 27, 2010, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the MSRB. The MSRB has requested accelerated effectiveness pursuant to 
Section 19(b)(2) of the Act.\3\ The Board seeks accelerated 
effectiveness of the rule change in order to implement the Board 
composition requirements of Section 975 of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 
(2010) (the ``Dodd-Frank Act''), which has an effective date of October 
1, 2010. The rule change must be effective prior to the effective date 
of the relevant provision of the Dodd-Frank Act so that the Board may 
elect a new Board for the 2011 fiscal year that complies with the Board 
composition provisions of the Dodd-Frank Act. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing with the SEC a proposed rule change consisting 
of amendments to Rule A-3, on membership on the Board, in order to 
facilitate the change in the composition of the Board to comply with 
the Dodd-Frank Act. The MSRB has requested that the proposed rule 
change be made effective on an accelerated basis.
    The text of the proposed rule change is available on the MSRB's Web 
site at http://www.msrb.org/Rules-and-Interpretations/SEC-Filings/2010-Filings.aspx 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 Board has prepared summaries, set forth in Section 
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 purpose of the proposed rule change is to make such changes to 
MSRB Rule A-3 as are necessary and appropriate prior to the election of 
new Board members for the fiscal year commencing on October 1, 2010 
(fiscal year 2011), in order to comply with the Dodd-Frank Act and, 
more specifically, those provisions of the Dodd-Frank Act governing the 
nomination, election, and composition of the Board. On July 21, 2010, 
the Dodd-Frank Act was signed into law by President Obama. This 
comprehensive financial reform legislation contains various provisions 
that affect the governance and mandate of the MSRB. The effective date 
of these provisions is October 1, 2010, which coincides with the first 
day of the MSRB's 2011 fiscal year.
    The Dodd-Frank Act provides that the number of public 
representatives of the Board shall at all times exceed the total number 
of regulated representatives, that the membership must be as evenly 
divided in number as possible between public and regulated 
representatives, and that the members be knowledgeable of matters 
related to the municipal securities markets.
    As for the public members, at least one must be representative of 
institutional or retail investors in municipal securities, at least one 
must be representative of municipal entities and at least one must be a 
member of the public with knowledge of or experience in the municipal 
industry. As for regulated representatives, at least one must be 
associated with and representative of broker-dealers, at least one must 
be associated with and representative of bank dealers, and at least one 
must be associated with a municipal advisor. For the first time, the 
MSRB has been authorized to promulgate rules governing the conduct of 
municipal advisors who must be fairly represented on the Board.
    Although Section 975(b) of the Dodd-Frank Act provides that the 
Board shall be composed of 15 members, the same section permits the 
Board to increase the number of Board members, so long as the total 
membership is an odd number. It also requires that the public members 
be independent, as defined by the Board, of entities regulated by the 
MSRB.
    In order to implement these terms of the Dodd-Frank Act by the 
effective date of October 1, 2010, the MSRB proposes a rule change to 
add sections (h) and (i) to Rule A-3. Section (h) defines certain terms 
consistent with the Dodd-Frank Act, including the term ``independent of 
any municipal securities broker, municipal securities dealer, or 
municipal advisor,'' which is similar to the independence definition 
used by other self-regulatory organizations. The term ``independent of 
any municipal securities broker, municipal securities dealer, or 
municipal advisor'' would mean that the individual has ``no material 
business relationship'' with any municipal securities broker, municipal 
securities dealer, or municipal advisor. The term ``no material 
business relationship,'' in turn, would mean that, at a minimum, the 
individual is not and, within the last two years, was not associated 
with a municipal securities broker, municipal securities dealer, or 
municipal advisor, and that the individual does not have a relationship 
with any municipal securities broker, municipal securities dealer, or 
municipal advisor, whether compensatory or otherwise, that reasonably 
could affect the independent judgment or decision making of the 
individual. The Board, or by delegation its Nominating Committee, may 
determine that additional circumstances involving the individual 
constitute a ``material business relationship'' with a municipal 
securities broker, municipal securities dealer, or municipal advisor.
    Section (i) is a transitional provision intended to effectuate the 
relevant governance provisions of the Dodd-Frank Act by increasing the 
Board from 15 members to 21 members, who are knowledgeable of matters 
related to the municipal securities markets, 11 of whom will be 
independent, public representatives and 10 of whom will be regulated 
representatives, as of October 1, 2010. Of the 11 public members, at 
least one will be representative of institutional or retail investors, 
at least one will be representative of municipal entities, and at least 
one will be a member of the public with knowledge of or experience in 
the municipal industry.

[[Page 54674]]

Of the 10 regulated representatives, at least one will be associated 
with and representative of broker-dealers, at least one will be 
associated with and representative of bank dealers, and at least one, 
and not less than 30% of the total number of regulated representatives, 
will be associated with and representative of municipal advisors. The 
Board believes that such composition is fair to each regulated 
constituency and to the public.
    In order to achieve this composition, the Board must elect 11 new 
members--eight public representatives and three municipal advisor 
representatives--prior to the start of the 2011 fiscal year. Although 
the Board had previously published a notice under the existing 
provisions of paragraph (a)(iii)(c) of Rule A-3 soliciting nominations 
of Board candidates for fiscal year 2011, in order to ensure a fair 
nomination process, the transition rule provides for a second 
publication, on or after enactment of the Dodd-Frank Act, of a notice 
in a national financial journal soliciting nominations for municipal 
advisor candidates, with the Nominating Committee accepting 
recommendations pursuant to such notice for a period of at least 14 
days from the date of publication.\4\
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    \4\ The MSRB published such additional notice on July 22, 2010, 
pursuant to which it received a number of additional recommendations 
for persons to serve as municipal advisor representatives on the 
Board.
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    Finally, the rule change provides that, in fiscal year 2011, the 
Board will amend Rule A-3(c) and make other changes consistent with the 
Act and the Dodd-Frank Act.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b) of the Act, as amended by the Dodd-Frank Act, in that it 
conforms the composition of the Board to the requirements of the Dodd-
Frank Act as more fully described above.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Board does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act since it provides for fair 
representation on the Board of public representatives, broker dealer 
representatives, bank dealer representatives and municipal advisor 
representatives.

C. Self-Regulatory Organization's Statement on Comments Received on the 
Proposed Rule Change by Members, Participants, or Others

    Written comments were neither solicited nor received on the 
proposed rule change.

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 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 the 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. The Commission seeks comments on all 
aspects of the MSRB's proposed rule change, including the proposed 
composition of the MSRB Board and whether the number and proportion of 
public representatives, broker-dealer representatives, bank 
representatives, and advisor representatives is appropriate. Because 
the MSRB, under the Dodd-Frank Act, now will be proposing and adopting 
rules with respect to the activities of two distinct categories of 
market participants--municipal securities dealers and municipal 
securities advisors--is the proposed structure of the MSRB Board 
designed to assure that the interests of each are appropriately 
represented, and that a fair and effective regulatory regime will be 
implemented both for municipal securities dealers and municipal 
securities advisors? Are there alternative Board structures or other 
governance arrangements that would better achieve these goals? Is 
increasing the size of the MSRB Board the appropriate way to 
accommodate the new representation required by the Dodd-Frank Act, or 
should the new representation be accomplished by reconstituting the 
current Board? Will increasing the size of the MSRB Board negatively 
impact its ability to operate effectively? Comments may be submitted by 
any of the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#7a080f161f57191517171f140e093a091f19541d150c"><span class="__cf_email__" data-cfemail="3341465f561e505c5e5e565d4740734056501d545c45">[email protected]</span></a>. Please include 
File Number SR-MSRB-2010-08 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MSRB-2010-08. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MSRB-2010-08 and should be 
submitted on or before September 22, 2010.\5\
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    \5\ The Commission believes that a 14-day comment period is 
reasonable, given the urgency of the matter. It will provide 
adequate time for comment.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22414 Filed 9-7-10; 8:45 am]
BILLING CODE 8010-01-P


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