Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 64423 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 72706 (July 

29, 2014) (the ‘‘Proposing Release’’), 79 FR 45546 

(August 5, 2014). 

4See Letters to Secretary, Commission, from 

Tamara K. Salmon, Senior Associate Counsel, 

Investment Company Institute (‘‘ICI’’), dated August 

19, 2014 (the ‘‘ICI Letter’’); David L. Cohen, 

Managing Director and Associate General Counsel, 

Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), dated August 21, 2014 (the 

‘‘SIFMA Letter’’); Dave A. Sanchez (‘‘Sanchez’’), 

dated August 25, 2014 (the ‘‘Sanchez Letter’’); 

Michael Nicholas, Chief Executive Officer, Bond 

Dealers of America (‘‘BDA’’), dated August 26, 2014 

(the ‘‘BDA Letter’’); Anonymous Attorney, dated 

August 26, 2014 (the ‘‘Anonymous Attorney 

Letter’’); Nathan R. Howard, Counsel, National 

Association of Independent Public Finance 

Advisors (‘‘NAIPFA’’), dated August 26, 2014 (the 

‘‘NAIPFA Letter’’); Cristeena G. Naser, Vice 

President, American Bankers Association (‘‘ABA’’), 

dated August 26, 2014 (the ‘‘ABA Letter’’); and 

Joshua Cooperman, Cooperman Associates 

(‘‘Cooperman’’), dated August 30, 2014 (the 

‘‘Cooperman Letter’’). 

5See Letter to Secretary, Commission, from 

Michael L. Post, Deputy General Counsel, MSRB, 

dated October 17, 2014 (the ‘‘MSRB Response 

Letter’’), available at http://www.sec.gov/comments/ 

sr-msrb-2014-06/msrb201406-9.pdf. 

6See Letter to Secretary, Commission, from 

Michael L. Post, Deputy General Counsel, MSRB, 

dated October 17, 2014 (the ‘‘MSRB Amendment 

Letter’’), available at http://www.sec.gov/comments/ 

sr-msrb-2014-06/msrb201406-10.pdf. In 

Amendment No. 1, the MSRB partially amended the 

text of the original proposed rule change to (i) 

revise paragraphs .01 and .02 of the Supplementary 

Material to Rule G–44 to expand the applicability 

of the provision, requiring a municipal advisor’s 

written supervisory procedures to address how its 

supervision is adequate even without having 

separate supervisors, to account for instances of 

self-supervision that may occur in firms that are not 

sole proprietorships; (ii) amend the text of Rule G– 

44(e) to reference Rule G–8(h)(v)(A)–(E) rather than 

Rule G–8(h)(iii); and (iii) amend the text of Rule G– 

9(k) to reference Rule 15Ba1–8(d) under the Act 

rather than Rule 15a1–8(d) under the Act. 

7See supra note 3. 

8 Id. 

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. 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 

publicly available. All submissions 

should refer to File Number 10–214 and 

should be submitted on or before 

November 19, 2014. Rebuttal comments 

should be submitted by December 3, 

2014. 

By the Commission. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–25675 Filed 10–28–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73415; File No. SR–MSRB– 

2014–06] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing of Amendment 

No. 1 and Order Granting Accelerated 

Approval of a Proposed Rule Change, 

as Modified by Amendment No. 1, 

Consisting of Proposed New Rule G– 

44, on Supervisory and Compliance 

Obligations of Municipal Advisors; 

Proposed Amendments to Rule G–8, 

on Books and Records To Be Made by 

Brokers, Dealers and Municipal 

Securities Dealers; and Proposed 

Amendments to Rule G–9, on 

Preservation of Records 

October 23, 2014. 

I. Introduction 

On July 24, 2014, the Municipal 

Securities Rulemaking Board (the 

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

Securities and Exchange Commission 

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

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change consisting of proposed new Rule 

G–44, on supervisory and compliance 

obligations of municipal advisors and 

proposed amendments to Rule G–8, on 

books and records to be made by 

brokers, dealers and municipal 

securities dealers, and proposed 

amendments to Rule G–9, on 

preservation of records. The proposed 

rule change was published for comment 

in the Federal Register on August 5, 

2014.3

The Commission received eight 

comment letters on the proposal.4 On 

October 17, 2014, the MSRB responded 

to the comments 5 and filed Amendment 

No. 1 to the proposed rule change.6 The 

Commission is publishing this notice to 

solicit comments on Amendment No. 1 

to the proposed rule change from 

interested persons and is approving the 

proposed rule change, as modified by 

Amendment No. 1, on an accelerated 

basis. 

II. Description of the Proposed Rule 

Change 

As further described in the Proposing 

Release, the MSRB states that the 

purpose of the proposed rule change is 

to establish supervisory and compliance 

obligations of municipal advisors when 

engaging in municipal advisory 

activities. Proposed Rule G–44 utilizes a 

primarily principles-based approach to 

supervision and compliance in order to, 

among other things, accommodate the 

diversity of the municipal advisor 

population, including small and singleperson entities. Proposed Rule G–44 is 

accompanied by proposed amendments 

to Rules G–8 and G–9 to establish 

fundamental books-and-records 

requirements for municipal advisors, 

including those related to their 

supervisory and compliance 

obligations.7

Proposed Rule G–44 

In the Proposing Release, the MSRB 

stated that proposed Rule G–44 follows 

a widely accepted model in the 

securities industry consisting of a 

reasonably designed supervisory system 

complemented by the designation of a 

chief compliance officer (‘‘CCO’’). The 

proposed rule draws on aspects of 

existing supervision and compliance 

regulation under other regimes, 

including those for broker-dealers under 

rules of the MSRB and Financial 

Industry Regulatory Authority 

(‘‘FINRA’’) and for investment advisers 

under the Investment Advisers Act of 

1940 (‘‘Advisers Act’’).8

In summary, proposed Rule G–44 

would require: 

• A supervisory system reasonably 

designed to achieve compliance with 

applicable securities laws; 

• Written supervisory procedures; 

• The designation of one or more 

municipal advisor principals to be 

responsible for supervision; 

• Compliance processes reasonably 

designed to achieve compliance with 

applicable securities laws; 

• An annual certification regarding 

those compliance processes; 

• The designation of a CCO to 

administer those compliance processes; 

and 

• At least annual reviews of 

compliance policies and supervisory 

procedures. 

The proposed amendments to Rules 

G–8 and G–9, in summary, would 

require each municipal advisor to make 

and keep records of its: 

• Written supervisory procedures; 

• Designations of persons as 

responsible for supervision; 

• Written compliance policies; 

• Designations of persons as CCO; 

• Reviews of compliance policies and 

supervisory procedures; and 

• Annual certifications regarding 

compliance processes. 

Paragraph (a) of proposed Rule G–44 

is the core provision, which would 

require all municipal advisors to 

establish, implement and maintain a 

system to supervise their municipal 

advisory activities and those of their 

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64424 Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 

9See supra note 6. 

10The MSRB intends to propose amendments to 

MSRB Rules G–2 and G–3 to create the ‘‘municipal 

advisor principal’’ classification, define the term 

and require qualification in accordance with the 

rules of the Board. The MSRB expects those 

changes to become effective well in advance of the 

proposed implementation dates of the proposed 

rule change. Although the MSRB does not expect 

a municipal advisor principal examination to be in 

place by the time of the implementation dates of the 

proposed rule change, the MSRB may develop such 

an examination in the future. The absence of such 

an examination does not preclude the creation of 

the classification. 

11These qualifications of a CCO draw on those 

specified in FINRA’s CCO requirement for its 

member firms. See FINRA Rule 3130 

Supplementary Material .05. 

12See Section 202(25) of the Advisers Act, 15 

U.S.C. 80b–2(25), and Rule 206(4)–7, 17 CFR 

275.206(4)–7. 

associated persons that is reasonably 

designed to achieve compliance with all 

applicable securities laws and 

regulations, including applicable MSRB 

rules (defined as ‘‘applicable rules’’). 

Paragraph (a) specifies that final 

responsibility for proper supervision 

rests with the municipal advisor. 

Subparagraph (a)(i) requires the 

establishment, implementation, 

maintenance and enforcement of written 

supervisory procedures reasonably 

designed to achieve compliance with 

applicable rules. Paragraph .01 of the 

Supplementary Material specifies 

several factors that municipal advisors’ 

written supervisory procedures must 

take into consideration, including the 

advisor’s size, organizational structure, 

nature and scope of activities, number 

of offices, disciplinary and legal history 

of its associated persons, the likelihood 

that associated persons may be engaged 

in relevant outside business activities, 

and any indicators of irregularities or 

misconduct (i.e., ‘‘red flags’’). This 

guidance allows municipal advisors to 

tailor their supervisory procedures to, 

among other things, their size, particular 

business model and structure. Paragraph 

.01 also requires in the case of a 

municipal advisor with any associated 

persons permitted under all applicable 

law to supervise their own activities, the 

written supervisory procedures must 

address the manner in which, in the 

absence of separate supervisory 

personnel, such procedures are 

nevertheless reasonably designed to 

achieve compliance with applicable 

rules.9 Paragraph .02 of the 

Supplementary Material emphasizes the 

flexibility of the proposed rule to 

accommodate small municipal advisor 

firms, even those with only one 

associated person. Proposed Rule G– 

44(a)(i) also specifies requirements to 

promptly amend supervisory 

procedures (i) to reflect changes in 

applicable rules and (ii) as changes 

occur in the municipal advisor’s 

supervisory system; and to 

communicate the procedures and 

amendments to the municipal advisor’s 

relevant associated persons. 

Proposed Rule G–44(a)(ii) would 

require municipal advisors to designate 

one or more municipal advisor 

principals to be responsible for the 

supervision required by the proposed 

rule. Paragraph .03 of the 

Supplementary Material specifies the 

authority and specific qualifications 

required for municipal advisor 

principals designated as responsible for 

supervisory functions. According to the 

proposed rule, they must have the 

authority to carry out the supervision 

for which they are responsible, 

including the authority to implement 

the municipal advisor’s established 

written supervisory procedures and take 

any other action necessary to fulfill their 

responsibilities. They also must have 

sufficient knowledge, experience and 

training to understand and effectively 

discharge their supervisory 

responsibilities.10 Paragraph .03 of the 

Supplementary Material also specifies 

that, even if not designated as a 

supervisory principal, whether a person 

has responsibility for supervision under 

the proposed rule would depend on 

whether, under the facts and 

circumstances of a particular case, the 

person has the requisite degree of 

responsibility, ability or authority to 

affect the conduct of the employee 

whose behavior is at issue. 

Paragraph (b) of proposed Rule G–44 

would require municipal advisors to 

implement processes to establish, 

maintain, review, test and modify 

written compliance policies and 

supervisory procedures. Proposed Rule 

G–44(b) would specify that the reviews 

of compliance policies and supervisory 

procedures must be conducted at least 

annually. Paragraph .04 of the 

Supplementary Material would provide, 

however, that municipal advisors 

should consider the need, in order to 

comply with all of the other 

requirements of the proposed rule, for 

more frequent reviews. The paragraph 

also would provide guidance on what, 

at a minimum, municipal advisors 

should consider during their reviews of 

compliance policies and supervisory 

procedures. These considerations 

include any compliance matters that 

arose since the previous review, any 

changes in municipal advisory activities 

and any changes in applicable law. 

Paragraph (c) of proposed Rule G–44 

would require municipal advisors to 

designate one individual as their CCO. 

Paragraph .05 of the Supplementary 

Material would explain the role of a 

CCO and the importance of that role. 

Specifically, a CCO is a primary advisor 

to the municipal advisor on its overall 

compliance scheme and the policies and 

procedures that the municipal advisor 

adopts in order to comply with 

applicable law. To fulfill this role, a 

CCO should have competence in the 

process of (1) gaining an understanding 

of the services and activities that need 

to be the subject of written compliance 

policies and written supervisory 

procedures; (2) identifying the 

applicable rules pertaining to those 

services and activities; (3) developing 

policies and procedures that are 

reasonably designed to achieve 

compliance with applicable law; and (4) 

developing programs to test compliance 

with the municipal advisor’s policies 

and procedures.11 Paragraph .05 would 

further explain that the CCO can be a 

principal of the firm or a person 

external to the firm; though, in that case, 

the person must have the described 

competence and the municipal advisor 

retains ultimate responsibility for its 

compliance obligations. This approach 

to the CCO function in the proposed 

rule, which would give municipal 

advisors the option to outsource the 

CCO role, follows the approach 

applicable to investment advisers under 

the Advisers Act.12

Paragraph .06 of the Supplementary 

Material specifies that the CCO, and any 

compliance officers that report to the 

CCO, shall have responsibility for and 

perform the compliance functions 

required by the proposed rule. 

Paragraph .07 of the Supplementary 

Material provides that a municipal 

advisor’s CCO may hold any other 

position within the municipal advisor, 

including senior management positions, 

so long as the person can discharge the 

duties of CCO in light of all of the 

responsibilities of any other positions. 

This guidance is especially relevant to 

small municipal advisors, including 

sole proprietorships and other oneperson entities. It makes clear that a 

single individual may, for example, 

serve under appropriate circumstances 

as chief executive officer (‘‘CEO’’), 

supervisory principal and CCO. In 

addition, as discussed above, the CCO 

may be external to the firm, such as an 

outside consultant. 

Paragraph (d) of proposed Rule G–44 

would require municipal advisors to 

have their CEO(s) (or equivalent 

officer(s)) annually certify in writing 

that the municipal advisor has in place 

processes to establish, maintain, review, 

test and modify written compliance 

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Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 64425 

13Proposed Rule G–8(h) includes reserved 

subparagraphs (ii)–(iv) for books and records 

provisions that the MSRB may propose in relation 

to other rules for municipal advisors. The MSRB 

will make conforming changes to this proposal as 

appropriate depending on relevant future 

rulemaking actions by the MSRB and SEC. 14See 17 CFR 240.15Ba1–8(b)(1). 

15 17 CFR 240.15Ba1–8(b)(2) & (c). 

16 17 CFR 240.15Ba1–8(f). 

17 17 CFR 240.15Ba1–8(d). 

18See supra notes 4 and 5. 

19 Id. 

20 Id. 

21See MSRB Response Letter. 

22See BDA Letter. 

23See Cooperman Letter. 

procedures and written supervisory 

procedures reasonably designed to 

achieve compliance with applicable 

rules. FINRA member firms that also are 

municipal advisors are already required 

under FINRA Rule 3130 to make 

annually a substantially similar 

certification with respect to applicable 

federal securities laws and regulations, 

including MSRB rules. In light of this 

existing FINRA requirement, proposed 

Rule G–44(d) would provide for an 

exception from the annual certification 

requirement for municipal advisors that 

are subject to a substantially similar 

FINRA requirement. Paragraph .08 of 

the Supplementary Material provides 

that the execution of the certification 

and any consultation rendered in 

connection with the certification does 

not by itself establish business line 

responsibility. 

Paragraph (e) of proposed Rule G–44 

would provide an exemption for banks 

engaging in municipal advisory 

activities in the exercise of bank 

fiduciary powers from Rule G–44 and 

the related books and records 

requirements if the municipal advisor 

certifies in writing annually that it is, 

with respect to those activities, subject 

to federal supervisory and compliance 

obligations and books and record 

requirements that are substantially 

equivalent to the supervisory and 

compliance obligations in Rule G–44 

and the books and records requirements 

of Rule G–8(h)(v)(A)–(E). The ability to 

so certify and utilize this exemption is 

provided because it is unnecessary for a 

municipal advisor to comply with each 

other provision of proposed Rule G–44 

if it is subject to substantially equivalent 

supervisory and compliance obligations 

as part of the extensive federal 

regulatory regime to which banks are 

already subject. 

Paragraph (f) of proposed Rule G–44 

would provide a definition of the term 

‘‘municipal advisor’’ for purposes of the 

rule as a person that is registered or 

required to be registered as a municipal 

advisor under Section 15B of the Act 

and rules and regulations thereunder. 

Proposed Amendments to Rules G–8 

and G–9 

The proposed amendments to Rules 

G–8 13 and G–9 would be the first 

revisions to those rules to address the 

books and records that must be made 

and preserved by municipal advisors 

registered or required to be registered 

with the SEC. As a fundamental 

element, new Rule G–8(h)(i) would 

require each municipal advisor to keep 

all of the general business records 

described in Exchange Act Rule 15Ba1– 

8(a)(1)–(8). New Rule G–8(h)(v) would 

require each municipal advisor to make 

and keep records related to its 

supervisory and compliance obligations. 

It would require each municipal advisor 

to make and keep its written 

supervisory procedures and written 

compliance policies, records of 

designations of persons as CCO and of 

persons responsible for supervision, 

records of reviews of its written 

compliance policies and written 

supervisory procedures, annual 

certifications as to compliance 

processes, and, if applicable, 

certifications regarding the exemption 

for federally regulated banks. 

The proposed amendments to Rule G– 

9 would require each municipal advisor 

to preserve the books and records 

described in Rule G–8(h), including 

records related to the municipal 

advisor’s supervisory and compliance 

obligations, for a period of not less than 

five years. This five-year preservation 

requirement would be consistent with 

the requirement of Exchange Act Rule 

15Ba1–8 (on books and records to be 

made and maintained by municipal 

advisors).14 New subsection (h) to Rule 

G–9 would require, however, that 

records of the designations of persons 

responsible for supervision and 

designations of persons as CCO be 

preserved for the period of designation 

of each person designated and for at 

least six years following any change in 

such designation. This six-year 

preservation requirement is supported 

by, among other things, the importance 

of such documents in later ascertaining 

the identity of responsible persons 

during particular periods of time. 

Moreover, it would be consistent with 

the current provisions of Rule G–9 for 

records of similar designations by 

brokers, dealers and municipal 

securities dealers. 

The proposed amendments to existing 

Rule G–9(e) would expressly provide 

that municipal advisors may retain 

records using electronic storage media 

or by other similar medium of record 

retention, subject to the retrieval and 

reproduction requirements of Rule G–9. 

The allowance for this means of 

compliance would be made generally 

applicable, so as to expressly 

accommodate the use of electronic 

storage media by dealers as well as 

municipal advisors. 

Proposed Rule G–9(i) would require 

compliance with Exchange Act Rule 

15Ba1–8(b)(2) and (c),15 regarding 

records related to the formation and 

cessation of business. Proposed Rule G– 

9(j) would require non-resident 

municipal advisors to comply with 

Exchange Act Rule 15Ba1–8(f),16

regarding records of non-resident 

municipal advisors. Proposed Rule G– 

9(k) would provide that whenever a 

record is preserved by a municipal 

advisor on electronic storage media, if 

the manner of storage complies with 

Exchange Act Rule 15Ba1–8(d),17 it will 

be deemed to be preserved in a manner 

that is in compliance with the 

requirements of Rule G–9. This 

provision would give municipal 

advisors the choice to comply with 

either the SEC’s or the MSRB’s 

preservation requirements. 

III. Summary of Comments Received 

and the MSRB’s Response 

As noted previously, the Commission 

received eight comment letters on the 

proposed rule change and a response 

letter from the MSRB.18 The 

commenters generally support the 

proposed rule change.19 However, some 

commenters asked for further 

clarification and provided suggestions 

to the proposed rule change.20 The 

MSRB has responded to the 

commenters, as discussed below.21

1. Flexibility for Small Municipal 

Advisors 

BDA commented that proposed Rule 

G–44 provides too much flexibility for 

small firms by allowing them to 

determine and make accommodations 

for themselves simply because of their 

size, and that those accommodations 

should be circumscribed.22

Alternatively, Cooperman commented 

that the proposed Rule G–44 imposes 

regulatory burdens on small municipal 

advisors and particularly sole 

proprietors that are not necessary, 

appropriate or logical to the protection 

of the municipal clients of such 

advisors.23 NAIPFA stated that 

proposed Rule G–44 appropriately 

accommodates small and single-person 

municipal advisors by, among other 

things, allowing supervisory systems to 

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64426 Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 

24See NAIPFA Letter. 

25 Id. 

26 Id. 

27See Sanchez Letter. 

28 Id. 

29See MSRB Response Letter. 

30 Id. 

31 Id. 

32See MSRB Amendment Letter. 

33See ICI Letter. 

34See Anonymous Attorney Letter. 

35See BDA Letter. 

36See NAIPFA Letter. 

37See Sanchez Letter. 

38 Id. 

39 Id. 

40See MSRB Response Letter. 

41 Id. 

42 Id. 

43 Id. 

44 Id. 

45 Id. 

be tailored to the size of the firm.24

However, NAIPFA suggested exempting 

single-person firms from developing a 

compliance manual to the extent such 

firms are not otherwise required to 

maintain policies pursuant to any other 

applicable laws.25 NAIPFA also believes 

the imposition of supervisory 

obligations on sole proprietors is likely 

not necessary or appropriate since such 

individuals will be obligated to monitor 

their own compliance thereby making a 

requirement that they maintain 

supervisory procedures superfluous.26

Sanchez stated that compliance with 

proposed Rule G–44(a) and (b), 

paragraph .04 of the Supplementary 

Material and the associated 

recordkeeping requirements should be 

deemed a sufficient supervisory system 

for municipal advisors with a single 

associated person.27 Sanchez suggested 

deleting the last sentence of paragraph 

.02 of the Supplementary Material, 

which requires that written supervisory 

procedures of municipal advisors with a 

single associated person address the 

manner in which, in the absence of 

separate supervisory personnel, such 

procedures are nevertheless reasonably 

designed to achieve compliance with 

applicable rules.28

In response to comments, the MSRB 

acknowledged that proposed Rule G–44 

contains standards that may vary based 

on firm size and that the MSRB 

deliberately drafted the rule to give 

firms flexibility to tailor their 

supervisory systems accordingly, 

striking an appropriate balance between 

burdens on, and flexibility for, small 

municipal advisors.29 MSRB also stated 

that the approach set forth in proposed 

Rule G–44 seems particularly 

appropriate for an industry in which 

many participants are becoming 

regulated at the federal level for the first 

time.30

With respect to paragraph .02 of the 

Supplementary Material, the MSRB 

believes this provision is important to 

ensuring all municipal advisors 

establish meaningful procedures that 

will satisfy the minimum standard 

established by proposed Rule G–44.31

The MSRB stated that developing 

appropriate systems and documenting 

and following written procedures is a 

well-established practice among 

businesses, regardless of size, for 

facilitating compliance with regulation 

in a broad range of other areas (e.g., 

taxes, human resources). Additionally, 

the MSRB noted that FINRA’s 

consolidated supervision rule (FINRA 

Rule 3110) includes a substantially 

similar requirement. Although the 

provision will always apply to sole 

proprietorships, the MSRB believes it is 

relevant to other firms in which 

associated persons may be otherwise 

permitted to supervise their own 

activities. Accordingly, the MSRB filed 

Amendment No. 1 to revise the rule text 

to expand the applicability of the 

requirement to all firms with associated 

persons who supervise their own 

activities.32

2. Annual Certification 

Several comment letters addressed the 

proposed annual certification 

requirement in proposed Rule G–44. ICI 

supports the proposed annual 

certification requirement as drafted 

because it is consistent with the 

requirements imposed on FINRA 

members pursuant to FINRA Rule 

3130(b).33 Anonymous Attorney 

supports the exception from the annual 

certification for municipal advisors that 

are subject to FINRA Rule 3130.34 While 

BDA supports the MSRB’s effort to 

ensure alignment of its annual 

certification requirement with FINRA 

Rule 3130, it stated that proposed Rule 

G–44 should require all municipal 

advisors to complete a periodic selfcertification regarding the meeting of 

professional qualification standards by 

its associated persons, as well as to 

certify to the municipal advisor’s ability 

to comply, and history of complying, 

with all applicable regulatory 

requirements.35 NAIPFA opposes any 

self-certification requirement, unless 

some objective basis can be provided 

that indicates such a requirement would 

result in a decrease in the number of 

compliance violations.36

Sanchez commented that the 

regulatory purpose of the annual 

certification requirement as to 

compliance processes in proposed Rule 

G–44(d) is unclear because the 

associated recordkeeping requirements 

essentially already require the 

equivalent of an annual certification.37

In addition, Sanchez does not believe 

the annual certification would foster 

discussion between persons responsible 

for compliance matters and upper 

management, and questions whether 

such a provision is necessary for small 

municipal advisors, particularly sole 

proprietors, in light of Section 

15B(b)(2)(L)(iv) of the Act.38 Finally, 

Sanchez believes there would be no 

‘‘harmonizing’’ benefit achieved by 

imposing the annual certification 

requirement similar to FINRA’s 

requirement because the vast majority of 

registered municipal advisors are not 

FINRA members, and FINRA members 

would be specifically exempted from 

proposed Rule G–44(d).39

In response to the comments, the 

MSRB stated that the certification 

requirement would result in the 

creation, maintenance and modification 

of robust written supervisory 

procedures that would promote 

compliance with all applicable rules.40

The MSRB noted that requiring the 

broader certification proposed by BDA 

would reduce the harmonization 

between the MSRB and FINRA 

certifications, which is an aspect of the 

proposal that BDA and ICI specifically 

support.41 The MSRB also noted that it 

would be an unnecessary burden at this 

time to require a broader certification 

such as the one proposed by BDA.42

In response to Sanchez’s comments, 

the MSRB stated that requiring each 

firm’s chief executive officer (or 

equivalent officer) to provide an annual 

certification would help ensure that 

compliance processes are given 

sufficient attention at the highest levels 

of management and would help promote 

compliance, without adding a 

significant burden.43 The MSRB further 

stated that the annual certification 

requirement will foster discussion 

between compliance personnel and 

upper management, as it creates 

accountability for, and incentivizes, the 

chief executive officer (or equivalent 

officer) to ensure that the certification is 

truthful and otherwise satisfies 

proposed Rule G–44(d).44 The MSRB 

acknowledged that the benefit from 

certification of fostering discussion does 

not exist in sole proprietorships and 

perhaps some very small firms, but 

stated that the benefits from certification 

can extend beyond fostering such 

discussion.45 The MSRB believes the 

annual certification requirement would 

help ensure that municipal advisors 

have in place a compliance framework 

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Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 64427 

46 Id. 47 Id. 48See Sanchez Letter. 49 Id. 50 Id. 51See MSRB Response Letter. 52See BDA Letter. 

53 Id. 54See MSRB Response Letter. 55 Id. 56See ABA Letter. 57See MSRB Response Letter. 58Public Law 111–2013, 124 Stat. 1376 (2010). 59See MSRB Response Letter. 60 Id. 

61 Id. 62See SIFMA Letter. 63See NAIPFA Letter. 64 Id. 65See Sanchez Letter. 66See MSRB Response Letter. 67 Id. 

that would allow them to adapt 

compliance efforts to an evolving 

business and regulatory environment, 

and promote prompt maintenance and 

modification of compliance programs.46

In addition, the MSRB believes this 

requirement includes multiple 

accommodations for small municipal 

advisors and is consistent with Section 

15B(b)(2)(L)(iv) of the Act.47

3. Comparison to Rule G–27 

Sanchez suggested replacing the 

proposed timing standard for amending 

written supervisory procedures and 

communicating such amendments to 

associated persons (i.e., ‘‘promptly’’) to 

the standard in MSRB Rule G–27(c)(iii) 

(i.e., ‘‘as appropriate within a reasonable 

time after changes occur’’).48 Sanchez 

stated the Rule G–27 standard is more 

reasonable and will be less confusing for 

entities that are registered as both 

broker-dealers and municipal 

advisors.49 Sanchez also stated the 

proposed standard of ‘‘prompt 

amendment’’ and ‘‘prompt 

communication’’ is vague and more 

burdensome than the standard the 

MSRB requires of other regulated 

activities without any apparent 

justification.50

The MSRB responded that the 

provision requiring prompt 

amendments of written supervisory 

procedures and prompt communication 

of such amendments to associated 

persons is intended to harmonize 

proposed Rule G–44 with FINRA’s rule 

on the maintenance of supervisory 

procedures in its consolidated 

supervision rule.51 The MSRB 

recognizes the proposed timing 

standards are different than those 

provided in the analogous provision in 

Rule G–27 and the MSRB may consider 

amending Rule G–27 in the future to 

harmonize it with proposed Rule G– 

44(a)(i) and the FINRA rule. 

4. Outsourcing CCO Function 

BDA commented that the language in 

paragraph .05 of the Supplementary 

Material to proposed Rule G–44, 

providing that a municipal advisor 

retains the ultimate responsibility for its 

compliance obligations, whether the 

CCO is outsourced or not, should be 

incorporated into the rule text.52 BDA 

believes some firms will take a strict 

reading of the rule text without 

appropriately considering the 

Supplementary Material as a component 

of their compliance with proposed Rule 

G–44.53

The MSRB responded that it is not 

relocating the provision into the rule 

text because the Supplementary 

Material would be part of new Rule G– 

44, if approved, and the provision’s 

location there is intended to improve 

the readability of the rule and does not 

affect the weight, significance or 

enforceability of the provision.54

Moreover, the MSRB stated that BDA’s 

comment that some firms would not 

appropriately consider the 

Supplementary Material when reading 

proposed Rule G–44 is speculative in 

nature and, if fully accepted, could 

suggest a need to remove all 

supplementary material from the rules 

of the MSRB and other self-regulatory 

organizations.55

5. Bank Trust Departments and Trust 

Companies 

The ABA praised the MSRB’s 

exemption in the proposed Rule G–44(e) 

for banks that certify they are subject to 

federal supervisory and compliance 

obligations and books and records 

requirements that are substantially 

equivalent to the supervisory and 

compliance obligations of proposed 

Rule G–44 and the books and records 

requirements of Rule G–8(h)(v)(A)–(E), 

and the ABA requested that a similar 

exemption be available for statechartered trust companies.56

The MSRB responded that it would 

not extend the exemption of proposed 

Rule G–44 to bank trust departments or 

trust companies that are not federally 

regulated.57 The MSRB stated that the 

need for proposed Rule G–44 arises 

from the MSRB’s regulatory oversight of 

municipal advisors as provided under 

the Dodd-Frank Wall Street Reform and 

Consumer Protection Act,58 which 

grants the MSRB broad rulemaking 

authority to develop a new, federal 

regulatory framework for municipal 

advisors.59 The MSRB believes all 

municipal advisors should be required, 

at a minimum, to adhere to federal 

supervisory and compliance obligations 

that are substantially equivalent to those 

set forth in proposed Rule G–44, 

regardless of their other business 

activities and regulatory obligations.60

MSRB noted that, as ABA 

acknowledges, not all states have 

adopted fiduciary regulations which are 

substantially based on the Office of the 

Comptroller of the Currency’s (‘‘OCC’’) 

rules and not all such state regulations 

are identical to the OCC’s rules.61 As a 

result of this lack of consistency 

between, and potential gaps in, state 

regulatory regimes, the MSRB stated it 

was not extending the exemption of 

proposed Rule G–44(e) to bank trust 

departments or trust companies that are 

not federally regulated with regard to 

relevant activities. 

6. Recordkeeping Requirements 

SIFMA supports the proposed 

amendments to Rules G–8 and G–9 

which it believes are reasonable and in 

line with existing MSRB recordkeeping 

and record retention requirements.62

NAIPFA requested that the proposed 

amendments to Rule G–9(h) be amended 

to state that the records described in 

Rule G–8(h)(v)(B) and (D) shall be 

preserved for the duration of a person’s 

designation as a supervisor and/or CCO 

and for at least five years following any 

change in such designation.63 NAIPFA 

stated that establishing a six-year 

requirement when all other similar 

retention requirements are five years 

creates an inconsistent and overly 

complex regulatory regime that is not 

likely to achieve any appreciable benefit 

for municipal entities or obligated 

persons.64 Sanchez also suggests a fiveyear requirement for such records 

because he believes imposing a six-year 

period of record retention is an 

unnecessary complexity.65

In response to comments, the MSRB 

stated there is a six-year retention 

period for records relating to 

designations of persons responsible for 

supervision and as CCO to be consistent 

with the current provisions of Rule G– 

9 for records of similar designations by 

brokers, dealers and municipal 

securities dealers.66 MSRB further 

stated that the longer requirement is 

supported by the importance of such 

records in ascertaining the identity of 

responsible persons during particular 

periods of time, including for purposes 

of examination and enforcement.67

7. Requests for Clarification and 

Guidance 

Anonymous Attorney requested 

clarification on three issues: (1) Whether 

a municipal advisor and investment 

advisor (‘‘MA/IA’’) firm’s compliance 

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64428 Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 

68See Anonymous Attorney Letter. 69See MSRB Response Letter. 70 Id. 71 Id. 72 Id. 73See SIFMA Letter. 74See NAIPFA Letter. 75See BDA Letter. 

76See MSRB Response Letter. 

77 15 U.S.C. 78o–4(b)(2). 

78 15 U.S.C. 78o–4(b)(2)(A)(i). 

79See 15 U.S.C. 78o–4(b)(2)(C). 80See Registration of Municipal Advisors, Rel. 

No. 34–70462 (Sept. 20, 2013) (‘‘Municipal Advisor 

Registration Adopting Release’’), 78 FR 67467 (Nov. 

12, 2013). 81See 15 U.S.C. 78o–4(b)(2)(L)(iv). 

manual must have two separate sets of 

written supervisory procedures for 

municipal advisor and investment 

advisor activities, and, if so, whether it 

would be permissible to incorporate by 

reference applicable existing procedures 

that apply to investment adviser 

activities, (2) whether the annual review 

of the municipal advisor and investment 

advisor compliance processes may be 

conducted jointly, and (3) whether a 

principal, designated pursuant to 

proposed Rule G–44(a)(ii), may be 

designated by title or position, instead 

of as a specific individual, and, if so, 

whether it would be acceptable to 

identify a principal by reference to a 

separate document or record.68

The MSRB responded that it used a 

primarily principles-based approach to 

proposed Rule G–44 to afford municipal 

advisors flexibility in determining the 

lowest cost means to meet regulatory 

objectives.69 Accordingly, the MSRB 

believes an MA/IA firm could establish 

and conduct its review of written 

supervisory procedures and compliance 

policies, in the manner it deems best, 

and where requirements are 

substantially similar, referencing how 

the firm will comply with applicable 

municipal advisor and investment 

advisor standards may be appropriate.70

However, the MSRB believes that 

separate written supervisory procedures 

for municipal advisors will need to exist 

given that the regulatory regimes are not 

identical.71 The MSRB believes the 

flexibility of proposed Rule G–44 

extends to a firm’s designation of the 

appropriate principal(s).72

8. Implementation Date 

SIFMA requested no less than six 

months as an implementation period for 

proposed Rule G–44.73 NAIPFA 

requested the proposed Rule G–44 have 

an effective date that is at least ninety 

days following the date on which it is 

enacted.74 BDA requested that the 

implementation period be delayed until 

six months after the SEC has approved 

all municipal advisor rules and 

regulations.75

The proposed rule sets forth an 

implementation period of six months 

following the Commission’s approval of 

the proposal except for proposed Rule 

G–44(d) which municipal advisors 

would be required to implement 

eighteen months after the Commission 

approval date. The MSRB responded 

that it does not intend to delay 

implementation of the proposed Rule 

G–44 until all municipal advisor rules 

have been approved by the SEC. 

Municipal advisors are currently subject 

to applicable federal securities laws and 

the MSRB believes it is important for 

firms to have a supervisory system and 

compliance processes in place to foster 

compliance with those laws and that 

can be updated as new rules are 

adopted.76

IV. Discussion and Commission 

Findings 

The Commission has carefully 

considered the proposed rule change, as 

modified by Amendment No. 1, as well 

as the eight comment letters received 

and the MSRB’s response. The 

Commission finds that the proposed 

rule change, as amended by 

Amendment No. 1, is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to the MSRB. 

In particular, the proposed rule 

change is consistent with Sections 

15B(b)(2), 15B(b)(2)(A)(i) and 

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

15B(b)(2) of the Act provides that MSRB 

shall propose and adopt rules to effect 

the purposes of that 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.77 Section 15B(b)(2)(A)(i) of the 

Act provides that the MSRB’s rules shall 

appropriately classify municipal 

securities brokers, municipal securities 

dealers, and municipal advisors (taking 

into account relevant matters, including 

types of business done, nature of 

securities other than municipal 

securities sold, and character of 

business organization), and persons 

associated with municipal securities 

brokers, municipal securities dealers, 

and municipal advisors.78 Section 

15B(b)(2)(C) of the Act requires that the 

MSRB’s rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

municipal securities 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, in general, to protect 

investors, municipal entities, obligated 

persons, and the public interest.79 The 

proposed rule requires municipal 

advisors to adopt a supervisory 

structure and compliance processes in 

order to help ensure knowledge of, and 

compliance with, applicable securities 

laws and regulations, including the 

Commission’s registration, form 

submission and recordkeeping 

requirements for municipal advisors.80

The Commission believes that 

supervision and compliance functions 

are fundamental to preventing securities 

law violations from occurring, and 

promoting early detection and prompt 

remediation of violations when they do 

occur. 

The Commission also finds that the 

proposed rule change is consistent with 

Section 15B(b)(2)(L)(iv), in that it does 

not impose a regulatory burden on small 

municipal advisors that is not necessary 

or appropriate in the public interest and 

for the protection of investors, 

municipal entities, and obligated 

persons.81 While the proposed rule 

change would affect all municipal 

advisors, including small municipal 

advisors, it is a necessary and 

appropriate regulatory burden in order 

to ensure knowledge of and compliance 

with applicable securities laws and 

regulations. The proposed rule is 

designed to provide flexibility to small 

municipal advisor firms, including 

those with only one associated person. 

Paragraph .02 of the Supplementary 

Material provides that a municipal 

advisor with only one associated person 

can have a sufficient supervisory system 

under proposed Rule G–44. Under the 

same paragraph, one person may be 

designated as responsible for 

supervision and the rule would allow 

for written supervisory procedures to be 

tailored based on factors such as the size 

of the firm. 

In addition, the Commission finds 

that the proposed rule change is 

consistent with Section 15B(b)(2)(G) of 

the Act which provides that the MSRB’s 

rules shall prescribe records to be made 

and kept by municipal advisors and the 

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82See 15 U.S.C. 78o–4(b)(2)(G). 

83 15 U.S.C. 78c(f). 

84Municipal Advisor Registration Adopting 

Release, 78 FR 67467, at 67608. 85See MSRB Amendment Letter. 

periods for which such records shall be 

preserved.82 The proposed rule change 

would require each municipal advisor 

to make and keep all of the general 

business records described in Exchange 

Act Rule 15Ba1–8(a)(1)–(8) as well as 

records of written supervisory 

procedures and compliance policies, 

designations of persons as CCO and of 

persons responsible for supervision, 

reviews of the adequacy of written 

compliance policies and written 

supervisory procedures, the annual 

certifications as to compliance 

processes, and, if applicable, annual 

certifications regarding the exemption 

for federally regulated fiduciary 

activities of banks. The proposed rule 

change also contains preservation 

requirements for the required records. 

In approving the proposed rule 

change, the Commission has considered 

the proposed rule’s impact on 

efficiency, competition, and capital 

formation.83 The Commission believes 

the proposed rule change includes 

accommodations that help promote 

efficiency such as an exemption for 

federally regulated banks in proposed 

Rule G–44(e) and an exemption to the 

annual certification requirement for 

municipal advisors that are subject to a 

substantially similar certification 

requirement by FINRA. 

The Commission believes the 

proposed rule takes into account 

competitive concerns that could arise as 

a result of the costs associated with the 

supervision and compliance 

requirements that could lead some 

municipal advisors to exit the market, 

curtail their activities or consolidate 

with other firms. By utilizing a 

primarily principles-based approach to 

supervision and compliance, the 

proposed rule is designed to provide 

flexibility to small municipal advisor 

firms, including those with only one 

associated person, allowing municipal 

advisors to tailor their supervisory 

procedures to, among other things, their 

size, particular business model and 

structure. Moreover, the Commission 

continues to believe ‘‘that the market for 

municipal advisory services is likely to 

remain competitive despite the potential 

exit of municipal advisors, 

consolidation of municipal advisors, or 

lack of new entrants into the market.’’ 84

The Commission believes that the 

effect of the proposed rule is beneficial 

and that the changes will enhance 

investor confidence by promoting robust 

supervisory policies and procedures, 

programs and controls that can be 

flexibly applied to account for the 

diversity of the municipal advisor 

population, including small municipal 

advisors and sole proprietorships. 

As noted above, the Commission 

received eight comment letters on the 

filing. The Commission believes that the 

MSRB, through its responses and 

through proposed changes in 

Amendment No. 1, has addressed 

commenters’ concerns. 

For the reasons noted above, 

including those discussed in the MSRB 

Response Letter and MSRB Amendment 

Letter, the Commission believes that the 

proposed rule change, as amended by 

Amendment No. 1, is consistent with 

the Act. 

V. Solicitation of Comments on 

Amendment No. 1 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether Amendment No. 1 to 

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–2014–06 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–2014–06. 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 

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– 

2014–06 and should be submitted on or 

before November 19, 2014. 

VI. Accelerated Approval of Proposed 

Rule Change as Modified by 

Amendment No. 1 

The Commission finds good cause for 

approving the proposed rule change, as 

amended by Amendment No. 1, prior to 

the 30th day after the date of 

publication of notice in the Federal 

Register. As discussed above, 

Amendment No. 1 amends the proposed 

rule change by: (i) Revising paragraphs 

.01 and .02 of the Supplementary 

Material to Rule G–44 to no longer limit 

the requirement in paragraph .02 that 

written supervisory procedures address 

the manner in which, in the absence of 

separate supervisory personnel, such 

procedures are nevertheless reasonably 

designed to achieve compliance with 

applicable rules for municipal advisors 

with a single person and expand its 

application to apply to all firms with 

any associated person permitted under 

applicable law to supervise their own 

activities and move the text from 

paragraph .02 or paragraph .01 of the 

Supplementary Material in light of the 

revised scope of the provisions; (ii) 

amending the text of Rule G–44(e) to 

reference Rule G–8(h)(v)(A)–(E) rather 

than Rule G–8(h)(iii); and (iii) amending 

the text of Rule G–9(k) to reference Rule 

15Ba1–8(d) under the Act rather than 

Rule 15a1–8(d) under the Act.85

The MSRB has proposed the revisions 

included in item (i) of the previous 

paragraph to expand the applicability of 

the provision, requiring a municipal 

advisor’s written supervisory 

procedures to address how its 

supervision is adequate even without 

having separate supervisors, to account 

for instances of self-supervision that 

may occur in firms that are not sole 

proprietorships. The MSRB believes the 

revision more properly identifies and 

captures the subset of municipal 

advisors for which the written 

supervisory procedures must address 

the additional matter. The MSRB is 

proposing the two technical revisions in 

items (ii) and (iii) in the previous 

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64430 Federal Register / Vol. 79, No. 209 / Wednesday, October 29, 2014 / Notices 

86 15 U.S.C. 78s(b)(2). 

87 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 72015 

(Apr. 24, 2014), 79 FR 24475 (‘‘Notice’’). 

4 In Amendment No. 1, the Exchange clarified the 

valuation of investments for purposes of calculating 

net asset value, provided additional details 

regarding the dissemination of the Disclosed 

Portfolio, and made other minor technical edits to 

the proposed rule change. Amendment No. 1 

provided clarification to the proposed rule change, 

and because it does not materially affect the 

substance of the proposed rule change or raise 

novel or unique regulatory issues, Amendment No. 

1 is not subject to notice and comment. 

5The Exchange filed Amendment No. 2 on June 

4, 2014 and withdrew it on June 5, 2014, and filed 

Amendment No. 3 on June 5, 2014 and withdrew 

it on June 6, 2014. Amendment No. 4 supersedes 

both Amendment Nos. 2 and 3. In Amendment No. 

4, the Exchange amended the proposal to reflect a 

name change to the Fund and the underlying index. 

Specifically, the Exchange replaced each reference 

to ‘‘Reality Shares Isolated Dividend Growth Index 

ETF’’ in the proposal with ‘‘Reality Shares DIVS 

Index ETF’’ and replaced each reference to ‘‘Reality 

Shares Isolated Dividend Growth Index’’ in the 

proposal with ‘‘Reality Shares DIVS Index.’’ 

Amendment No. 4 is a technical amendment and 

is not subject to notice and comment as it does not 

materially affect the substance of the filing. 

6 15 U.S.C. 78s(b)(2). 

7See Securities Exchange Act Release No. 72385, 

79 FR 35205 (Jun. 19, 2014). The Commission 

designated a longer period within which to take 

action on the proposed rule change and designated 

July 29, 2014, as the date by which it should 

approve, disapprove, or institute proceedings to 

determine whether to disapprove the proposed rule 

change. 

8 15 U.S.C. 78s(b)(2)(B). 

9See Securities Exchange Act Release No. 72714, 

79 FR 45574 (Aug. 5, 2014) (‘‘Order Instituting 

Proceedings’’). Specifically, the Commission 

instituted proceedings to allow for additional 

analysis of the proposed rule change’s consistency 

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

among other things, that the rules of a national 

securities exchange be ‘‘designed to prevent 

fraudulent and manipulative acts and practices, to 

promote just and equitable principles of trade,’’ and 

‘‘to protect investors and the public interest.’’ See 

id. 

10See Letter from Eric Ervin, President, Reality 

Shares ETF Trust and Reality Shares Advisors, LLC, 

and President and CEO, Reality Shares, Inc., to 

Kevin M. O’Neill, Deputy Secretary, Commission, 

dated August 22, 2014. 

11 15 U.S.C. 78s(b)(2). 

12See supra note 3. 

13 15 U.S.C. 78s(b)(2). 

14 17 CFR 200.30–3(a)(57). 

paragraph to indicate the correct crossreferences. 

The Commission believes that 

Amendment No. 1 does not alter the 

substance of the original proposed rule 

change and are consistent with the 

purpose of the original proposed rule 

change and do not raise significant new 

issues. Accordingly, the Commission 

finds good cause for approving the 

proposed rule change, as modified by 

Amendment No. 1, on an accelerated 

basis, pursuant to Section 19(b)(2) of the 

Act. 

VII. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,86 that the 

proposed rule change (SR–MSRB–2014– 

06), as modified by Amendment No. 1, 

be, and hereby is, approved on an 

accelerated basis. 

For the Commission, pursuant to delegated 

authority.87

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–25669 Filed 10–28–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73417; File No. SR– 

NYSEArca–2014–41] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Designation of a 

Longer Period for Commission Action 

on Proceedings To Determine Whether 

To Approve or Disapprove a Proposed 

Rule Change as Modified by 

Amendment Nos. 1 and 4 Thereto, 

Relating to Listing and Trading of 

Shares of the Reality Shares DIVS 

Index ETF Under NYSE Arca Equities 

Rule 5.2(j)(3) 

October 23, 2014. 

On April 11, 2014, NYSE Arca, Inc. 

(‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

list and trade shares (‘‘Shares’’) of the 

Reality Shares DIVS Index ETF 

(‘‘Fund’’) (formerly, Reality Shares 

Isolated Dividend Growth Index ETF) 

under NYSE Arca Equities Rule 5.2(j)(3). 

The proposed rule change was 

published for comment in the Federal 

Register on April 30, 2014.3 On May 6, 

2014, the Exchange filed Amendment 

No. 1 to the proposed rule change, 

which amended and replaced the 

proposed rule change in its entirety.4

On June 6, 2014, the Exchange filed 

Amendment No. 4 to the proposed rule 

change.5 On June 13, 2014, pursuant to 

Section 19(b)(2) of the Act,6 the 

Commission designated a longer period 

within which to approve the proposed 

rule change, disapprove the proposed 

rule change, or institute proceedings to 

determine whether to disapprove the 

proposed rule change.7 On July 29, 

2014, the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Act 8 to determine whether to 

approve or disapprove the proposed 

rule change.9 In response to the Order 

Instituting Proceedings, the Commission 

received one comment letter on the 

proposal.10

Section 19(b)(2) of the Act 11 provides 

that, after initiating disapproval 

proceedings, the Commission shall issue 

an order approving or disapproving the 

proposed rule change not later than 180 

days after the date of publication of 

notice of filing of the proposed rule 

change. The Commission may, however, 

extend the period for issuing an order 

approving or disapproving the proposed 

rule change by not more than 60 days 

if the Commission determines that a 

longer period is appropriate and 

publishes the reasons for that 

determination. The proposed rule 

change was published for notice and 

comment in the Federal Register on 

April 30, 2014.12 The 180th day after 

publication of the notice of the filing of 

the proposed rule change in the Federal 

Register is October 27, 2014, and the 

240th day after publication of the notice 

of the filing of the proposed rule change 

in the Federal Register is December 26, 

2014. 

The Commission finds it appropriate 

to designate a longer period within 

which to issue an order approving or 

disapproving the proposed rule change 

so that it has sufficient time to consider 

the proposed rule change, including the 

matters raised in the comment letter to 

the proposed rule change. 

Accordingly, the Commission, 

pursuant to Section 19(b)(2) of the 

Act,13 designates December 26, 2014 as 

the date by which the Commission shall 

either approve or disapprove the 

proposed rule change (File No. SR– 

NYSEArca–2014–41). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–25673 Filed 10–28–14; 8:45 am] 

BILLING CODE 8011–01–P 

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