Document ID: SEC-2014-0294-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2014-02-19T05:00Z

[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9558-9563]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03566]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71536; File No. SR-MSRB-2014-01]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change Consisting of 
Proposed Revisions to MSRB Rule G-30, on Prices and Commissions and the 
Deletion of Rule G-18, on Execution of Transactions

February 12, 2014.
    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 January 29, 2014, the Municipal Securities Rulemaking Board 
(the ``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (the ``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 with the Commission a proposed rule change 
consisting of proposed revisions to MSRB Rule G-30, on prices and 
commissions and the deletion of Rule G-18, on execution of transactions 
(the ``proposed rule change'').
    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2014-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 MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

[[Page 9559]]

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

1. Purpose
Summary of Proposed Rule Change
    The purpose of the proposed rule change is to codify the substance 
of existing fair-pricing obligations of brokers, dealers, and municipal 
securities dealers (collectively, ``dealers'') and further streamline 
the MSRB's Rule Book. Fair-pricing provisions are currently organized 
in two separate rules, Rules G-18 and G-30, with interpretive guidance 
under Rule G-30 as well as under a third rule, Rule G-17, on fair 
dealing. We note that market participants support the objective of 
consolidating and codifying the existing substance of these rules and 
interpretive guidance.
    To achieve this objective, the MSRB is proposing to consolidate 
Rules G-18 and G-30 into a single fair-pricing rule, and to consolidate 
the existing interpretive guidance under Rules G-17 and G-30 and codify 
that guidance in the same rule. Existing Rule G-18 provides a pricing 
standard for agency transactions, while existing Rule G-30(a) provides 
a pricing standard for principal transactions, with both rules using 
different formulations to reflect differences between the two types of 
trades. As a practical matter, the investor-protection function of the 
two provisions does not differ, and it is appropriate to organize these 
standards in a single rule, as proposed. In addition, the MSRB has 
issued extensive interpretive guidance under MSRB Rules G-17 and G-30 
discussing fair pricing in general, as well as in specific scenarios. 
The proposed rule change would consolidate the substance of this 
guidance \3\ and codify it into rule language.\4\ The MSRB will archive 
this interpretive guidance, current as of January 1, 2013, on its Web 
site. To the extent that past interpretive guidance does not conflict 
with any MSRB rules or interpretations thereof, it remains potentially 
applicable, depending on the facts and circumstances of a particular 
case.
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    \3\ The formal fair-pricing guidance under current Rule G-30 
that is to be codified was not filed with the Commission, and is as 
follows: Review of Dealer Pricing Responsibilities (Jan. 26, 2004) 
(``2004 Notice''); Interpretive Notice on Commissions and Other 
Charges, Advertisements and Official Statements Relating to 
Municipal Fund Securities (Dec. 19, 2001); Republication of 
September 1980, Report on Pricing (Oct. 3, 1984); Interpretive 
Notice on Pricing of Callable Securities (Aug. 10, 1979); 
Interpretive Letter--Rules G-21, G-30 and G-32 (Dec. 11, 2001); and 
Factors in pricing (Nov. 29, 1993). The formal fair-pricing guidance 
under Rule G-17 that is to be codified that was not filed with the 
Commission is as follows: Guidance on Disclosure and Other Sales 
Practice Obligations to Individual and Other Retail Investors in 
Municipal Securities (Jul. 14, 2009); MSRB Reminds Firms of their 
Sales Practice and Due Diligence Obligations When Selling Municipal 
Securities in the Secondary Market (Sept. 20, 2010); and Bond 
Insurance Ratings--Application of MSRB Rules (Jan. 22, 2008). The 
formal guidance under Rule G-17 that is to be codified that was 
filed with the Commission is contained in Restated Interpretive 
Notice Regarding the Application of MSRB Rules to Transactions with 
Sophisticated Municipal Market Professionals (Jul. 9, 2012).
    \4\ The MSRB is separately proposing to consolidate its 
interpretive guidance under Rule G-17 related to time of trade 
disclosures, suitability of recommendations, and dealings with 
sophisticated municipal market professionals (``SMMPs'') and to 
codify that guidance into several rules: A new time of trade 
disclosure rule (proposed Rule G-47), a revised suitability rule 
(Rule G-19), and two new SMMP rules (proposed Rules D-15 and G-48). 
See Securities Exchange Act Release No. 70593 (Oct. 1, 2013), 78 FR 
62867 (Oct. 22, 2013), File No. SR-MSRB-2013-07.
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    The MSRB believes the new fair-pricing rule will significantly 
enhance regulated entities' ability to understand and comply with their 
fair-pricing obligations by organizing them together in a single 
location. Further, the relevant information from the existing 
interpretive guidance will be succinctly stated in the new rule. The 
MSRB believes this could be particularly beneficial for new municipal 
market entrants, which would be in a position to focus, with respect to 
fair-pricing obligations, on the new, consolidated rule. In sum, the 
MSRB believes that the proposed rule change will ease burdens on 
dealers and reduce costs by clarifying dealer obligations.
    The structure of proposed Rule G-30 (rule language followed by 
supplementary material) is the same structure used by FINRA and other 
self-regulatory organizations (``SROs''). The MSRB intends generally to 
transition to this structure for all of its rules going forward in 
order to streamline the rules, harmonize the format with that of other 
SROs, and make the rules easier for dealers and municipal advisors to 
understand and follow.
    Following is a summary of the provisions and the supplementary 
material comprising proposed Rule G-30:
Rule Language
    Proposed revised Rule G-30(a) applies to principal transactions and 
states that a dealer can only purchase municipal securities for its own 
account from a customer, or sell municipal securities for its own 
account to a customer, at an aggregate price (including any mark-up or 
mark-down) that is fair and reasonable.\5\
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    \5\ Proposed revised Rule G-30(a) is substantially similar to 
the first clause of existing Rule G-30(a).
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    Proposed revised Rule G-30(b) applies to agency transactions. 
Subsection (i) states that when a dealer executes a transaction in 
municipal securities for or on behalf of a customer, the dealer must 
make a reasonable effort to obtain a price for the customer that is 
fair and reasonable in relation to prevailing market conditions. 
Subsection (ii) states a dealer cannot purchase or sell municipal 
securities for a customer for a commission or service charge in excess 
of a fair and reasonable amount.\6\
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    \6\ Subsection (i) of proposed Rule G-30(b) is derived from 
current Rule G-18. Subsection (ii) is derived from the first clause 
of existing Rule G-30(b).
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Supplementary Material
    Supplementary Material .01 specifies five general principles 
concerning the fair-pricing requirements: (a) That a dealer, whether 
effecting a trade on an agency or principal basis, must exercise 
diligence in establishing the market value of the security and the 
reasonableness of the compensation received on the transaction; (b) 
that a dealer effecting an agency transaction must exercise the same 
level of care as it would if acting for its own account; (c) that a 
``fair and reasonable'' price bears a reasonable relationship to the 
prevailing market price of the security; (d) that dealer compensation 
on a principal transaction is considered to be a mark-up or mark-down 
that is computed from the inter-dealer market price prevailing at the 
time of the customer transaction; \7\ and (e) that reasonable 
compensation differs from fair pricing.\8\
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    \7\ This language was added to address comments the MSRB 
received in response to its August 6, 2013 request for comment on a 
draft of the proposed rule change.
    \8\ Supplementary Material .01 is derived from the 2004 Notice.
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    Supplementary Material .02 provides a non-exhaustive list of 
relevant factors in determining the fairness and reasonableness of 
prices.\9\
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    \9\ Supplementary Material .02(a) is derived from the 2004 
Notice. Supplementary Material .02(b) is derived from Rule G-30(a), 
the 2004 Notice, the MSRB Interpretive Letter--Rules G-21, G-30 and 
G-32 (Dec. 11, 2001), the MSRB Interpretive Letter--Factors in 
Pricing (Nov. 29, 1993), the Republication of September 1980, Report 
on Pricing (Oct. 3, 1984); and the Interpretive Notice on Pricing of 
Callable Securities (Aug. 10, 1979).
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    Supplementary Material .03 provides a non-exhaustive list of 
relevant factors in determining the fairness and reasonableness of 
commissions or

[[Page 9560]]

service charges.\10\ The proposed rule change makes it easier for 
market participants to find these relevant factors.
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    \10\ Supplementary Material .03 is derived from existing Rule G-
30(b), the 2004 Notice and Republication of September 1980, Report 
on Pricing (Oct. 3, 1984). Supplementary Material .03(a)(viii) 
refers to Rule 2830 of the National Association of Securities 
Dealers, Inc. (``NASD''), which provides a sales charge schedule for 
registered investment company securities, and remains in effect in 
the Financial Industry Regulatory Authority, Inc. rulebook. The MSRB 
recognizes that, due to the limitations of Section 15B(b)(2)(C) of 
the Act, it could not, by rule or interpretation, ``impose any 
schedule or fix rates of commissions, allowances, discounts, or 
other fees to be charged'' by dealers for the sale of municipal fund 
securities. The MSRB believes, however, that the charges permitted 
by FINRA under NASD Rule 2830 may, depending upon the totality of 
the facts and circumstances, be a significant factor in determining 
whether a dealer selling municipal fund securities is charging a 
commission or other fee that is fair and reasonable.
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    Supplementary Material .04 discusses the application of fair-
pricing requirements to some of the situations that may create large 
intra-day price differentials.\11\
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    \11\ Supplementary Material .04 is derived from the 2004 Notice.
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    Finally, Supplementary Material .05 discusses the general duty 
under proposed revised Rule G-30(b)(i) of dealers operating alternative 
trading systems to act to investigate any alleged pricing 
irregularities on their systems brought to their attention, which duty 
applies equally to transactions effected for SMMPs.\12\
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    \12\ Supplementary Material .05 is derived from interpretive 
guidance that was previously filed with the Commission and which is 
separately proposed to be generally codified in Rule G-48 based on 
its relevance to SMMPs. See Restated Interpretive Notice Regarding 
the Application of MSRB Rules to Transactions with Sophisticated 
Municipal Market Professionals (Jul. 9, 2012).
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act,\13\ which provides that the MSRB's 
rules shall
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    \13\ 15 U.S.C. 78o-4(b)(2)(c).

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 preserves the substance of the current 
requirement that dealers must exercise diligence in establishing the 
market value of a security and the reasonableness of the compensation 
received on a transaction. This requirement protects investors and is 
central to the role of a dealer in facilitating municipal securities 
transactions. At the same time, the MSRB believes the proposed rule 
change will remove impediments to and perfect the mechanism of a free 
and open market. The MSRB believes it will ease burdens on dealers and 
reduce costs by clarifying dealer obligations. Most commenters agree 
and believe that the proposed rule change would promote regulatory 
efficiency. For example, one commenter supports the adoption of the 
proposed rule and believes it will ease the burden on firms and market 
participants seeking to comply with the rule.\14\ Two commenters 
commend the MSRB's effort to promote regulatory efficiency through its 
proposed consolidation of Rules G-18 and G-30 and codification of 
related interpretive guidance.\15\ Another commenter supports the 
MSRB's efforts to promote regulatory efficiency and is generally 
supportive of this rule consolidation which preserves the substance of 
existing fair-pricing requirements.\16\
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    \14\ See letter from David T. Bellaire, Esq., Executive Vice 
President and General Counsel, Financial Services Institute 
(``FSI''), dated September 20, 2013.
    \15\ See letter from Robert J. McCarthy, Director of Regulatory 
Policy, Wells Fargo Advisors, LLC (``WFA''), dated September 20, 
2013 and letter from Gerald K. Mayfield, Senior Counsel, Wells Fargo 
& Company Law Department, Wells Fargo Securities, dated September 
20, 2013.
    \16\ See letter from David L. Cohen, Managing Director and 
Associate General Counsel, Securities Industry and Financial Markets 
Association (``SIFMA''), dated September 20, 2013.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.\17\ The proposed 
rule change consolidates existing Rules G-18 and G-30 and codifies 
current interpretive guidance reasonably and fairly implied by those 
rules or Rule G-17. The proposed rule change makes no substantive 
change and, therefore, does not add any burden on competition. The MSRB 
believes, as discussed above, that the proposed rule change will, by 
contrast, ease burdens on dealers and reduce costs by clarifying dealer 
obligations. As noted, most commenters agree and believe that the 
proposed rule change would promote regulatory efficiency.
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    \17\ On September 26, 2013 the MSRB publicly announced its 
adoption of a formal policy to further integrate the use of economic 
analysis in MSRB rulemaking. By its terms, the policy does not apply 
to rulemaking initiatives, like the proposed rule change, that were 
initially presented to the MSRB Board of Directors before September 
26, 2013. The MSRB has, however, historically taken account of the 
costs and burdens of its rulemaking initiatives, including those 
associated with the proposed rule change. Significantly, the 
proposed rule change would make no substantive change to existing 
requirements.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    On August 6, 2013, the MSRB published a request for public comment 
on a draft of the proposed rule change.\18\ The MSRB received five 
comment letters.\19\
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    \18\ See MSRB Notice 2013-15 (Aug. 6, 2013).
    \19\ Comment letters were received from: (1) FSI, (2) the 
Investment Company Institute (``ICI''), (3) SIFMA, (4) WFA, and (5) 
Wells Fargo Securities. Wells Fargo Securities' sole comment is that 
it strongly supports the comments specified in WFA's letter and that 
it urges the MSRB to strongly consider WFA's comments.
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    Following are summaries of the comment letters:
 Support for the Proposal
    Comments: Four of the five commenters generally support the MSRB's 
initiative to consolidate and codify the fair-pricing requirements. FSI 
supports the adoption of the proposed rule and believes it will ease 
the burden on firms and market participants seeking to comply with the 
rule. WFA and Wells Fargo Securities commend the MSRB's effort to 
promote regulatory efficiency through its proposed consolidation of 
Rules G-18 and G-30 and codification of related interpretive guidance. 
SIFMA supports the MSRB's efforts to promote regulatory efficiency and 
is generally supportive of this rule consolidation which preserves the 
substance of existing fair-pricing requirements.
    MSRB Response: The MSRB believes these comments support the MSRB's 
statement on the burden on competition.
 Application to Municipal Fund Securities
    Comment: ICI requests that, for the sake of clarity, the MSRB 
expressly limit the scope of the rule to municipal securities other 
than municipal fund securities that are 529 college savings plans. ICI 
believes that there are significant differences in the pricing and 
execution of transactions in municipal fund securities as compared with 
those involving other types of municipal securities. If, instead, the 
MSRB intends for the rule to apply to transactions involving municipal 
fund securities, ICI recommends that the MSRB clarify the

[[Page 9561]]

rule's meaning in the context of municipal fund securities.
    MSRB Response: The MSRB intends for the proposed rule to apply to 
transactions involving municipal fund securities. Unless an MSRB rule 
specifically exempts municipal fund securities, the proposed rule 
applies to municipal fund securities. The MSRB believes no further 
clarification regarding the proposed rule's application to municipal 
fund securities is necessary. An investor that invests in a broker-sold 
529 college savings plan may pay a fee provided to the dealer that 
represents the dealer's commission and any other charge. The proposed 
rule includes a non-exhaustive list of potentially relevant factors in 
determining the fairness and reasonableness of commissions and service 
charges, and the last listed factor in subsection (viii) pertains 
expressly to 529 plans.
 The Proposed Rule Should Be Revised To Include Additional 
Existing Guidance
    Comments: SIFMA and WFA request that the proposed rule include a 
description of the relationship between mark-up, current inter-dealer 
market prices, and compensation in order to avoid confusion.
    MSRB Response: The MSRB agrees that the requested addition would 
further clarify the proposed rule and has added language drawn from its 
existing guidance to address the commenters' concern. The added 
language is in Supplementary Material .01(d).
    Comments: SIFMA requests that all factors discussed in existing 
MSRB guidance be detailed in Supplementary Material .02, including 
improved market conditions and trading history. WFA requests that the 
rule include all factors discussed in existing MSRB guidance.
    MSRB Response: The MSRB does not believe that all factors discussed 
in existing MSRB guidance need be or should be specified in the 
streamlined, proposed rule. First, the MSRB believes that the factor 
specified in Supplementary Material .02(a) of the proposed rule 
sufficiently encapsulates the concept of ``improved market 
conditions.'' Second, like the factors specified in the existing 
guidance, the factors specified in the proposed rule are not 
exhaustive. The MSRB chose to include the factors that are listed in 
the non-exhaustive list based on its experience administering and 
interpreting Rules G-18 and G-30.
 The Proposed Rule Should Be Revised To Include New Guidance
    Comment: SIFMA requests that the MSRB expressly recognize in 
commentary to the final rule that underlying ratings may not yet be 
updated by the relevant rating agency to reflect material events 
affecting an issuer or insurer and that dealers are neither under an 
obligation to determine pricing based on ratings believed to be 
inaccurate nor are they required to forecast ratings changes that have 
not yet occurred.
    MSRB Response: The MSRB disagrees with this request at this time. 
The objective of this rulemaking initiative is to codify, not 
substantively change, the existing fair-pricing requirements.\20\ This 
request goes beyond the scope of this rulemaking initiative, and the 
MSRB can consider this request as part of any consideration of 
substantive changes at a later date.
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    \20\ See MSRB Notice 2013-15 (Aug. 6, 2013) (proposing to 
consolidate existing Rules G-18 and G-30 and ``codify existing 
guidance regarding fair pricing''); id. (stating the proposed rule 
``preserves the substance of the existing fair-pricing 
requirements'').
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    Comment: SIFMA believes the meaning of the term ``service charge'' 
should be clarified in the proposed rule.
    MSRB Response: The MSRB disagrees with this request at this time. 
The objective of this rulemaking initiative is to codify, not 
substantively change, the existing fair-pricing requirements. This 
request goes beyond the scope of this rulemaking initiative, and the 
MSRB can consider this request as part of any consideration of 
substantive changes at a later date.
    Comment: SIFMA requests that Supplementary Material .03, which 
lists factors that may affect the fairness and reasonableness of a 
commission or service charge, include the following factor: ``the 
presence of uniform commission arrangements disclosed to customers in 
advance of transacting that are considered by the dealer to be fair and 
reasonable.'' SIFMA states that this factor should be included because 
the proposed rule should ``acknowledge a common industry practice of 
having a standard pricing policy, for example, a uniform price per 
bond, rather than having charges vary based on the aforementioned 
factors.''
    MSRB Response: The MSRB disagrees with this request at this time. 
The objective of this rulemaking initiative is to codify, not 
substantively change, the existing fair-pricing requirements. This 
request, seeking incorporation in the rule of what the commenter states 
is a common industry practice, goes beyond the scope of this rulemaking 
initiative, and the MSRB can consider this request as part of any 
consideration of substantive changes at a later date.
    Comment: SIFMA states that MSRB staff has long provided informal 
guidance that, if a dealer cannot determine the fair market value of a 
municipal security after reasonable diligence and its customer needs to 
sell the securities, the dealer may effect the trade as an agency 
trade. SIFMA requests that the MSRB incorporate that informal staff 
guidance in this rule proposal.
    MSRB Response: The MSRB disagrees with this request. The purpose of 
the proposed rule change is to codify existing formal MSRB guidance, 
not informal staff guidance. Thus, this request goes beyond the scope 
of this rulemaking initiative, and the MSRB can consider this request 
as part of any consideration of substantive changes at a later date. We 
note, in addition and without comment on the merits of any particular 
informal guidance, that because the proposed rule change makes no 
substantive change, the potential for any informal staff guidance to be 
provided that was previously provided would likewise be unchanged.
    Comment: WFA suggests that certain content in the proposed rule's 
Supplementary Material .04, on Fair-Pricing Responsibilities and Large 
Price Differentials, should be organized in its own supplementary 
section. WFA believes the guidance concerning dealer duties when 
transacting in illiquid municipal securities does not belong in section 
.04 because the fact that a municipal bond is illiquid does not, by 
itself, suggest there will be a large intra- day price differential.
    MSRB Response: Supplementary Material .04 (Fair-Pricing 
Responsibilities and Large Price Differentials) is derived from Review 
of Dealer Pricing Responsibilities (January 26, 2004), which is 
interpretive guidance under Rule G-30. The guidance referenced by WFA 
appears under an identical heading in the existing interpretive notice 
(Fair-Pricing Responsibilities and Large Price Differentials). This 
organization does not suggest a view on the part of the MSRB that 
illiquidity alone suggests there will be a large price differential. 
Indeed, Supplementary Material .04 states that the price differential 
for illiquid issues ``might generally'' be larger.
 Cross-Reference to Rule G-48
    Comment: SIFMA believes a dealer's fair-pricing requirements, in 
certain agency transactions, are significantly

[[Page 9562]]

affected by the status of a customer as a sophisticated municipal 
market professional (``SMMP'') and acknowledges that the substance of 
this reduced obligation may soon be codified in proposed Rule G-48.\21\ 
SIFMA requests that the proposed rule, at a minimum, cross reference 
proposed Rule G-48. SIFMA believes a cross-reference will further 
assist dealers and other market participants who seek to understand, 
comply with, and enforce fair-pricing requirements.
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    \21\ See Securities Exchange Act Release No. 70593 (Oct. 1, 
2013), 78 FR 62867 (Oct. 22, 2013), File No. SR-MSRB-2013-07.
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    MSRB Response: The MSRB disagrees with this request. Rule G-48, if 
approved, will expressly modify dealers' pricing obligations when 
dealing with SMMPS, and the MSRB does not believe a cross-reference to 
Rule G-48 is necessary.
 Reorganization of the Proposed Rule
    Comment: SIFMA requests that the factors under proposed 
Supplementary Material .02(b)(vii) relating to ratings and call 
features be separately listed rather than combined given that they are 
independent considerations.
    MSRB Response: The MSRB disagrees with this request. All of the 
factors included under Supplementary Material .02(b)(vii) relate 
directly to the subject category described--``the rating and call 
features of the security (including the possibility that a call feature 
may not be exercised).'' The MSRB believes the organization of the 
subsections is appropriate.
 Clarification Concerning Guidance That Is Not in the Proposed 
Rule
    Comment: SIFMA requests clarification from the MSRB as to why 
certain MSRB interpretive guidance concerning pricing in the primary 
market is missing from the proposed rule. SIFMA highlights as examples: 
Guidance on Disclosure and Other Sales Practice Obligations to 
Individual and Other Retail Investors in Municipal Securities (Jul. 14, 
2009); MSRB Interpretation of December 11, 2001 (differential re-
offering prices); MSRB Interpretation of March 16, 1984 (fixed- price 
offerings); and Interpretive Notice Concerning the Application of MSRB 
Rule G-17 to Underwriters of Municipal Securities (Aug. 2, 2012).
    MSRB Response: The MSRB believes that the substance of all of the 
interpretive guidance relating to fair-pricing under Rule G-17, which 
includes Guidance on Disclosure and Other Sales Practice Obligations to 
Individual and Other Retail Investors in Municipal Securities (Jul. 14, 
2009) and Interpretive Notice Concerning the Application of MSRB Rule 
G-17 to Underwriters of Municipal Securities (Aug. 2, 2012), is 
incorporated in the proposed rule, except for guidance that pertains to 
retail order periods. The rationale for this limited exception is that 
the MSRB is considering codifying guidance concerning retail order 
periods under a separate rule or rules that pertain specifically to 
primary offerings and retail order periods. The substance of the 
relevant guidance from the cited MSRB interpretive letter dated 
December 11, 2001 (differential re-offering prices), essentially that 
the resulting yield to the customer is the most important factor in 
determining the fairness and reasonableness of a price in any given 
transaction, is included in the proposed rule. The cited MSRB 
interpretive letter dated March 16, 1984, regarding fixed-price 
offerings does not contain any substantive guidance regarding fair 
pricing that would warrant codification. That letter addresses Rule G-
11, which is a disclosure rule. Although the letter contains a one-
sentence description of Rule G-30, that sentence does not contain any 
substantive interpretive guidance regarding fair pricing.
 Changes to Existing Fair-Pricing Requirements
    Comment: WFA believes that any move by the MSRB to revise its 
existing fair-pricing requirements should be accompanied by a 
demonstration that market conditions have changed in a manner that 
makes it necessary and appropriate to impose a different standard.
    MSRB Response: The proposed rule merely codifies the substance of 
existing requirements and does not impose any different standard. 
Although no substantive change is made here, we note that substantive 
changes can become necessary or appropriate for reasons other than 
changes in market conditions.

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 of up to 90 days (i) as 
the Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove 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 email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2014-01 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.

All submissions should refer to File Number SR-MSRB-2014-01. 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-2014-01 and should be 
submitted on or before March 12, 2014.

[[Page 9563]]

    For the Commission, pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03566 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P