Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Notices 37079 

20 15 U.S.C. 78s(b)(2). 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(i). 

4 17 CFR 240.19b–4(f)(1). 

among other things, strike a fair balance 

between providing notice to associated 

persons of changes to their U4 where 

obtaining a signature may prove 

difficult and allowing firms to 

expeditiously update information. In 

addition, the Commission believes that 

it is appropriate for FINRA to make 

explicit in its rules a member’s 

obligation to ensure that information in 

Form U4 regarding its associated 

persons is accurate, even though this 

requirement is explicit in FINRA’s ByLaws. Ensuring that information in Web 

CRD is current and accurate enhances 

the usefulness of Web CRD. 

The Commission believes that FINRA, 

in its Response Letter, adequately 

addressed the comments raised in the 

Schwab Letter. The Commission 

emphasizes that FINRA correctly noted 

that both firms and associated persons 

have a duty to keep information in Web 

CRD current, and both are responsible 

for ensuring that disclosure information 

is accurate; this proposal merely 

codifies this obligation. The 

Commission also agrees with FINRA 

that firms should try to ensure the 

accuracy and completeness of 

information submitted. This purpose 

should be served by the rule requiring 

a firm to use reasonable efforts to 

provide the associated person with a 

copy of the amended disclosure 

information post-filing, since the firm 

should have contact information for the 

associated person, whom it is 

responsible for regulating, and the 

associated person can ensure that the 

amended information is accurate. 

For the reasons discussed above, the 

Commission finds that the rule change 

is consistent with the Act and the rules 

and regulations thereunder. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,20 that the 

proposed rule change (SR–FINRA– 

2009–019), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17764 Filed 7–24–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60359; File No. SR–MSRB– 

2009–08] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Guidance on 

Disclosure and Other Sales Practice 

Obligations to Individual and Other 

Retail Investors in Municipal Securities 

July 21, 2009. 

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 July 14, 

2009, the Municipal Securities 

Rulemaking Board (‘‘MSRB’’), filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been substantially prepared by the 

MSRB. The MSRB has designated the 

proposed rule change as constituting a 

stated policy, practice, or interpretation 

with respect to the meaning, 

administration, or enforcement of an 

existing rule of the self-regulatory 

organization pursuant to Section 

19(b)(3)(A)(i) of the Act,3 and Rule 19b– 

4(f)(1) thereunder,4 which renders the 

proposal effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The MSRB has filed with the 

Commission a proposed rule change 

consisting of interpretive guidance on 

disclosure and other sales practice 

obligations of brokers, dealers and 

municipal securities dealers (‘‘dealers’’) 

relating to sales of municipal securities 

to individual and other retail investors. 

The text of the proposed rule change is 

available on the MSRB’s Web site 

(http://www.msrb.org), at the MSRB’s 

principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

MSRB included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. The MSRB has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The proposed rule change provides 

guidance to brokers, dealers and 

municipal securities dealers (‘‘dealers’’) 

of their sales practice obligations under 

MSRB rules as applied specifically to 

individual and other retail investors. 

Among other things, the proposed rule 

change updates guidance to dealers on 

(i) their obligations to disclose material 

information about issuers, their 

securities and credit/liquidity support 

for such securities in connection with 

the fulfillment of their disclosure 

obligations under MSRB Rule G–17, (ii) 

their obligations to use such material 

information in fulfilling their suitability 

obligations under MSRB Rule G–19, and 

(iii) their fair pricing obligations under 

MSRB Rules G–18 and G–30. The 

proposed rule change also applies 

previous guidance on bond insurance 

rating downgrades and wide-scale 

auction failures for municipal auction 

rate securities (‘‘ARS’’), to municipal 

securities transactions in general and 

specifically to transactions with 

individual and other retail investors in 

variable rate demand obligations 

(‘‘VRDOs’’). 

Disclosure 

The proposed rule change makes clear 

that dealers are responsible under Rule 

G–17 for disclosing to their customers, 

at or prior to the time of trade for any 

municipal securities transaction, all 

material information about the 

transaction known by the dealer, as well 

as material information about the 

security that is reasonably accessible to 

the market, including information 

available from established industry 

sources. Dealers must provide such 

disclosures notwithstanding the 

availability to investors of 

comprehensive information from the 

MSRB’s Electronic Municipal Market 

Access system (EMMA) and other 

established industry sources. Dealers are 

expected to establish procedures 

reasonably designed to ensure that 

information known to the dealer is 

communicated internally or otherwise 


jlentini on DSKJ8SOYB1PROD with NOTICES
37080 Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Notices 

made available to relevant personnel in 

a manner reasonably designed to ensure 

compliance with this disclosure 

obligation. 

The proposed rule change provides 

that, in general, information is 

considered ‘‘material’’ if there is a 

substantial likelihood that its disclosure 

would have been considered important 

or significant by a reasonable investor. 

The duty to disclose material 

information to a customer in a 

municipal securities transaction 

includes the duty to give a complete 

description of the security, including a 

description of the features that likely 

would be considered significant by a 

reasonable investor and facts that are 

material to assessing the potential risks 

of the investment. For VRDOs, ARS or 

other securities for which interest 

payments may fluctuate, such material 

facts would include a description of the 

basis on which periodic interest rate 

resets are determined. 

The proposed rule change provides 

that the following information will 

generally be material information 

required to be disclosed to investors in 

credit/liquidity enhanced securities, 

including but not limited to VRDOs, if 

known to the dealer or if reasonably 

available from established industry 

sources: (i) The credit rating of the issue 

or lack thereof; (ii) the underlying credit 

rating or lack thereof, (iii) the identity 

of any credit enhancer or liquidity 

provider; and (iv) the credit rating of the 

credit provider and liquidity provider, 

including potential rating actions (e.g., 

downgrade). Additionally, material 

terms of the credit facility or liquidity 

facility should be disclosed (e.g., any 

circumstances under which a standby 

bond purchase agreement (‘‘SBPA’’) 

would terminate without a mandatory 

tender). If the remarketing agent for a 

VRDO has customarily or from time-totime taken tendered bonds into 

inventory to make it unnecessary to 

draw on the liquidity facility for 

unremarketed bonds (thereby in effect 

providing liquidity support), the fact 

that the remarketing agent is not 

contractually obligated to maintain such 

practice will generally be material 

information required to be disclosed to 

customers to which VRDOs are sold. 

This list is not exhaustive. Other 

information may also be material to 

investors in credit/liquidity enhanced 

securities. 

The proposed rule change reminds 

dealers that they are not relieved of their 

suitability obligations under MSRB Rule 

G–19 or their fair pricing obligations to 

their customers under MSRB Rules G– 

18 and G–30 simply by disclosing 

material information to the customer. 

The information known by a dealer in 

connection with a municipal security, 

together with the information available 

from established industry sources, 

generally should inform the dealer, to 

the extent applicable, in undertaking the 

necessary analyses and determinations 

needed to meet these other customer 

protection obligations. 

Suitability 

Under the proposed rule change, 

dealers are obligated to make a 

suitability determination arising under 

Rule G–19 in connection with a 

recommended transaction. This requires 

a meaningful analysis, taking into 

consideration the information obtained 

about the investor and the security, 

which establishes the reasonable 

grounds for believing that the 

recommendation is suitable. Such 

suitability determinations are required 

regardless of the apparent safety of a 

particular security or issuer or the 

apparent wealth or sophistication of a 

particular investor. Suitability 

determinations should be based on the 

appropriately weighted factors that are 

relevant in any particular set of facts 

and circumstances, and those factors 

may vary from transaction to 

transaction. Factors to be considered 

include, but are not limited to, the 

investor’s financial profile, tax status, 

investment objectives (including 

portfolio concentration/diversification), 

and the specific characteristics and risks 

of the municipal security recommended 

to the investor. 

In the proposed rule change, the 

MSRB notes that Section (c) of Exchange 

Act Rule 15c2–12 provides that it is 

impermissible for a dealer to 

recommend the purchase or sale of a 

municipal security unless the dealer has 

procedures in place that provide 

reasonable assurance that it will receive 

prompt notice of the specified material 

events that are subject to the continuing 

disclosure obligations of the rule. A 

dealer would be expected to have 

reviewed any applicable continuing 

disclosures made available through 

EMMA or other established industry 

sources and to have taken such 

disclosures into account in undertaking 

its suitability determination. 

The proposed rule change provides 

guidance specifically with regard to 

credit-enhanced securities. Facts 

relating to the credit rating of the credit 

enhancer may affect suitability 

determinations, particularly for 

investors who have conveyed to the 

dealer investment objectives relating to 

credit quality of investments. In the case 

of recommended VRDOs or any other 

securities that are viewed as providing 

significant liquidity to investors, a 

dealer must consider both the liquidity 

characteristics of the security and the 

investor’s need for a liquid investment 

when making a suitability 

determination. Facts relating to the 

short-term credit rating, if any, of a 

letter of credit or SBPA provider, or of 

any other third-party liquidity facility 

provider, generally would affect 

suitability determinations in such 

securities. To the extent that an investor 

seeks to invest in VRDOs due to their 

liquidity characteristics, a suitability 

analysis also generally would require a 

dealer, in recommending a VRDO to an 

individual investor, to consider 

carefully the circumstances, if any, 

under which the liquidity feature may 

no longer be effectively available to the 

customer. 

With respect to new products 

introduced into the municipal securities 

market, the proposed rule change 

reminds dealers that they must review 

the relevant disclosure documents to 

become familiar with the specific 

characteristics of the product, including 

the tax features, prior to recommending 

such products to their customers. 

Pricing 

The proposed rule change provides 

that, as a general matter, in addition to 

information about prices of transactions 

effected by dealers and other market 

participants in a particular municipal 

security, material information about a 

security available through EMMA or 

other established industry sources may 

also be among the relevant factors that 

the dealer should consider in 

connection with ensuring fair pricing of 

its transactions with investors. Among 

other things, dealers would be expected 

to have reviewed any applicable 

continuing disclosures made available 

through EMMA or other established 

industry sources and to have taken such 

disclosures into account in determining 

a fair and reasonable transaction price. 

In addition, dealers should consider the 

effect of ratings on the value of the 

securities involved in customer 

transactions, and should specifically 

consider the effect of information from 

rating agencies, both with respect to 

actual or potential changes in the 

underlying rating of a security and with 

respect to actual or potential changes in 

the rating of any third-party credit 

enhancement applicable to the security. 

Dealers are reminded that an issuer’s 

use of a retail order period based on a 

perception that the retail order period 

will improve pricing of the new issue 

for the issuer does not create a safe 

harbor for dealers to engage in pricing 

that violates the fair pricing obligation 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 142 / Monday, July 27, 2009 / Notices 37081 

5 15 U.S.C. 78o–4(b)(2)(C). 

6 15 U.S.C. 78s(b)(3)(A)(i). 

7 17 CFR 240.19b–4(f)(1). 

8See Section 19(b)(3)(C) of the Act, 15 U.S.C. 

78s(b)(3)(C). 9 17 CFR 200.30–3(a)(12). 

under Rule G–30. Large differences 

between institutional and individual 

prices that exceed the price/yield 

variance that normally applies to 

transactions of different sizes in the 

primary market provide evidence that 

the duty of fair pricing to individual 

clients may not have been met. 

2. Statutory Basis 

The MSRB has adopted the proposed 

rule change pursuant to Section 

15B(b)(2)(C) of the Act,5 which provides 

that the MSRB’s rules shall: 

Be designed to prevent fraudulent and 

manipulative acts and practices, to promote 

just and equitable principles of trade, to 

foster cooperation and coordination with 

persons engaged in regulating, clearing, 

settling, processing information with respect 

to, and facilitating transactions in municipal 

securities, 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. 

The MSRB believes that the proposed 

rule change is consistent with the Act 

because it will further investor 

protection by strengthening and 

clarifying dealers’ customer protection 

obligations relating to sales of municipal 

securities to individual and other retail 

customers, including but not limited to 

the duty to provide material information 

to customers investing in municipal 

securities and to use material 

information in fulfilling their suitability 

obligations and their fair pricing 

obligations. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The MSRB does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended, 

since it would apply equally to all 

dealers. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

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 

The proposed rule change has become 

effective pursuant to Section 

19(b)(3)(A)(i) of the Act 6 and Rule 19b– 

4(f)(1) thereunder,7 in that the proposed 

rule change constitutes a stated policy, 

practice, or interpretation with respect 

to the meaning, administration, or 

enforcement of an existing rule of the 

self-regulatory organization. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

may summarily abrogate such rule 

change if it appears to the Commission 

that such action is necessary or 

appropriate in the public interest, for 

the protection of investors, or otherwise 

in furtherance of the purposes of the 

Act.8

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–MSRB–2009–08 on the 

subject line. 

Paper Comments 

• 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–2009–08. 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 inspection and copying 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 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–2009–08 and should 

be submitted on or before August 17, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–17820 Filed 7–24–09; 8:45 am] 

BILLING CODE 8010–01–P 

SOCIAL SECURITY ADMINISTRATION 

Agency Information Collection 

Activities: Proposed Request and 

Comment Request 

The Social Security Administration 

(SSA) publishes a list of information 

collection packages requiring clearance 

by the Office of Management and 

Budget (OMB) in compliance with 

Public Law (Pub. L.) 104–13, the 

Paperwork Reduction Act of 1995, 

effective October 1, 1995. This notice 

includes revisions and extensions of 

OMB-approved information collections 

and a new collection. 

SSA is soliciting comments on the 

accuracy of the agency’s burden 

estimate; the need for the information; 

its practical utility; ways to enhance its 

quality, utility, and clarity; and ways to 

minimize the burden on respondents, 

including the use of automated 

collection techniques or other forms of 

information technology. Mail, email, or 

fax your comments and 

recommendations on the information 

collection(s) to the OMB Desk Officer 

and the SSA Director for Reports 

Clearance to the addresses or fax 

numbers shown below. 

(OMB), Office of Management and 

Budget, Attn: Desk Officer for SSA, 

Fax: 202–395–6974, E-mail address: 

OIRA_Submission@omb.eop.gov. 

(SSA), Social Security Administration, 

DCBFM, Attn: Director, Center for 

Reports Clearance, 1333 Annex 

Building, 6401 Security Blvd., 

Baltimore, MD 21235, Fax: 410–965– 

0454. E-mail address: 

OPLM.RCO@ssa.gov 

I. The information collection below is 

pending at SSA. SSA will submit it to 


jlentini on DSKJ8SOYB1PROD with NOTICES