Document ID: SEC-2016-1503-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2016-08-26T04:00Z

[Federal Register Volume 81, Number 166 (Friday, August 26, 2016)]
[Notices]
[Pages 58989-58992]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20452]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78622; File No. SR-MSRB-2016-11]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Delay the Due Date for Certain Submissions Under Rule G-45 
and Provide Guidance on the Application of Rules G-42 and G-44 to 
Municipal Advisors to Sponsors or Trustees of Municipal Fund Securities

August 22, 2016.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on August 12, 2016 the Municipal Securities 
Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities 
and Exchange Commission (the ``Commission'' or ``SEC'') the proposed 
rule change as described in Items I and II 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 filed with the Commission a proposed rule change to delay 
by two years, until August 29, 2018, the date on which submissions must 
be made pursuant to Rule G-45, on reporting of information on municipal 
fund securities, by underwriters of programs established to implement 
the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 
(the ``ABLE Act''

[[Page 58990]]

and an ``ABLE program'').\3\ The submissions on Form G-45 from such 
underwriters currently are due August 29, 2016. However, the current 
due dates under Rule G-45 for submissions from underwriters of other 
types of municipal fund securities, namely tax-advantaged college 
savings plans established under section 529 of the Internal Revenue 
Code of 1986, as amended (the ``Code'') (a ``529 college savings 
plan''),\4\ would remain unchanged.
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    \3\ The ABLE Act was enacted on December 19, 2014 as part of The 
Tax Increase Prevention Act of 2014 (Pub. L. 113-295).
    \4\ 26 U.S.C. 529(b)(1)(A)(ii).
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    In addition, the proposed rule change would provide guidance under 
(i) Rule G-42, on duties of non-solicitor municipal advisors, that such 
rule applies to municipal advisors that engage in municipal advisory 
activities for sponsors or trustees of ABLE programs and (ii) Rule G-
44, on supervisory and compliance obligations of municipal advisors, 
that such rule equally applies to municipal advisors that engage in 
municipal advisory activities for sponsors or trustees of 529 college 
savings plans, ABLE programs, and other municipal fund securities (the 
amendment to Rule G-45 and guidance under Rules G-42 and G-44, 
collectively the ``proposed rule change''). The MSRB proposes an 
immediate effectiveness for 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/2016-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.

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

1. Purpose
    The MSRB proposes to delay by two years, until August 29, 2018, the 
date the submissions are due under Rule G-45 on Form G-45 from 
underwriters to ABLE programs. In addition, the MSRB proposes to 
provide guidance under (i) Rule G-42, that such rule applies to 
municipal advisors that engage in municipal advisory activities for 
sponsors or trustees of ABLE programs and (ii) Rule G-44, that such 
rule equally applies to municipal advisors that engage in municipal 
advisory activities for sponsors or trustees of 529 college savings 
plans, ABLE programs, and other municipal fund securities.
    The ABLE Act added section 529A to the Code to permit a state, or 
an agency or instrumentality thereof, to establish and maintain a new 
type of tax-advantaged savings program to help support individuals with 
disabilities in maintaining health, independence, and quality of life. 
Section 529A was modeled on section 529 of the Code.\5\ Section 529 of 
the Code, in part, established 529 college savings plans to encourage 
saving for future higher education costs.\6\ The SEC has determined 
that interests offered by such 529 college savings plans are municipal 
securities under section 3(a)(29) of the Act.\7\
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    \5\ Report to accompany H.R. 647, Committee on Ways and Means, 
H.R. Rept. No. 113-614, part 1 at 7 (2014).
    \6\ Section 529 also established prepaid tuition plans. 26 
U.S.C. 529(b)(1)(A)(i). Under a prepaid tuition plan, an investor 
may purchase tuition credits or certificates on behalf of a 
designated beneficiary, which entitle the beneficiary to the waiver 
or payment of qualified higher education expenses. Prepaid tuition 
plans generally have residency requirements. Such credits or 
certificates generally are not viewed as being municipal securities, 
and dealers generally do not participate in the marketing of prepaid 
tuition plans.
    \7\ Exchange Act Release No. 70462 (Sept. 20, 2013), 78 FR 
67468, 67472-73 (Nov. 12, 2013). See Letter from Catherine McGuire, 
Chief Counsel, Division of Market Regulation, SEC, to Diane G. 
Klinke, General Counsel, MSRB (Feb. 26, 1999) (determining that at 
least some interests in higher education trusts are municipal 
securities under the Act).
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    Given the similarities between the structure of ABLE accounts and 
529 college savings plan accounts and the manner in which interests in 
those accounts will be distributed, the MSRB requested interpretive 
guidance from the SEC staff. Specifically, the MSRB requested guidance 
on:
    (i) Whether interests in an ABLE account offered through an ABLE 
program are ``municipal securities,'' as defined in Section 3(a)(29) of 
the Exchange Act, and
    (ii) whether a dealer participating in the sale of those interests 
would be participating in a ``primary offering'' and thus be subject to 
the requirements of Rule 15c2-12 under the Exchange Act.
    In response to the first request, the SEC staff stated that: \8\
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    \8\ Letter dated March 31, 2016 from Jessica S. Kane, Director, 
Office of Municipal Securities, SEC, to Robert A. Fippinger, Esq., 
Chief Legal Officer, MSRB, in response to letter dated December 31, 
2015 from Robert A. Fippinger to Jessica S. Kane available at 
https://www.sec.gov/info/municipal/msrb-letter-033116-interests-in-able-accounts.pdf [footnote omitted].

at least some interests in ABLE accounts . . . may be ``municipal 
securities'' as defined in Section 3(a)(29) of the Exchange Act, 
depending on the facts and circumstances, including without 
limitation, the extent to which an ABLE account through an ABLE 
Program is a direct obligation of, or obligation guaranteed as to 
principal or interest by, a State or any agency or instrumentality 
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thereof.

With respect to the second request, the SEC staff stated: \9\
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    \9\ Id.

[W]e note that Rule 15c2-12(f)(7) under the Exchange Act defines a 
``primary offering'' as including an offering of municipal 
securities directly or indirectly by or on behalf of an issuer of 
such securities. Based upon your letter and communications with MSRB 
staff, it is our understanding that interests in ABLE Programs 
generally are offered only by direct purchase from the issuer. 
Accordingly, we would view those interests as having been sold in a 
``primary offering'' as that term is defined in Rule 15c2-12. If a 
dealer is acting as an ``underwriter'' (as defined in Rule 15c2-
12(f)(8)) in connection with that primary offering, the dealer may 
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be subject to the requirements of Rule 15c2-12.

In April 2016, after the Board had received the SEC staff guidance, the 
Board provided interpretative guidance under MSRB Rule D-12, on the 
definition of ``municipal fund security.'' \10\
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    \10\ MSRB Regulatory Notice 2016-14 (Apr. 12, 2016) (the ``April 
guidance'').
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    The April guidance provided that interests in ABLE accounts may be 
municipal fund securities, and that to the extent that dealers effect 
transactions in municipal fund securities, such dealers may be subject 
to all Board rules, unless those dealers are specifically exempted from 
any of those rules. The April guidance also anticipated that the Board 
would publish guidance to address particular issues, including Rule G-
45, applicable to the sale of interests in ABLE programs by 
dealers.\11\ The proposed rule change is the first of such guidance

[[Page 58991]]

to address particular issues related to the sale of interests in ABLE 
programs by dealers and related to municipal advisory activities 
provided by municipal advisors to sponsors or trustees of ABLE 
programs.
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    \11\ Id.
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    Specifically, as ABLE programs become operational, the proposed 
rule change would delay, by two years from August 29, 2016 until August 
29, 2018, the date that submissions are due under Rule G-45 from 
underwriters to ABLE programs. The MSRB believes that the delay would 
help ensure that the MSRB receives reliable, complete and accurate 
filings on Form G-45 from such underwriters. The MSRB also believes 
that the delay would help ensure that the MSRB receives more meaningful 
data about a larger set of ABLE programs on Form G-45. However, the 
current deadlines under Rule G-45 for submissions from underwriters of 
529 college savings plans would remain unchanged.
    Further, the proposed rule change would provide guidance in 
supplementary material under (i) Rule G-42, that such rule applies to 
municipal advisors that engage in municipal advisory activities for 
sponsors or trustees of ABLE programs and (ii) Rule G-44, that such 
rule equally applies to municipal advisors that engage in municipal 
advisory activities for sponsors or trustees of 529 college savings 
plans, ABLE programs, and other municipal fund securities. The proposed 
guidance would provide clarity about the applicability of such rules to 
municipal advisors that engage in municipal advisory activities for 
sponsors or trustees of municipal fund securities. The MSRB is 
proposing this guidance in response to requests from industry groups in 
other Board rulemaking proposals.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
section 15B(b)(2)(C) of the Act,\12\ which provides that the MSRB's 
rules shall:
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    \12\ 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, 
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municipal entities, obligated persons, and the public interest.

    As ABLE programs become operational, the proposed rule change would 
provide underwriters to ABLE programs with additional time to submit 
reliable, accurate and complete data to the MSRB under Rule G-45. The 
proposed rule change also would provide the MSRB with more meaningful 
data about a larger set of ABLE programs under Rule G-45. Further, the 
proposed rule change would provide guidance about the applicability of 
(i) Rule G-42 to municipal advisors that engage in municipal advisory 
activities for sponsors or trustees of ABLE programs and (ii) Rule G-44 
to municipal advisors that engage in municipal advisory activities for 
sponsors or trustees of 529 college savings plans, ABLE programs, and 
other municipal fund securities. The proposed guidance would provide 
clarity about the applicability of such rules to municipal advisors 
that engage in municipal advisory activities for sponsors or trustees 
of municipal fund securities.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act \13\ requires that MSRB rules be 
designed not to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The MSRB does 
not believe that the proposed rule change would impose any burden on 
competition not necessary or appropriate in furtherance of the Act. The 
proposed rule change would extend the date that submissions on Form G-
45 are due from underwriters to ABLE programs by two years from August 
29, 2016 until August 29, 2018. The proposed rule change also would 
provide guidance about the applicability of (i) Rule G-42 to municipal 
advisors that engage in municipal advisory activities for sponsors or 
trustees of ABLE programs and (ii) Rule G-44 to municipal advisors that 
engage in municipal advisory activities for sponsors or trustees of 529 
college savings plans, ABLE programs, and other municipal fund 
securities.
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    \13\ Id.
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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

    Pursuant to section 19(b)(3)(A) \14\ of the Act and Rule 19b-
4(f)(6) \15\ thereunder, the MSRB has designated the proposed rule 
change as one that affects a change that does not: (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate. A proposed rule change filed under Rule 
19b-4(f)(6) normally does not become operative until 30 days after the 
date of filing.\16\ However, Rule 19b-4(f)(6)(iii) permits the 
Commission to designate a shorter time if consistent with the 
protection of investors and the public interest.\17\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ Id.
    \17\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file a proposed rule change, along with a brief 
description and text of such proposed rule change, at least five 
business days prior to the date of filing, or such shorter time as 
designated by the Commission. The MSRB fulfilled this obligation.
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    The MSRB has requested that the Commission waive the 30-day 
operative delay specified in Rule 19b-4(f)(6)(iii).\18\ The deadline 
for underwriters to ABLE programs to submit data under Rule G-45 for 
the period ending June 30, 2016 is August 29, 2016. According to the 
MSRB, the waiver of the 30-day operative delay will provide certainty 
with respect to the due date for underwriters to make submissions on 
Form G-45 in connection with ABLE programs. In order to delay such 
submissions, the MSRB states that it is important that the proposed 
rule change become effective immediately. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest as it will provide certainty as to 
the due date for submissions on Form G-45 and avoid confusion in the 
market. Accordingly, the Commission hereby waives the 30-day operative 
delay specified in Rule 19b-4(f)(6)(iii) and designates the proposed 
rule change to be operative upon filing.\19\
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    \18\ See SR-MSRB-2016-11 (filed with the Commission on August 
12, 2016).
    \19\ For the purpose of waiving the 30-day operative delay for 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the

[[Page 58992]]

Commission summarily may temporarily suspend 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.

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-2016-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2016-11. 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-2016-11 and should be 
submitted on or before September 16, 2016.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, pursuant to delegated authority.\20\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20452 Filed 8-25-16; 8:45 am]
 BILLING CODE 8011-01-P