Document ID: SEC-2011-0769-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2011-06-03T04:00Z

[Federal Register Volume 76, Number 107 (Friday, June 3, 2011)]
[Notices]
[Pages 32248-32255]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-13752]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64564; File No. SR-MSRB-2011-03]

 Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Amendment No. 1 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 1, to Amend Rule G-23, on Activities of Financial 
Advisors

May 27, 2011
    On February 9, 2011, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend MSRB Rule G-23, on 
activities of financial advisors. The Commission published the proposed 
rule change for comment in the Federal Register on February 28, 2011 
(the ``Commission Notice'').\3\ The Commission received eighteen 
comment letters.\4\ On May 27,

[[Page 32249]]

2011, the MSRB filed an amendment (``Amendment No. 1'') to the proposed 
rule change.\5\ The Commission is publishing this notice and order to 
solicit comments on Amendment No. 1 and to approve the proposed rule 
change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 63946 (February 22, 
2011), 76 FR 10926.
    \4\ See letter from F. John White, Chief Executive Officer, 
Public Financial Management, Inc., dated February 25, 2011 (``PFM 
Letter''); e-mail to Mary N. Simpkins, Senior Special Counsel, 
Commission, from Patricia Bowen, Vice President, Eastern Bank, dated 
March 2, 2011 (``Eastern Bank Letter''); letter from Robert W. Doty, 
President, American Governmental Financial Services, dated March 10, 
2011 (``AGFS Letter''); letter from Hill A. Feinberg, Chairman and 
CEO, First Southwest Company, dated March 16, 2011 (``First 
Southwest Letter''); letter from Carl Giles, dated March 16, 2011 
(``Giles Letter''); letter from Keith Kolb, Managing Director, 
Director of Baird Public Finance, Robert W. Baird & Co. 
Incorporated, dated March 18, 2011 (``Baird Letter''); letter from 
Joy A. Howard, Principal, WM Financial Strategies, dated March 18, 
2011 (``Joy Howard Letter''); letter from Christopher Hamel, Head of 
Municipal Finance, RBC Capital Markets, LLC, dated March 21, 2011 
(``RBC Letter''): letter from Nathan R. Howard, Municipal Advisor, 
WM Financial Strategies, dated March 21, 2011 (``Nathan Howard 
Letter''); letter from Mike Nicholas, Chief Executive Officer, Bond 
Dealers of America, dated March 21, 2011 (``BDA Letter''); e-mail 
from David A. Wagner, Senior Vice President and Financial Advisor, 
Ehlers Associates, Inc., dated March 21, 2011 (``Ehlers Letter''); 
letter from Colette J. Irwin-Knott, President, National Association 
of Independent Public Finance Advisors, dated March 21, 2011 
(``NAIPFA Letter''); letter from Steve Apfelbacher, President, 
Ehlers Associates, Inc., dated March 21, 2011 (``Apfelbacher 
Letter''): letter from Leslie M. Norwood, Managing Director and 
Associate General Counsel, The Securities Industry and Financial 
Markets Association, dated March 21, 2011 (``SIFMA Letter''); letter 
from Larry Kidwell, President, Kidwell & Company Inc., dated March 
21, 2011 (``Kidwell Letter''); e-mail from Robert J. Stracks, 
Counsel, BMO Capital Markets GKST Inc., dated March 22, 2011 (``BMO 
Letter''); letter from Susan Gaffney, Director, Federal Liaison 
Center, Government Finance Officers Association, dated March 21, 
2011 (``GFOA Letter''); letter from Thomas M. DeMars, Managing 
Principal, Fieldman, Rolapp & Associates, dated March 23, 2011 
(``Fieldman Letter'').
    \5\ Amendment No. 1 partially amends the text of the original 
proposed interpretive notice to: (i) Clarify that Rule G-23 is 
solely a conflicts rule; (ii) eliminate the rebuttable presumption 
that a dealer providing certain advice is a financial advisor; (iii) 
emphasize that Rule G-23(b) does not require a writing in order for 
a financial advisory relationship to exist; (iv) provide additional 
clarity as to when a dealer will be deemed to be ``acting as an 
underwriter'' and not as a financial advisor for purposes of Rule G-
23(b); and (v) provide guidance on certain activities (in addition 
to underwriting activities) in which a dealer may engage without 
violating Rule G-23(d).
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I. Description of Proposed Rule Change and Summary of Comments

    As described in the Commission Notice, the MSRB is proposing to 
amend its Rule G-23, on activities of financial advisors. Proposed Rule 
G-23 would, subject to limited exceptions, (i) prohibit a dealer 
financial advisor with respect to the issuance of municipal securities 
from acquiring all or any portion of such issue directly or indirectly, 
from the issuer as principal, or acting as agent for the issuer in 
arranging the placement of such issue, either alone or as a participant 
in a syndicate or other similar account formed for that purpose; (ii) 
apply the same prohibition to any dealer controlling, controlled by, or 
under common control with the dealer financial advisor; and (iii) 
prohibit a dealer financial advisor from acting as the remarketing 
agent for such issue. In addition, the proposed interpretive guidance, 
as amended, would provide guidance on when a dealer that renders advice 
would be considered to be ``acting as an underwriter'' rather than as a 
financial advisor for purposes of proposed Rule G-23.
    The proposed rule change resulted from a concern that a dealer 
financial advisor's ability to underwrite the same issue of municipal 
securities, on which it acted as financial advisor, presented a 
conflict that is too significant for the existing disclosure and 
consent provisions of Rule G-23 to cure. Even in the case of a 
competitive underwriting, the perception on the part of issuers and 
investors that such a conflict might exist was sufficient to cause 
concern that permitting such role switching was not consistent with ``a 
free and open market in municipal securities,'' which the Board is 
mandated to perfect.\6\ Of the eighteen comment letters received on the 
proposed rule change,\7\ eleven commenters expressed some support for 
the proposed rule change, including the general principle that prompted 
the proposed rule change, but these commenters also suggested certain 
changes to or exemptions from the proposed rule change.\8\ Seven 
commenters objected to all or part of the proposed rule change.\9\
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    \6\ See Commission Notice, supra note 3 at 10927.
    \7\ See supra note 4.
    \8\ See PFM Letter, AGFS Letter, First Southwest Letter, Joy 
Howard Letter, Nathan Howard Letter, Ehlers Letter, NAIPFA Letter, 
Apfelbacher Letter, Kidwell Letter, GFOA Letter and Fieldman Letter.
    \9\ See Eastern Bank Letter, Giles Letter, Baird Letter, RBC 
Letter, BDA Letter, SIFMA Letter and BMO Letter.
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    The MSRB's responses to comments and changes to the proposed rule 
change made by Amendment No. 1 are described below.

A. Scope of ``Acting as an Underwriter'' and Rule G-23(b)

    Several commenters stated that the proposed rule change would 
preserve the general confusion between the role of a financial advisor 
and the role of an underwriter and preserve historically abusive market 
practices.\10\ One commenter expressed concern that the exemption for 
underwriters under the proposed interpretive guidance is inconsistent 
with the underwriter exemption provided under the Dodd-Frank Act and 
the Commission's proposed rules,\11\ and would help underwriters evade 
fiduciary duties.\12\ Another commenter stated that the proposed rule 
change: (i) Undermines the will of the Exchange Act to adhere to clear 
lines between interests that are public and interests that are private; 
(ii) perpetuates a culture of conflict that the Exchange Act intended 
to eliminate; (iii) creates loopholes for bank/broker dealers to 
continue to serve in multiple roles and represent conflicting interests 
in transactions; (iv) avoids the intent of the Exchange Act to impose 
fiduciary duties on municipal advisors who are bank/broker dealers; (v) 
creates confusion and perplexity as opposed to clarity and precision as 
a baseline for interpretation of the rules; (vi) invites opportunity 
for continued abuses of municipal issuers; and (vii) conflicts with the 
stated mission of the MSRB to protect the interests of issuers, 
investors, and the public trust, and not those of the bank/broker 
dealer community.\13\
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    \10\ See Joy Howard Letter at 1-2. See also Kidwell Letter at 2-
3 and Nathan Howard Letter at 1. One commenter expressed the belief 
that the current financial crisis was caused in part by the acts of 
financial advisors who engaged in conflicts of interest that were 
either undisclosed, or disclosed and misunderstood, by debt issuers, 
borrowers, and investors. See id. at 2.
    \11\ See Exchange Act Release No. 63576 (December 20, 2010), 76 
FR 824 (January 6, 2011) (``Municipal Advisor Registration Proposing 
Release'').
    \12\ See PFM Letter at 2-4.
    \13\ See Kidwell Letter at 4. This commenter stated that state 
and local governments and their instrumentalities should be held to 
a different and higher standard than individuals or corporations 
because the risk associated with loss due to a conflict of interest 
is of public monies, where the officials responsible for the 
allowance of the conflict bear no personal financial responsibility 
in association with such actions. See id. at 3.
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    Another commenter stated that it has asked the MSRB, on various 
occasions, to consider whether it is appropriate for a broker-dealer to 
provide the kind of advice that financial advisors typically 
provide.\14\ This commenter stated that the MSRB has failed to 
recognize the distinction between providing advice and acting as an 
underwriter, and objected to the exemption from the definition of 
municipal advisor for underwriters that render ``advice to an issuer, 
including advice with respect to the structure, timing, terms and other 
similar matters concerning the issuance of municipal securities.''\15\
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    \14\ See NAIPFA Letter at 1.
    \15\ Id. at 2.
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    Other commenters expressed concern that the lack of distinction 
between the ``advice'' provided by municipal advisors and the 
``advice'' provided by underwriters will reduce market transparency and 
the distinction between the roles, and as such will confuse market 
participants, including small infrequent municipal issuers.\16\ 
Specifically, one commenter stated that because the proposed rule 
change uses the term ``advice'' to describe both the actions of 
financial advisors and underwriters, market participants will be 
confused as to the type of services that may be provided.\17\ This 
commenter suggested using the term ``recommendation or guidance'' in 
the context of municipal advisors, and the term ``information'' in the 
context of underwriters.\18\
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    \16\ See Joy Howard Letter at 8 and Nathan Howard Letter at 1.
    \17\ See Nathan Howard Letter at 1.
    \18\ See id. at 1-4.
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    Several commenters suggested enhanced disclosure by dealers who act 
as underwriters. According to one commenter, with regard to negotiated 
sales, dealers, in their course of engagement as underwriters, 
typically provide input regarding matters related to the structure, 
timing, and terms of the

[[Page 32250]]

bonds.\19\ The commenter stated its belief that this input should not 
be substituted for advice the issuer receives from a financial 
advisor.\20\ This commenter also suggested that when the issuer is 
represented by a financial advisor, this underwriter input should not 
be seen as violating the intent of Rule G-23.\21\ However, when the 
issuer is not so represented, such input provided by the underwriter 
becomes the issuer's sole source of financial advice, and this may 
cause the underwriter to be the de facto financial advisor to the 
issuer.\22\ The commenter suggested that the latter relationship should 
be prohibited by Rule G-23.\23\ As such, this commenter suggested that 
the proposed interpretive guidance should at least require the 
underwriter to disclose that it is not serving as the issuer's 
financial advisor, and has no fiduciary obligation to act in the best 
interest of the issuer.\24\ This commenter further stated that 
``[i]ssuers need to clearly understand that their underwriter is not 
their financial advisor and that they are not discouraged from hiring a 
financial advisor because of a loophole in the proposed Guidance that 
suggests the underwriter can perform both roles.'' \25\
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    \19\ See GFOA Letter at 2.
    \20\ See id.
    \21\ See id..
    \22\ See id.
    \23\ See id.
    \24\ See id.
    \25\ Id.
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    Another commenter stated that if the Commission adopts the 
expansive view of what constitutes ``acting as an underwriter'' as 
proposed by the MSRB, the underwriters acting as financial advisors 
should be required to decide the role they wish to play before they 
talk with the issuer and affirmatively disclose the conflicts inherent 
in their underwriting role to the issuer, if that is the role they 
decide to pursue.\26\ Further, this commenter stated that any contract 
that the underwriter had for acting as an advisor for an issuer must be 
terminated when the firm is hired or seeks to be hired as an 
underwriter to the issuer, or in any other role that is inconsistent 
with the role of a fiduciary.\27\ Another commenter stated that a firm 
should disclose in writing, prior to beginning any work for a municipal 
issuer, whether it will be working as a broker-dealer or as a municipal 
advisor so as to allow a municipality to make an informed decision to 
use a broker-dealer instead of a municipal advisor.\28\
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    \26\ See NAIPFA Letter at 7-8. This commenter also noted the 
extensive affirmative disclosure obligations the MSRB is seeking to 
impose on municipal advisors, and the lack of similar disclosure 
required of dealers. See id. As such, this commenter suggested that 
dealers providing advice should be required to do more than merely 
state that they are acting as an underwriter to avoid being deemed a 
financial advisor. See id. at 8. Rather, the commenter suggested 
that disclosure similar to that proposed for municipal advisors 
should be required for underwriters. See id.
    \27\ See NAIPFA Letter at 8.
    \28\ See Ehlers Letter.
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    Another commenter generally expressed support for the proposed rule 
change and the proposed interpretive guidance.\29\ With respect to the 
proposed interpretive guidance, the commenter pointed out that it is 
possible that a dealer may make representations or engage in conduct at 
the outset of a relationship that leads a municipal entity to believe 
that the dealer, even though labeled as ``underwriter,'' is providing 
advice in the municipal entity's best interests.\30\ Moreover, the 
commenter stated that the ``advice'' offered to a municipal entity may 
have other functions than being offered in an issuer's best 
interests.\31\ Further, this commenter pointed out that even if a 
direct explicit representation is not made, there are a variety of 
methods to lead a municipal entity to believe that an underwriter's 
advice places the entity's interests first.\32\ In addition, this 
commenter expressed skepticism that merely informing an issuer that a 
dealer will be an underwriter is sufficient to ``whitewash the dealer's 
advice to the issuer'' because many issuers do not know the difference 
between an underwriter and a financial advisor.\33\ As such, this 
commenter suggested that the dealer be required to inform the issuer 
that the advice is not offered in a fiduciary capacity, with an 
explanation of what that means.\34\ Lastly, this commenter suggested 
that dealers serving as underwriters should engage in discussions with 
issuers underscoring the non-fiduciary character of the relationship 
and state in bond purchase agreements atypical facts and circumstances 
in which underwriters do assume fiduciary roles.\35\
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    \29\ See AGFS Letter at 1.
    \30\ See id.
    \31\ See id.
    \32\ See id.
    \33\ See id. at 2. See also Kidwell Letter at 2-3 (stating that 
while conflicts of interest may have been disclosed to issuers, many 
may not fully understand how their interests could be adversely 
affected by permitting such conflicts of interest to exist).
    \34\ See AGFS Letter at 2.
    \35\ See id. at 2-3. The commenter also pointed out that the 
discussions should occur at the outset of the relationship, and 
prior to the time that issuers commit themselves to particular 
courses of action. See id. at 3.
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    On a similar note, five commenters \36\ suggested amending or 
deleting paragraph (b) of Rule G-23 in order to reduce confusion about 
the scope of the role of an underwriter and the role of a financial 
advisor. One of these commenters stated that under the Exchange Act, an 
individual acts as a municipal advisor if it provides ``advice with 
respect to the structure, timing, terms and other similar matters 
concerning such financial products or issues,'' and a ``broker, dealer, 
or municipal securities dealer serving as an underwriter'' is excluded 
from the definition of a municipal advisor.\37\ This commenter then 
pointed out that ``[t]he definition of `underwriter' under Section 
2(a)(11) of the Securities Act of 1933 does not include `a person that 
provides advice to or on behalf of a municipal entity or obligated 
person with respect to municipal financial products or the issuance of 
municipal securities, including advice with respect to the structure, 
timing, terms, and other similar matters concerning such financial 
products or issues.' '' \38\ As such, the commenter stated that 
proposed Rule G-23 confuses the distinction between municipal advisors 
and underwriters, thereby making the market less transparent and more 
susceptible to conflicts of interest and abuse and that proposed Rule 
G-23 would be less ambiguous if paragraph (b) was deleted in its 
entirety.\39\ Another commenter suggested that the last sentence of 
paragraph (b) of proposed Rule G-23 be revised to read: 
``Notwithstanding the foregoing, for purposes of this rule, a financial 
advisory relationship shall not be deemed to exist when, in the course 
of acting as an underwriter, a broker, dealer or municipal securities 
dealer provides information to an issuer relating to the sale of the 
securities to investors such as transactional structures, the 
underwriter's capabilities to sell various securities, how particular 
terms of a security structure may affect rates and yields, and matters 
incidental to the underwriting of a new issue of municipal 
securities.'' \40\
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    \36\ See PFM Letter, Joy Howard Letter, Nathan Howard Letter, 
NAIPFA Letter and Kidwell Letter.
    \37\ See Joy Howard Letter at 2.
    \38\ Id.
    \39\ See id.
    \40\ NAIPFA Letter at 6.
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    In response, in Amendment No. 1, the MSRB stated that, in order for 
a dealer to be considered to be acting as an underwriter under Rule G-
23(b), it must clearly identify itself, in writing, as an underwriter 
and not as a financial advisor from the earliest stages of the

[[Page 32251]]

relationship and, in the proposed interpretive guidance, as amended by 
Amendment No. 1, the MSRB provides additional examples of what the 
earliest stage of a relationship may be. Amendment No. 1 would also 
amend the proposed interpretive guidance to provide that the required 
disclosure must make clear that the primary role of an underwriter is 
to purchase, or arrange the placement of, securities in an arm's-length 
commercial transaction between the issuer and the underwriter and that 
the underwriter has financial and other interests that differ from 
those of the issuer. Additionally, as amended, the proposed 
interpretive guidance would provide that the dealer must not engage in 
a course of conduct that is inconsistent with an arm's length 
relationship with the issuer in connection with such issue of municipal 
securities or the dealer will be deemed to be a financial advisor with 
respect to that issue and precluded from underwriting that issue by 
Rule G-23(d). The MSRB is of the view that these disclosures would be 
adequate to alert the issuer to the role of the dealer as an 
underwriter with respect to an issue, especially when coupled with the 
requirement that the dealer's course of conduct must not be 
inconsistent with its disclosures if it is to avoid being considered a 
financial advisor.
    The Commission understands commenters' concerns regarding clarity 
of the roles of an underwriter and a financial advisor and believes 
that the requirement under the proposed rule, as amended, that a firm 
wishing to serve as an underwriter must make a written disclosure of 
its proposed role with respect to an issuance at the earliest stages of 
its relationship with the issuer and continue to engage in a course of 
conduct consistent with that role in connection with such issue, will 
help achieve that clarity. In addition, the Commission notes that a 
variety of facts and circumstances, including the presence or absence 
of another firm serving as a financial advisor with respect to that 
issuance, may ultimately inform any review of whether or not a dealer 
has engaged in a course of conduct consistent with the role of an 
underwriter with respect to that issue.
    As discussed above, several commenters expressed concern that the 
proposed rule conflicted with the provisions of Section 15B(c)(1) of 
the Exchange Act \41\ which provides that ``municipal advisors have a 
fiduciary duty to their municipal entity clients.'' \42\ The Commission 
notes that the proposed rule, as amended, explicitly does not define 
``whether provision of the advice permitted by Rule G-23 would cause 
the dealer to be considered a `municipal advisor' under the Exchange 
Act.'' In addition, the proposed interpretive guidance, as amended, 
clarifies that ``Rule G-23 is only a conflicts-of-interest rule and 
does not set normative standards for dealer conduct. In particular, 
Rule G-23, as amended, would not address whether the provision of any 
of the advice permitted by Rule G-23 would subject the dealer to a 
fiduciary duty as a `municipal advisor.' '' \43\ The Commission further 
notes that although it shall not be a violation of Rule G-23(d) for a 
dealer acting as an underwriter to give advice with respect to the 
investment of the proceeds of the issue, municipal derivatives 
integrally related to the issue or other similar matters concerning the 
issue, as proposed in the Municipal Advisor Registration Proposing 
Release, such dealer would be required by the Commission to register as 
a municipal advisor with respect to such advice.\44\ Since October 1, 
2010, municipal advisors, and any persons associated with a municipal 
advisor, have had a fiduciary duty to any municipal entity for whom the 
municipal advisor acts as a municipal advisor. In addition, the 
Commission notes that a dealer acting as an underwriter who must also 
register as a municipal advisor may be subject to additional rules 
(including, but not limited to, limitations on unmanageable conflicts 
or additional disclosures regarding compensation and conflicts of 
interest) based upon fiduciary duty or other laws or rules.
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    \41\ 15 U.S.C. 78o-4(c)(1).
    \42\ See, e.g., PFM Letter, Joy Howard Letter, NAIPFA Letter and 
Kidwell Letter.
    \43\ See Amendment No. 1 at 4.
    \44\ See Municipal Advisor Registration Proposing Release, supra 
note 11.
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B. Rebuttable Presumption of Financial Advisor Status

    Several commenters objected to the rebuttable presumption in the 
proposed interpretive guidance, which stated that a dealer that 
provides advice to an issuer with respect to the issuance of municipal 
securities will be presumed to be a financial advisor with respect to 
that issue and suggested that the presumption be eliminated. One 
commenter suggested that the interpretive guidance does not provide any 
clarity because it states that an underwriter could still be considered 
a financial advisor by engaging in certain unspecified subsequent 
actions.\45\ This commenter opined that rather than using presumptions, 
the rule should be that if a party is engaged by an issuer as a 
financial advisor, then it is a financial advisor; and if a party is 
engaged by an issuer as an underwriter, then it is an underwriter.\46\ 
This commenter further stated that if the Commission does not believe 
issuers can understand the differences between those roles, it can 
prescribe disclosures to make the differences clear.\47\
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    \45\ See BDA Letter at 3.
    \46\ See id.
    \47\ See id.
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    Another commenter expressed concerns with the ability of 
underwriters to advise issuers in connection with an offering in the 
context of the proposed rebuttable presumption.\48\ The commenter 
stated that, in connection with the solicitation of municipal 
underwriting business, prospective underwriters are frequently asked by 
issuers about structuring and strategic alternatives, comparative 
analyses and general market intelligence, and other relevant ideas, and 
this dialogue provides an important informational foundation for many 
issuers in the financing process.\49\ As such, this commenter stated 
that the presumption that dealers are financial advisors would chill or 
eliminate this pre-engagement exchange, particularly because even if a 
dealer had properly alerted the issuer that it was acting solely as an 
underwriter, its subsequent course of conduct may still cause it to be 
considered a financial advisor and thus be precluded from participating 
in the underwriting.\50\ The commenter stated that this problem is 
exacerbated because of the proposed deletion of the reference to 
compensation in Rule G-23(b), which has provided a bright line for 
determining whether a person is a financial advisor.\51\ Consequently, 
the commenter suggested that the presumption be eliminated, and 
instead, the interpretive guidance should provide that dealers 
intending to act solely as underwriters make clear and unambiguous such 
intentions in their initial communications with the issuer.\52\ Another 
commenter objected to

[[Page 32252]]

the proposed presumption and stated that underwriter conduct is clearly 
discernible because such transactions are formally concluded by a bond 
purchase agreement.\53\
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    \48\ See SIFMA Letter at 3.
    \49\ See id. at 4.
    \50\ See id.
    \51\ See id.
    \52\ See id. This commenter further suggested that the proposed 
interpretive guidance should provide that a written agreement 
between the prospective underwriter and municipal issuer reflecting 
such understanding would, in fact, establish a presumption that the 
underwriter will continue to act in such role throughout the 
pendency of the offering. See id. at 4-5.
    \53\ See BMO Letter.
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    On the other hand, several commenters requested more guidance about 
the content of the actions necessary to rebut the presumption of 
financial advisory status.\54\ One commenter stated that ``[t]o give 
the Rule any substantive meaning, the timing and content of a rebuttal 
of a municipal advisory relationship must be well defined * * * It is 
particularly important that the rebuttal be clear about the broker-
dealer's role and its limits in the context of a negotiated transaction 
in which there is no municipal advisor.'' \55\
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    \54\ See Joy Howard Letter at 5-8 and Fieldman Letter. For 
example, one commenter raised questions about the meaning of the 
phrases ``in the course of acting as an underwriter'' and ``clearly 
identify itself as an underwriter'' as they are used in the proposed 
interpretive guidance. See Joy Howard Letter at 5-8.
    \55\ Fieldman Letter. This commenter suggested that the rebuttal 
must state that the underwriter broker-dealer is not serving as a 
municipal advisor; that the underwriter also represents interests 
that may conflict with those of the issuer; and that the broker-
dealer does not owe a fiduciary duty and duties of loyalty and care 
to the issuer. See id. This commenter also suggested that the 
rebuttal must be in writing and acknowledged by the issuer, and must 
be provided prior to the beginning of any work for the issuer. See 
id.
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    In response, in Amendment No. 1, the MSRB noted that Amendment No. 
1 would amend the proposed interpretive guidance by removing the 
rebuttable presumption language and replacing it with language that a 
financial advisory relationship will be deemed to exist whenever a 
dealer renders the types of advice provided for in proposed Rule G-
23(b), because the revised language is more consistent with the 
language of proposed Rule G-23(b).

C. Section 23(c): Writing Requirement for Financial Advisors

    One commenter recommended that Rule G-23(c) be deleted or revised 
\56\ because it is no longer necessary.\57\ This commenter stated that 
the Dodd-Frank Act provided a definition of ``municipal advisor'' and 
the Commission's proposing release on the registration of municipal 
advisors made it clear that an individual will be treated as a 
municipal advisor regardless of whether these services are free.\58\ As 
such, the commenter opined that a written agreement is unnecessary for 
determining whether the broker-dealer is a financial advisor.\59\
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    \56\ See Joy Howard Letter at 3-4. This commenter suggested that 
the rule be modified such that a broker-dealer that intends to serve 
as an underwriter would be required to submit to the municipal 
entity a written document that defines the broker-dealer's role as 
an underwriter, and indicates that the underwriter is not serving as 
an advisor and is not serving as a fiduciary. See id. at 4.
    \57\ See id. at 3.
    \58\ See id.
    \59\ See id.
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    In response, in Amendment No. 1, the MSRB noted that Amendment No. 
1 would amend the proposed interpretive guidance to reiterate what Rule 
G-23 has always provided: it is not necessary to have a writing in 
order for a financial advisory relationship to exist. Instead, Rule G-
23(c) provides that a writing must be entered into prior to, upon or 
promptly after the inception of the financial advisory relationship. 
The Commission believes that the change in Amendment No. 1 clarifying 
that it is not necessary to have a written agreement for a financial 
advisory relationship to exist is consistent with the provisions of the 
Exchange Act.

D. Small and/or Infrequent Issuers

    Several commenters \60\ stated that the proposed amendments to Rule 
G-23 would harm small and infrequent issuers, with one commenter \61\ 
specifically calling for an exemption for ``Small Issue Deals'' or 
``offerings under $5 million in aggregate principal amount'' and 
another commenter \62\ calling for an exemption for ``issuances under 
$10 million.''
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    \60\ See e.g., RBC Letter, First Southwest Letter, BDA Letter 
and SIFMA Letter. See also Eastern Bank Letter.
    \61\ See First Southwest Letter at 1-2.
    \62\ See SIFMA Letter at 5.
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    One commenter expressed concern that the proposed rule change will 
adversely impact small municipal bond transactions because it will 
eliminate an already limited number of potential underwriters for such 
transactions, resulting in decreased competition, decreased choice, and 
increased costs to issuers.\63\ Several other commenters expressed 
similar concerns about decreased competition, decreased choice, and 
increased costs.\64\ Further, one commenter stated that it is unaware 
of any history of abuse in simple fixed rate bonds that make up most of 
the small issuances, and that any concern relating to potential abuse 
by financial advisors is addressed through federal and state fiduciary 
duties imposed on financial advisors.\65\ One commenter suggested that, 
if the proposed rule change is approved, the MSRB carefully monitor the 
impact of the rule change on small and/or infrequent issuers and revise 
the rule if needed to increase market accessibility.\66\
---------------------------------------------------------------------------

    \63\ See First Southwest Letter at 1.
    \64\ See SIFMA Letter at 5 and BDA Letter at 2.
    \65\ See SIFMA Letter at 5.
    \66\ See BDA Letter at 2.
---------------------------------------------------------------------------

    On the other hand, one commenter that supported the proposed 
amendments to Rule G-23 did not support an exception to the proposed 
amendments for small and/or infrequent issuers.\67\ This commenter 
noted that small and infrequent issuers will be the primary 
beneficiaries of the revised Rule G-23 because these issuers are the 
least likely to understand the conflicts of interest that arise when a 
financial advisor switches to serving as an underwriter.\68\
---------------------------------------------------------------------------

    \67\ See Joy Howard Letter at 10.
    \68\ See id.
---------------------------------------------------------------------------

    In Amendment No. 1, the MSRB stated that it believes that the 
potential negative impact on fees and market accessibility for small 
and/or infrequent issuers would be minimal compared to the protections 
that will be afforded to such issuers. The MSRB stated that it was 
persuaded by arguments that small and/or infrequent issuers are, in 
many cases, unable to appreciate the difference in the nature of the 
roles of a financial advisor and an underwriter and did not believe 
that exceptions should be provided for smaller offerings as suggested 
by several commenters. The Commission agrees that it is appropriate to 
apply the protections of proposed Rule G-23 to small and/or infrequent 
issuers.

E. Competitive Bid Offerings

    Six commenters \69\ supported changes to the proposed amendments 
that would exempt some or all competitively bid transactions from the 
proposed rule change. Several commenters stated that there has been no 
history of abuse by dealers that had previously served as financial 
advisors in competitive bids.\70\ One commenter pointed out that the 
competitive bidding process for municipal issues has become almost 
exclusively electronic, and the electronic process provides for a

[[Page 32253]]

completely transparent, highly efficient and tamper proof process.\71\ 
Another commenter stated that the municipal underwriting market is 
competitive, and competition and transparency resulting from a free and 
open market would prohibit inappropriate or unethical behavior by 
financial advisors acting as underwriters.\72\ One other commenter 
stated that financial advisors would have no practical opportunity in 
these straightforward, simple contexts to structure an offering that 
might give them any competitive advantage.\73\ Several commenters also 
expressed concern that by prohibiting the bid of financial advisors 
under the proposed rule change, issuers may end up being locked out of 
the market, or the lowest bid would be removed from the process, 
harming particularly the smaller issuers.\74\ Moreover, some commenters 
stated that concerns relating to potential abuse by financial advisors 
would be addressed through their fiduciary duties under federal and 
state law.\75\
---------------------------------------------------------------------------

    \69\ See Giles Letter, BDA Letter, Baird Letter, RBC Letter, 
SIFMA Letter and First Southwest Letter. One commenter stated that 
except for municipal bond transactions under $5 million, the 
commenter does not believe there should be an exception for 
competitively bid transactions. See First Southwest Letter at 1.
    \70\ See RBC Letter at 2. This commenter stated that there is no 
evidence that financial advisors structure transactions to give 
themselves an advantage, or are not diligent in seeking other 
bidders in order to improve their chances of being the successful 
bidder. See id. See also Baird Letter at 3; SIFMA Letter at 3; and 
Giles Letter at 1 (stating that the proposed rule change is based on 
the ``specious argument'' that ``a conflict of interest might exist 
when a financial advisor acts as an underwriter,'' and that there is 
no tangible proof that an actual conflict of interest exists or that 
such conflict of interest has resulted in wrongdoing).
    \71\ See RBC Letter at 2. See also SIFMA Letter at 3 (stating 
that ``competitively bid, non rated, non credit-enhanced, fixed rate 
municipal debt issuances in which the issuer utilizes an electronic 
bidding platform'' should be exempt from the proposed rule change in 
order to ensure continued unfettered access to the credit markets 
for municipal issuers).
    \72\ See Giles Letter at 2. See also BDA Letter at 2 (stating 
that potential conflicts of interest for financial advisors who act 
as underwriters are eliminated in a fairly run, competitively bid 
offering of securities) and Giles Letter at 1 (stating that ``any 
conflict of interest that might exist would be erased by permitting 
competitive bidding'').
    \73\ See SIFMA Letter at 3.
    \74\ See RBC Letter at 2. This commenter opined that this 
proposed rule change would create an additional artificial barrier 
to entry to the market by non-rated competitive issuers because such 
issuers have historically depended on ``bidders that are willing to 
do their homework in order to bid,'' such as financial advisors. See 
id. at 3. See also SIFMA Letter at 3 and Giles Letter at 2 (stating 
that the proposed rule change could be economically harmful to 
taxpayers by eliminating competitive bidders and precluding best 
execution for the issuer).
    \75\ See SIFMA Letter at 3. See also RBC Letter at 3.
---------------------------------------------------------------------------

    On the other hand, one commenter expressed support for the absence 
of an exception for competitive sales in the proposed rule change 
because this would ensure that financial advisors aggressively work to 
secure the largest number of bids possible.\76\ This commenter 
acknowledged that there could be instances where a small issuer 
experiences difficulty in obtaining bids.\77\ However, the commenter 
stated that if a financial advisor is allowed to switch roles to become 
an underwriter, the financial advisor would effectively be allowed to 
breach its fiduciary duty by structuring and marketing the transaction 
in a fashion to insure their success as the winning bidder rather than 
seeking to obtain the largest number of bids possible.\78\
---------------------------------------------------------------------------

    \76\ See Joy Howard Letter at 10.
    \77\ See id.
    \78\ See id.
---------------------------------------------------------------------------

    In Amendment No. 1, the MSRB stated that it does not believe that 
the use of electronic bidding platforms mitigates the conflict of 
interest posed by a dealer financial advisor's switching to an 
underwriter role, in part, because such platforms are not necessarily 
available to all issuers. Further, in the Commission Notice, the MSRB 
stated its belief that involvement in this process provides a dealer 
financial advisor with information that can provide an unfair advantage 
when such dealer participates in a competitive bid transaction. The 
Commission believes that the MSRB's proposed rule change helps prevent 
potential conflicts of interest and/or unfair competition issues that 
could arise when a dealer financial advisor participates in a 
competitive bid transaction without limiting access to potential 
purchasers of an issuance of municipal securities.

F. Effective Date

    Several commenters suggested that the six-month transition period 
provided in the proposed rule change should be extended. Commenters 
suggested various transitional timeframes to allow market participants 
adequate time to comply with any changes.\79\ One commenter suggested a 
transitional period of one year to allow issuers, dealers, and 
financial advisors sufficient time to take action to comply with the 
rules.\80\ Another commenter expressed concern that the six-month 
implementation period proposed by the MSRB for the proposed rule change 
is insufficient to avoid market disruption.\81\ One commenter suggested 
incorporating a grandfather clause that would allow current Rule G-23 
to continue to apply to financial advisory relationships that are in 
place at the time the proposed rule change is adopted.\82\
---------------------------------------------------------------------------

    \79\ See BDA Letter, Baum Letter and SIFMA Letter.
    \80\ See BDA Letter at 3.
    \81\ See SIFMA Letter at 6.
    \82\ See id.
---------------------------------------------------------------------------

    On the other hand, several commenters suggested that the transition 
period should be shortened or eliminated. One commenter suggested that 
in order to clarify and enforce the fiduciary duty of financial 
advisors, there should not be a transition period for prohibiting role 
switching from financial advisor to underwriter.\83\ Another commenter 
stated that because municipal advisors had a fiduciary duty under 
federal law effective October 1, 2010, any role switching that occurred 
after that date is a violation of the Exchange Act.\84\
---------------------------------------------------------------------------

    \83\ See Joy Howard Letter at 9. This commenter stated that in 
MSRB Notice 2010-42, dated October 1, 2010, the MSRB stated that 
financial advisors are subject to a federal fiduciary duty to their 
municipal entity clients as of October 1, 2010, even before MSRB 
rulemaking on the subject. See id. As such, this commenter stated 
that any broker-dealer that has served as a financial advisor on or 
after October 1, 2010 and subsequently switched to serving as an 
underwriter has already violated its fiduciary duty. See id.
    \84\ See NAIPFA Letter at 8.
---------------------------------------------------------------------------

    In response, in Amendment No. 1, the MSRB stated that it does not 
recommend changing the current proposal that the rule change be made 
effective for new issues for which the Time of Formal Award (as defined 
in MSRB Rule G-34) occurs more than six months after Commission 
approval. In addition, the MSRB does not recommend a grandfather 
provision, as the MSRB has determined that the effective date described 
above provides an ample time period for issuers of municipal securities 
to finalize any outstanding transactions that might be affected by the 
proposed rule change. The Commission believes that the proposed 
effective date for proposed Rule G-23 is appropriate.

G. Other Comments

    Several commenters expressed concern that the MSRB never published 
the proposed interpretive guidance to proposed Rule G-23 for public 
comment before it was filed with the Commission, as it did with other 
amendments to Rule G-23.\85\ In response, in Amendment No. 1, the MSRB 
noted that it filed the proposed rule change with the Commission in 
accordance with the requirements of Section 19(b) of the Exchange Act, 
which generally provides for a 21-day comment period following 
publication in the Federal Register of a rule change proposed by a 
self-regulatory organization.
---------------------------------------------------------------------------

    \85\ See e.g., PFM Letter at 1-2 and GFOA Letter at 2.
---------------------------------------------------------------------------

    Two commenters objected to the part of the proposed rule change 
that would allow for a dealer to serve as a financial advisor on one 
transaction and serve as the underwriter on a separate transaction for 
the same issuer.\86\ One commenter suggested that proposed Rule G-23 be 
revised such that it would force the underwriter acting as an advisor 
to decide which role they will play for the issuer and prohibit the 
firm from playing both roles at the same

[[Page 32254]]

time.\87\ This commenter suggested a one year cooling off period from 
the time an advisor terminates its role as a municipal advisor and the 
time the advisor would be allowed to negotiate an issue with the issuer 
or act in any other role that is inconsistent with the role of a 
fiduciary.\88\ One commenter raised a concern that some broker-dealers 
serve as financial advisors with the objective of establishing a 
relationship with the issuer that will ultimately enable the company to 
serve as the underwriter for subsequent transactions, and that the 
proposed rule change does not resolve this conflict of interest.\89\ As 
such, this commenter suggested that Rule G-23 require a two-year period 
after a financial advisory relationship has expired before a broker-
dealer serving as a financial advisor can switch to serving as an 
underwriter.\90\
---------------------------------------------------------------------------

    \86\ See NAIPFA Letter at 9 and GFOA Letter at 1.
    \87\ See NAIPFA Letter at 9.
    \88\ See id.
    \89\ See Joy Howard Letter at 9.
    \90\ See id. at 10.
---------------------------------------------------------------------------

    In response, in Amendment No. 1, the MSRB noted that it has 
determined to continue to apply Rule G-23 on an issue-by-issue basis. 
The proposed amendments would not prohibit a dealer financial advisor 
from providing financial advisory services on one issue and then 
serving as underwriter on another issue, even if the two issues were in 
the market concurrently. The Commission believes that applying proposed 
Rule G-23 on an issue-by-issue basis is consistent with the Exchange 
Act in light of the requirements in the proposed rule that a dealer 
clearly identify its role as an underwriter and engage in a course of 
conduct not inconsistent with that role.
    Another commenter expressed concern about the requirement that a 
dealer may not act as a remarketing agent with respect to an issue for 
one year following the termination of an advisory relationship in 
connection with such issue.\91\ This commenter opined that the one-year 
period is arbitrary and unnecessarily long, and should be no longer 
than three months.\92\ In response, the MSRB noted in Amendment No. 1 
that it has previously stated that it does consider it to be 
appropriate to impose a one-year cooling off period during which a 
dealer financial advisor could not serve as remarketing agent for the 
same issue of municipal securities. The MSRB stated that the one year 
period is a significant timeframe that would more adequately address 
any potential or actual conflicts of interest than the three month 
timeframe. The Commission agrees with the MSRB that a one-year cooling 
off period is appropriate.
---------------------------------------------------------------------------

    \91\ See SIFMA Letter at 5-6.
    \92\ See id.
---------------------------------------------------------------------------

    One commenter stated that current Rule G-23 has provided balanced 
guidance to financial advisors who seek to act as underwriters without 
any history of abuse.\93\ As such, the commenter suggested that the 
Commission consider sunsetting the proposed rule change two years after 
its implementation, which would allow the MSRB to assess the impact of 
the proposed rule change and would ensure reconsideration of the actual 
need for its continuance at such time.\94\ In response, the MSRB stated 
in Amendment No. 1 that it does not recommend a sunset provision, as 
the MSRB and Commission comment periods have provided ample opportunity 
for public comment and considerations of those comments on the proposed 
rule change. The Commission agrees with the MSRB that a sunset 
provision is not appropriate. In particular, the Commission notes the 
importance of the protections that will be provided by proposed Rule G-
23, as amended, and believes it is appropriate to have those 
protections on a going-forward basis and not to sunset the Rule after a 
specified period of time.
---------------------------------------------------------------------------

    \93\ See id. at 6.
    \94\ See id. See also BMO Letter.
---------------------------------------------------------------------------

II. Discussion and Commission's Findings

    The Commission has carefully considered the proposed rule change, 
the comment letters received, and Amendment No.1 and finds that the 
proposed rule change, as amended, is consistent with the requirements 
of the Exchange Act and the rules and regulations thereunder applicable 
to the MSRB.\95\
---------------------------------------------------------------------------

    \95\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    In particular, the Commission finds that the proposed rule, as 
amended, does not conflict with Section 15B(e)(4)(A) of the Exchange 
Act,\96\ which defines the term ``municipal advisor,'' because the 
proposed rule, as amended, explicitly does not state whether provision 
of the advice permitted by proposed Rule G-23, as amended, would cause 
the dealer to be considered a ``municipal advisor'' under the Exchange 
Act.
---------------------------------------------------------------------------

    \96\ 15 U.S.C. 78o-4(e)(4)(A).
---------------------------------------------------------------------------

    The Commission also finds that the proposed rule, as amended, does 
not conflict with the provisions of Section 15B(c)(1) of the Exchange 
Act,\97\ which provides that ``[a] municipal advisor * * * shall be 
deemed to have a fiduciary duty to any municipal entity for whom such 
municipal advisor acts as a municipal advisor'' because, as the MSRB 
notes in Amendment No. 1, the proposed rule, as amended, does not set 
normative standards for dealer conduct. The Commission notes that other 
laws or rules may set the normative standards for the activities 
allowed by the proposed rule, as amended.
---------------------------------------------------------------------------

    \97\ 15 U.S.C. 78o-4(c)(1).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule, as amended, is 
consistent with Section 15B(b)(2) of the Exchange Act \98\ and, in 
particular, Section 15B(b)(2)(C) of the Exchange Act,\99\ which 
provides that the rules of the MSRB shall:
---------------------------------------------------------------------------

    \98\ 15 U.S.C. 78o-4(b)(2).
    \99\ 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, as amended, is consistent with Section 
15B(b)(2) of the Exchange Act because it will help prevent potentially 
fraudulent and manipulative acts and practices caused by a dealer 
financial advisor serving as underwriter or placement agent for an 
issue of municipal securities for which it provided financial advisory 
services. Accordingly, the proposed rule change, as amended, will help 
protect municipal entities and help to perfect the mechanism of a free 
and open market in municipal securities to the benefit of investors, 
municipal entities, and the public interest.
    Furthermore, the Commission finds that the proposed rule, as 
amended, is consistent with Section 15B(b)(2)(L)(iv) of the Exchange 
Act,\100\ which requires that rules adopted by the MSRB:
---------------------------------------------------------------------------

    \100\ 15 U.S.C. 78o-4(b)(2)(L)(iv).

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 Commission believes that the proposed rule, as amended, would 
principally affect dealer financial advisors that are not small 
municipal

[[Page 32255]]

advisors. Furthermore, it is likely that those dealer financial 
advisors that are small municipal advisors primarily serve as financial 
advisors to issuers of municipal securities that do not access the 
capital markets frequently and, when they do so, issue securities in 
small principal amounts. Those issuers may be less likely than larger, 
more frequent issuers to understand the conflict presented when their 
financial advisors also underwrite their securities. The Commission 
believes it is appropriate for the prohibitions in the proposed rule, 
as amended, to also apply to those dealer financial advisors that are 
small municipal advisors.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
to the proposed rule change is consistent with the Exchange 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-2011-03 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-2011-03. 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 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 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-2011-03 and should be 
submitted on or before June 24, 2011.

IV. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause for approving the proposed rule 
change, as modified by Amendment No. 1, before the 30th day after the 
date of publication in the Federal Register. The Commission notes that 
the proposal was published for notice and comment, and the Commission 
received eighteen comment letters, which comments have been discussed 
in detail above.
    The Commission believes that Amendment No.1 is consistent with the 
requirements of the Exchange Act and finds good cause, consistent with 
Section 19(b)(2) of the Act,\101\ to approve the proposed rule change, 
as modified by Amendment No. 1, on an accelerated basis.
---------------------------------------------------------------------------

    \101\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with the 
requirements of the Exchange Act and the rules and regulations 
thereunder applicable to the MSRB, and in particular, Sections 
15B(b)(2),\102\ 15B(c)(1),\103\ and 15B(e)(4)(A) \104\ of the Exchange 
Act. The proposal will become effective for new issues for which the 
Time of Formal Award (as defined in MSRB Rule G-34(a)(ii)(C)(1)(a)) 
occurs more than six months after the date of this order.
---------------------------------------------------------------------------

    \102\ 15 U.S.C. 78o-4(b)(2).
    \103\ 15 U.S.C. 78o-4(c)(1).
    \104\ 15 U.S.C. 78o-4(e)(4)(A).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\105\ that the proposed rule change (SR-MSRB-2011-03), as 
modified by Amendment No. 1, be, and hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \105\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\106\
---------------------------------------------------------------------------

    \106\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-13752 Filed 6-2-11; 8:45 am]
BILLING CODE 8011-01-P