25790 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59636 

(March 27, 2009), 74 FR 15190 (‘‘Commission’s 

Notice’’). 

4See letters from Douglas Adamson, Executive 

Vice President, Technical Services Division, 

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

April 24, 2009; Robert Schifellite, President, 

Broadridge Financial Solutions, Inc. (‘‘BFS’’), dated 

May 5, 2009; and Leslie M. Norwood, Managing 

Director and Associate General Counsel, Securities 

Industry and Financial Markets Association 

(‘‘SIFMA’’), dated May 10, 2009. 

Furthermore, on May 15, 2009, representatives of 

BFS met with Martha M. Haines, Chief and Mary 

N. Simpkins, Senior Special Counsel, Office of 

Municipal Securities, Division of Trading and 

Markets to discuss the proposed rule change and to 

provide additional materials related to their 

comments on the proposal. The materials may be 

found at http://www.sec.gov/comments/sr-msrb2009–02/msrb200902–2.pdf. 

5See letters from Ernesto A. Lanza, General 

Counsel, MSRB, to Elizabeth M. Murphy, Secretary, 

SEC, dated May 12, 2009 (‘‘Response Letter I’’) and 

May 18, 2009 (‘‘Response Letter II’’). 

6See Response Letter II, supra note 5. 

7See Commission Notice, supra note 3. 

8See supra note 4. 

9See letter from the ABA, supra note 4. 

10See Response Letter II, supra note 5. The MSRB 

stated that this agreement would expand and 

reposition existing language on the EMMA Web site 

to ensure that users of the EMMA Web site have a 

fuller understanding of the sources of information 

displayed on the EMMA Web site and of the 

proprietary rights of third parties (including but not 

limited to the proprietary rights of the ABA in the 

Database) in certain displayed data elements. Such 

language would advise users of the limitations on 

their use or re-use of any proprietary information 

accessed on the EMMA Web site, and users would 

be required to acknowledge such limitations before 

being provided access to any portion of the 

Database. Additional systemic and reporting 

mechanisms would be implemented to further 

protect against inappropriate use of the Database. 

See Response Letter I, supra note 5. 

11See letter from the BFS, supra note 4. 

12See Securities Exchange Act Release No. 55146 

(January 22, 2007), 72 FR 4148 (January 29, 2007). 

13See Securities Act Release No. 8998 (January 

13, 2009), 74 FR 4546 (January 26, 2009). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59966; File No. SR–MSRB– 

2009–02] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Order Granting Approval of 

Proposed Rule Change Relating to the 

Establishment of a Primary Market 

Disclosure Service and Trade Price 

Transparency Service of the Electronic 

Municipal Market Access System 

(EMMA®) and Amendments to MSRB 

Rules G–32 and G–36 

May 21, 2009. 

On March 23, 2009, the Municipal 

Securities Rulemaking Board (‘‘MSRB’’), 

filed with the Securities and Exchange 

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

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 implement an 

electronic system for free public access 

to primary market disclosure documents 

and transaction price information for 

the municipal securities market through 

the MSRB’s Electronic Municipal 

Market Access system (‘‘EMMA’’). The 

proposed rule change was published for 

comment in the Federal Register on 

April 2, 2009.3 The Commission 

received three comment letters on the 

proposed rule change.4 On May 12, 

2009 and May 18, 2009, the MSRB filed 

responses to the comment letters.5 This 

order approves the proposed rule 

change. 

The proposed rule change would: (i) 

Establish EMMA’s permanent primary 

market disclosure service for electronic 

submission and public availability on 

EMMA’s Internet portal of official 

statements, advance refunding 

documents and related primary market 

documents and information; (ii) 

establish EMMA’s permanent 

transparency service making municipal 

securities transaction price data 

publicly available on the EMMA portal; 

(iii) establish a real-time subscription to 

the primary market document 

collection; (iv) terminate the existing 

pilot EMMA facility of the Municipal 

Securities Information Library (MSIL) 

system and suspend submissions of 

official statements, advance refunding 

documents and Forms G–36(OS) and G– 

36(ARD) to the MSIL system and (v) 

amend and consolidate current Rules G– 

32 and G–36 into new Rule G–32 on 

disclosures in connection with primary 

offerings, replace current Forms G– 

36(OS) and G–36(ARD) with new Form 

G–32, provide transitional submission 

requirements, and amend certain related 

recordkeeping requirements, to establish 

an ‘‘access equals delivery’’ standard for 

electronic official statement 

dissemination in the municipal 

securities market. 

The MSRB requested approval of this 

proposed rule change, along with 

MSRB–2009–03 and MSRB–2009–04, by 

no later than May 22, 2009, so that the 

MSRB may commence operation of the 

EMMA services described therein, 

including but not limited to the 

permanent primary market disclosure 

service and pilot continuing disclosure 

service, on June 1, 2009.6 A full 

description of the proposal is contained 

in the Commission’s Notice.7

As previously noted, the Commission 

received three comment letters relating 

to the proposed rule change.8 One 

commenter, the ABA, expressed 

concerns regarding certain legal issues 

relating to the protection of its 

intellectual property and contractual 

rights in the CUSIP database (the 

‘‘Database’’) that it states have not yet 

been resolved. The ABA noted that it 

was the owner of the Database, which is 

administered by the CUSIP Service 

Bureau (‘‘CSB’’), as its exclusive 

licensee, and believed it was critical 

that these legal issues be resolved before 

the MSRB be allowed to move forward 

with the proposed expansion and full 

implementation of EMMA. It further 

requested that the operation of the 

EMMA Web site incorporate a variety of 

protections with respect to its 

intellectual property rights, including 

compliance with CSB’s current 

licensing practices, permissible use 

guidelines, appropriate copyright 

notices and adequate security.9

In response to the ABA’s concerns, 

the MSRB and the CSB, as the ABA’s 

exclusive licensee, have entered into a 

memorandum of understanding dated 

May 15, 2009 (‘‘MOU’’) in which CSB 

expressly permits use of the CUSIP 

database for purposes, among other 

things, of displaying information on the 

MSRB’s EMMA public Web portal and 

for inclusion in data disseminated by 

the MSRB to subscribers of the EMMA 

data feed.10 The MSRB has agreed in the 

MOU to provide certain safeguards with 

respect to the ABA’s intellectual 

property and contractual rights of the 

ABA in the Database. The Commission 

believes that the MSRB has taken 

sufficient action to ensure that all 

necessary arrangements will be in place 

in order to operate the permanent 

primary market disclosure service and 

pilot continuing disclosure service, as 

anticipated by the implementation date. 

Another commenter, BFS, believed 

that the adoption of an ‘‘access equals 

delivery’’ standard for official 

statements would unintentionally result 

in less viewing of information by 

individual investors and suggested 

alternatives to obtaining industry 

efficiencies without reducing the 

number of investors that view 

information contained in official 

statements.11 BFS cited to internal 

statistics generated in connection with 

the Commission’s adoption of rules on 

Internet availability of proxy materials 

in support of its view.12 BFS also cited 

to the Commission’s recently adopted 

rules on delivery of summary mutual 

fund prospectuses and posting of the 

statutory prospectuses on the Internet as 

an alternative method of providing 

disclosure to investors while realizing 

cost savings.13

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Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Notices 25791 

14See Response Letter I, supra note 5. 

15See letter from SIFMA, supra note 4. 

16See Response Letter I, supra note 5. 

The MSRB disagreed with BFS’s 

comparison of on-line access to proxy 

materials with on-line access to official 

statements and, in Response Letter I, 

pointed out the differences between the 

two materials.14 Specifically, the MSRB 

argued that: proxy statements are posted 

in a highly decentralized manner, 

whereas official statements are available 

on the centralized EMMA Web site 

specifically crafted for their 

presentation; proxy statements often are 

posted without any additional 

meaningful contextual information, 

whereas official statements are posted 

on EMMA along with transaction prices, 

rate/yield information and other 

relevant disclosures for the security 

being purchased and for all other 

securities in the marketplace, together 

with educational information to assist 

the individual investor in 

understanding the information in the 

official statement; proxy statements are 

unsolicited communications to a large 

group of investors triggered by company 

action (i.e., the investor is passive), 

whereas the MSRB’s official statement 

dissemination requirement is triggered 

by an investor taking action to purchase 

a municipal security; proxy statements 

typically relate to matters of a 

generalized importance relating to a 

company and normally do not relate 

directly to an investment, whereas 

official statements have direct relevance 

to the investor’s investment; proxy 

statements are intended to provide 

information prior to an investor voting 

his or her proxy, whereas official 

statements (much like prospectuses) 

often serve to disclose the detailed 

terms of a security after the investment 

decision has already been made; and 

proxy statements generally have little 

value once the vote occurs, whereas 

official statements retain significant 

value for the remaining life of the 

security and would remain available to 

all investors throughout that period in 

EMMA’s permanent library. 

Furthermore, the MSRB believed that 

BFS seemed to place too much 

emphasis on cost savings as a reason for 

approving the proposed rule change. 

While acknowledging the sizeable cost 

saving associated with adoption of the 

proposal, the MSRB stated that it 

submitted the proposal primarily 

because of the significant improvements 

in the municipal securities disclosure 

system that would result from it. 

Specifically, the MSRB believed that the 

proposal would place individual 

investors on an equal footing with 

investment professionals with respect to 

access to key information and allow 

such information to flow into the 

marketplace more quickly. 

In addition, in response to BFS’s 

suggestion of the summary mutual fund 

prospectus as a possible alternative, the 

MSRB stated that it will monitor the 

level of adoption of the summary 

prospectus in the mutual fund market, 

as well as the impact its use may have 

on the quality and timeliness of 

disclosure for mutual funds. Noting that 

it has no authority over the nature, 

content or timing of issuer disclosures 

in the municipal securities market and 

therefore could not adopt a requirement 

for the creation and use of summary 

official statements by municipal issuers, 

the MSRB believed that the experience 

in the mutual fund market with 

summary prospectuses could be 

instructive in crafting future disclosure 

initiatives in the municipal securities 

market. The Commission believes that 

the MSRB has provided a rational 

response to counter BFS’s belief that an 

‘‘access equals delivery’’ standard for 

official statements would reduce 

viewing by individual investors of the 

information, and agrees with the MSRB 

that the proposal would make 

information easily available to all 

market participants in the municipal 

securities market. 

Finally, the third commenter, SIFMA, 

was very supportive of the EMMA 

system, but expressed concern with 

certain operational and timing issues.15

Specifically, SIFMA requested that the 

proposed rule change conform to the 

rules applicable to the registered 

securities market by not requiring 

broker dealers to accommodate a 

customer’s standing request for copies 

of official statements for all of his or her 

transactions with the dealer. SIFMA 

argued that such an accommodation 

would require dealers to undertake an 

enormous amount of expense for such a 

limited number of retail investors and 

that the costs of such changes would 

interfere with the ability of issuers and 

other market participants to achieve 

anticipated cost savings. 

In response, the MSRB stated it was 

important to allow investors to establish 

standing instructions with their dealers 

to receive paper copies of official 

statements for all of their new issue 

purchases and not to obligate them to 

make transaction by transaction requests 

for paper copies.16 Although the 

potential for costs savings was an 

important factor in the MSRB’s 

proposal, the MSRB again indicated that 

such a factor does not trump the needs 

of individual investors to obtain the 

disclosures they are due. The MSRB 

also stated that revised Rule G–32 

would not obligate dealers to rely on 

access to electronic official statements 

on EMMA, and that those dealers who 

are not yet prepared to do so upon 

launch of the new rule provisions could 

continue to meet their official statement 

dissemination obligation through actual 

delivery of the official statement to 

customers as under current Rule G–32. 

Therefore, the MSRB did not believe 

any change was merited. 

SIFMA also urged the MSRB to permit 

an underwriter to designate to the 

MSRB that information it has submitted 

to the new issue information 

dissemination system (‘‘NIIDS’’) under 

revised Rule G–34 also be used for 

purposes of completing new Form G–32. 

SIFMA requested that the MSRB make 

a firm commitment to take the outbound 

information feed from NIIDS to pre-fill 

the G–32 forms beginning no later than 

90 days after SEC approval of the rule 

change proposal. 

In response, the MSRB stated that, as 

noted in its proposed rule change, it 

will continue working toward 

permitting dealers to designate to the 

MSRB that information they have 

submitted to NIIDS under Rule G–34 

should also be used for purposes of 

completing new Form G–32. The MSRB 

will publish a notice advising dealers of 

the availability of such functionality 

once it becomes available, but that it 

was not prepared at this time to commit 

to a specific timeframe for making this 

functionality available and that 

approval of the proposed rule change 

should not be contingent on such a 

commitment. 

Finally, SIFMA requested that the 

MSRB provide dealers at least 30 

calendar days’ notice prior to 

implementing the proposed rule change, 

citing various factors regarding holiday 

and vacation schedules and lack of 

training and usage materials. In 

response, the MSRB stated that it will 

announce training sessions for use of 

the EMMA submission system and 

publish its user manual in the near 

future, and will have staff available to 

assist users in transitioning to the new 

submission process. The MSRB also 

indicated that, while it could not 

commit to providing the length of notice 

requested, it would provide notification 

of the operational date as soon as it 

becomes available. The Commission 

believes that the MSRB has reasonably 

addressed the operational and timing 

concerns raised by SIFMA, and that the 

changes suggested by SIFMA are not 

warranted at this time. 

The Commission has carefully 

considered the proposed rule change, 

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25792 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Notices 

17 15 U.S.C. 78o-4(b)(2)(C). 

18 Id. In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition 

and capital formation. 15 U.S.C. 78c(f). 

19 15 U.S.C. 78s(b)(2). 

20 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. 59696 

(April 2, 2009), 74 FR 16020 (‘‘Notice’’). 

4See Securities Exchange Act Release No. 56145 

(July 26, 2007), 72 FR 42169 (August 1, 2007), as 

amended by Securities Exchange Act Release No. 

56145A (May 30, 2008), 73 FR 32377 (June 6, 2008) 

(File No. SR–NASD–2007–023) (‘‘Consolidation 

Approval Order’’). 

5See supra note 3. 

the comment letters received, and the 

MSRB’s responses to the comment 

letters and finds that the proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

the MSRB and, in particular, the 

requirements of Section 15B(b)(2)(C) of 

the Act 17 and the rules and regulations 

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

Act requires, among other things, that 

the MSRB’s rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

municipal securities, to remove 

impediments to and perfect the 

mechanism of a free and open market in 

municipal securities, and, in general, to 

protect investors and the public 

interest.18

In particular, the Commission finds 

that the proposed rule change is 

consistent with the Act because it 

would serve as an additional 

mechanism by which the MSRB works 

toward removing impediments to and 

helping to perfect the mechanisms of a 

free and open market in municipal 

securities by providing a centralized 

venue for free public access to primary 

market disclosure documents and 

transaction price information for the 

municipal securities market through 

EMMA. The proposed rule change 

would provide greater access to primary 

market disclosure documents and 

transaction price information about 

municipal securities information to all 

participants in the municipal securities 

market on an equal basis, thereby 

removing potential barriers to obtaining 

such information, and will allow the 

municipal securities industry to 

produce more accurate trade reporting 

and transparency. Broad access to 

primary market disclosure documents 

and price transparency information 

through the EMMA portal should also 

assist in preventing fraudulent and 

manipulative acts and practices by 

improving the opportunity for public 

investors to access material information 

about issuers, their securities and the 

prices at which such securities trade. 

Furthermore, free public access to 

disclosure and transaction price 

information should promote a more fair 

and efficient municipal securities 

market in which transactions are 

effected on the basis of material 

information available to all parties to 

such transactions, and thereby allow for 

fairer pricing of transactions. In 

addition, the electronic dissemination of 

primary market disclosure documents 

should enable issuers to reduce their 

issuance costs by eliminating the need 

to print and to distribute in paper 

official statements in connection with 

their primary offerings, thereby 

resulting in lower costs to issuers and 

savings to their citizens, lower expenses 

for underwriters, and potentially lower 

prices for investors. All of these factors 

serve to promote the statutory mandate 

of the MSRB to protect investors and the 

public interest. 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–MSRB–2009– 

02), be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–12442 Filed 5–28–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59962; File No. SR–FINRA– 

2009–020] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving 

Proposed Rule Change Relating to the 

FINRA Regulation Board Composition 

and Conforming Changes to the FINRA 

Regulation By-Laws 

May 21, 2009. 

I. Introduction 

On March 27, 2009, Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) (f/k/a National Association 

of Securities Dealers, Inc. (‘‘NASD’’)) 

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 amend the By-Laws of FINRA 

Regulation, Inc. (‘‘FINRA Regulation’’) 

to modify the composition of the board 

of directors of FINRA Regulation 

(‘‘FINRA Regulation Board’’), to adopt 

changes to conform the FINRA 

Regulation By-Laws to the FINRA ByLaws, and to make various nonsubstantive or conforming changes. The 

proposed rule change was published for 

comment in the Federal Register on 

April 8, 2009.3 The Commission 

received no comments on the proposal. 

This order approves the proposed rule 

change. 

II. Description of the Proposal 

On July 30, 2007, NASD and New 

York Stock Exchange Regulation, Inc. 

(‘‘NYSE Regulation’’), the regulatory 

subsidiary of the New York Stock 

Exchange, consolidated their member 

firm regulation operations into a 

combined organization, FINRA. As part 

of the consolidation, the Commission 

approved amendments to the NASD ByLaws to implement governance and 

related changes.4 The approved changes 

included a FINRA Board governance 

structure that balanced public and 

industry representation. FINRA 

Regulation (formerly known as NASD 

Regulation, Inc. (‘‘NASD Regulation’’)) 

is a subsidiary of FINRA that operates 

according to the Plan of Allocation and 

Delegation of Functions by NASD to 

Subsidiaries, as amended, which NASD 

adopted in 1996 when it formed NASD 

Regulation. FINRA Regulation’s ByLaws were not amended at the time of 

the consolidation, other than in a few 

sections where those By-Laws conflicted 

with the new FINRA By-Laws. 

The proposed rule change would 

modify the FINRA Regulation By-Laws 

to parallel more closely the composition 

and governance structure of the FINRA 

board of directors (‘‘FINRA Board’’). In 

addition, the proposed rule change 

would modify the FINRA Regulation 

By-Laws to reflect current business and 

legal practices concerning the 

administration and capital stock of 

FINRA Regulation. Furthermore, the 

proposed rule change would make nonsubstantive or conforming changes, 

including updating the FINRA 

Regulation By-Laws to reflect the 

corporate name change. A more detailed 

description of the proposed rule change 

is provided in the Notice.5 The 

Commission discusses below the most 

significant aspects of the proposed 

changes to the FINRA Regulation ByLaws. 

mstockstill on PROD1PC66 with NOTICES