Document ID: SEC-2010-1773-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2010-11-18T05:00Z

[Federal Register: November 18, 2010 (Volume 75, Number 222)]
[Notices]               
[Page 70756-70757]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no10-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63309; File No. SR-MSRB-2010-16]

 
Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Amendments to Rule G-5, on Disciplinary 
Actions by Appropriate Regulatory Agencies, Remedial Notices by 
Registered Securities Associations; and Rule G-17, on Conduct of 
Municipal Securities Activities

November 12, 2010.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``the Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 1, 2010, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the MSRB. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing a proposed rule change consisting of amendments 
to Rule G-5, on disciplinary actions by appropriate regulatory 
agencies, and Rule G-17, the Board's basic fair practice rule, to apply 
the rules to municipal advisors. The text of the proposed rule change 
is available on the MSRB's Web site at http://www.msrb.org/Rules-and-
Interpretations/SEC-Filings/2010-Filings.aspx, 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 Board has prepared summaries, set forth in Section 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Rule G-5 currently provides that brokers, dealers, and municipal 
securities dealers (``dealers'') may not engage in municipal securities 
activities in contravention of restrictions imposed on them by the 
Commission, a registered securities association, or another appropriate 
regulatory agency. The purposes of the portion of the proposed rule 
change consisting of amendments to Rule G-5 are to remove a reference 
to an outdated NASD rule and to provide that municipal advisors and 
their associated persons may not engage in the municipal advisory 
activities described in Section 15B(e)(4)(A)(i) and (ii) of the Act in 
contravention of restrictions imposed upon them by the Commission.
    Rule G-17 currently provides that, in the conduct of its municipal 
securities activities, each dealer shall deal fairly with all persons 
and shall not engage in any deceptive, dishonest, or unfair practice. 
The purpose of the portion of the proposed rule change consisting of 
amendments to Rule G-17 is to apply the MSRB's core fair dealing rule 
to municipal advisors in the same manner that it currently applies to 
dealers.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2) of the Act, which provides that:

The Board shall propose and adopt rules to effect the purposes of 
this 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, and municipal advisors.

    Section 15B(b)(2)(C) of the Act provides that the rules of the MSRB 
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 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, and, in general, to protect investors, 
municipal entities, obligated persons, and the public interest.

    The proposed rule change is consistent with Section 15B(b)(2) of 
the Act, because it provides that: (i) Municipal advisors shall deal 
fairly with all persons and not engage in any deceptive, dishonest, or 
unfair practice and (ii) municipal advisors and their associated 
persons shall not conduct the activities described in Section 
15B(e)(4)(A)(i) and (ii) of the Act in contravention of restrictions 
imposed upon them by the Commission.
    Section 15B(2)(L) of the Act requires that rules adopted by the 
Board

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, 
provided that there is robust protection of investors against fraud.

    The proposed rule change is necessary for the robust protection of 
investors against fraud. Many municipal advisors play a key role in the 
structuring of offerings of municipal securities and the preparation of 
offering documents used to market those securities to investors. In 
some cases, they advise on the appropriateness of derivatives entered 
into by municipal issuers, the effectiveness of which may have a 
substantial impact on the finances of those issuers. In other cases, 
they solicit public pension fund investment advisory business that, if 
not conducted according to the highest standards, may have a 
substantial effect on the finances of the State and local governments 
that control those funds. Investors, therefore, have a substantial 
interest in municipal advisors conducting their municipal advisory 
activities fairly, not engaging in fraudulent conduct, and not engaging 
in municipal advisory activities contrary to

[[Page 70757]]

disciplinary actions imposed by the SEC.

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 not necessary or appropriate in furtherance 
of the purposes of the Act, since it would apply equally to all 
municipal advisors. In particular, the MSRB believes that the 
amendments to Rule G-5 impose no regulatory burden on any municipal 
advisor because Section 15B(c) of the Act already permits the SEC to 
limit the activities of municipal advisors in the manner provided for 
in amended Rule G-5. Further, the MSRB believes that the amendment to 
Rule G-17 imposes no regulatory burden on any municipal advisor not 
necessary or appropriate in furtherance of the purposes of the Act 
since most municipal advisors already comport themselves in accordance 
with the standards of behavior required by Rule G-17 and no municipal 
advisor has a legitimate interest in engaging in behavior that is 
fraudulent or otherwise unfair.

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

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

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2010-16 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-2010-16. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies 
of the submission, all subsequent amendments, all written statements 
with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street, NE., Washington, 
DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of such filing also will be available for inspection and 
copying at the MSRB's offices. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-MSRB-2010-16 and should be submitted on or before 
December 9, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-29077 Filed 11-17-10; 8:45 am]
BILLING CODE 8011-01-P