Document ID: SEC-2022-0342-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2022-03-15T04:00Z

[Federal Register Volume 87, Number 50 (Tuesday, March 15, 2022)]
[Notices]
[Pages 14596-14598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05372]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94383; File No. SR-MSRB-2022-01]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Further Extend the Regulatory Relief and Permit Dealers To 
Conduct Office Inspections Remotely Until December 31, 2022 Pursuant to 
MSRB Rule G-27, on Supervision

March 9, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on March 1, 2022, the Municipal Securities 
Rulemaking Board (``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the MSRB. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to amend 
Supplementary Material .01, Temporary Relief for Completing Office 
Inspections, of MSRB Rule G-27, on supervision, to further extend the 
regulatory relief and permit brokers, dealers and municipal securities 
dealers (collectively, ``dealers'') to conduct office inspections, due 
to be completed during calendar year 2022, remotely until December 31, 
2022 (the ``proposed rule change'').
    The MSRB has designated the proposed rule change as constituting a 
``noncontroversial'' rule change under Section 19(b)(3)(A) \3\ of the 
Act and Rule 19b-4(f)(6) \4\ thereunder, which renders the proposal 
effective upon receipt of this filing by the Commission. The MSRB 
proposes an operative date of May 2, 2022.
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    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2022-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 14597]]

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

1. Purpose
    The MSRB continues to closely monitor the impact on municipal 
market participants resulting from the coronavirus disease (``COVID-
19'' or ``pandemic'') and believes the additional six-month extension 
of time to conduct office inspections remotely, due to be completed in 
calendar year 2022, would allow dealers to better address ongoing 
operational challenges caused by the pandemic. In light of these 
operational challenges and disruptions to normal business functions as 
a result of the pandemic, the MSRB previously filed a proposed rule 
change for immediate effectiveness with the SEC in April 2020,\5\ a 
second proposed rule change in December 2020,\6\ and a third proposed 
rule change in October 2021 \7\ (``April relief,'' ``December relief,'' 
and ``October relief''). In connection with the April relief, the MSRB 
provided an extension of time for dealers to complete certain 
supervisory obligations, including, among other things, that office 
inspections due to be conducted during calendar year 2020 could be 
conducted by March 31, 2021, but with the expectation that dealers 
would conduct their inspections on-site. The December relief provided 
dealers with the option to conduct their office inspections remotely 
that were due to be completed by March 31, 2021 (for calendar year 
2020) and those for calendar year 2021, subject to certain conditions 
being met. The October relief provided an additional extension of time 
permitting dealers to continue to conduct office inspections remotely 
until June 30, 2022, for their office inspections that are due to be 
completed for calendar year 2022.\8\
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    \5\ See Exchange Act Release No. 88694 (April 20, 2020), 85 FR 
23088 (April 24, 2020) (File No. SR-MSRB-2020-01).
    \6\ See Exchange Act Release No. 90621 (December 9, 2020), 85 FR 
81254 (December 15, 2020) (File No. SR-MSRB-2020-09).
    \7\ See Exchange Act Release No. 93435 (October 27, 2021), 86 FR 
60522 (November 2, 2021) (File No. SR-MSRB-2021-06).
    \8\ The MSRB noted in the October relief that it would continue 
to monitor the effectiveness of remote office inspections on 
dealers' overall supervisory systems and would consider more long-
term regulatory initiatives that align with and promote the evolving 
ways dealers are doing business and supervising the activities of 
the dealer and its associated persons. Id. The MSRB is still 
undertaking such review.
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    Through stakeholder engagement, the MSRB notes that dealers have 
delayed their return to office plans due to the continued pandemic and 
are considering, or have implemented, hybrid work arrangements 
dependent on functions and regulatory requirements, which has created 
logistical challenges to conducting in-person office inspections. To 
that end, in order to address ongoing industry-wide concerns regarding 
having to conduct in-person office inspections while safety concerns 
related to the pandemic persist \9\ and to align with the ongoing 
pandemic-related regulatory relief provided by FINRA,\10\ the MSRB is 
proposing amendments to Supplementary Material .01 of MSRB Rule G-27. 
The proposed amendments to Supplementary Material .01 of MSRB Rule G-27 
would allow dealers to satisfy their office inspection obligations by 
permitting dealers to conduct calendar year 2022 office inspections 
remotely for the remainder of calendar year 2022--extending the current 
relief for an additional six months from June 30, 2022, to December 31, 
2022.\11\
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    \9\ See The Centers for Disease Control and Prevention 
(``CDC''), Omicron Variant: What You Need to Know (stating, in part, 
that ``the Omicron variant spreads more easily than the original 
virus that causes COVID-19 and the Delta variant. [The] CDC expects 
that anyone with Omicron infection can spread the virus to others, 
even if they are vaccinated or don't have symptoms.'') available at 
https://www.cdc.gov/coronavirus/2019-ncov/variants/omicron-variant.html (updated February 2, 2022).
    \10\ On January 10, 2022, FINRA made a filing with the SEC for 
immediate effectiveness having noted that amendments to FINRA Rule 
3110.17 provides a tailored regulatory alternative for their member 
firms to have the option, subject to specified conditions, to 
complete their inspection obligations remotely. See Exchange Act 
Release No. 94018 (January 20, 2022), 87 FR 4072 (January 26, 2022) 
(File No. SR-FINRA-2022-001). Previously, on September 13, 2021, 
FINRA made a filing with the SEC for immediate effectiveness, noting 
that while some firms have taken affirmative steps to develop and 
implement phased-in office re-entry plans based on local conditions, 
there are many other firms that have not. See Exchange Act Release 
No. 93002 (September 15, 2021), 86 FR 52508 (September 21, 2021) 
(File No. SR-FINRA-2021-023).
    \11\ As previously noted, a temporary location established in 
response to the implementation of a business continuity plan is not 
deemed an office for purposes of complying with the office 
inspection obligations, under MSRB Rule G-27. See supra note 5.
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    The conditions required to be met for dealers to avail themselves 
of the option to conduct office inspections remotely remain unchanged; 
however, amendments are being proposed to paragraph (a) and (d) to 
reflect the additional extension of time under the proposed rule 
change. Pursuant to paragraphs (b)-(d) of Supplementary Material .01 of 
MSRB Rule G-27, in dealers electing to conduct their office inspections 
remotely, such dealers must (i) amend or supplement their written 
supervisory procedures as appropriate to provide for remote inspections 
that are reasonably designed to assist in detecting and preventing 
violations of, and achieving compliance with, applicable securities 
laws and regulations, and with applicable Board rules; (ii) use remote 
office inspections as part of an effective supervisory system, which 
would include the ongoing review of activities and functions occurring 
at all offices and locations whether or not the dealer conducts 
inspections remotely; and (iii) make and maintain the required records 
for all offices or locations that had inspections that were conducted 
remotely; and any offices or locations for which the dealer determined 
to impose additional supervisory procedures or more frequent 
monitoring.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Exchange 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.

    The proposed rule change is designed to provide dealers additional 
time to comply with certain obligations under MSRB rules for a 
temporary period of time; it does not relieve dealers from compliance 
with their core regulatory obligations to establish and maintain a 
system to supervise the activities of each of its associated persons 
that is reasonably designed to achieve compliance with applicable rules 
and regulations, and with applicable MSRB rules, which serve to protect 
investors, municipal entities, obligated persons, and the public 
interest. The MSRB continues to believe extending the relief and 
affording dealers the option to conduct remote inspections due to be 
completed in calendar year 2022, an additional six-month extension, 
until December 31, 2022, is a prudent regulatory approach allowing 
dealers more time to assess when and how to have their employees safely 
return to

[[Page 14598]]

their offices while continuing to serve the important investor 
protection objectives of the inspection obligations under these unique 
circumstances.
    In a time when faced with unique challenges resulting from the 
sustained pandemic, the proposed rule change will afford dealers the 
ability to safeguard the health and safety of their personnel and to 
more effectively allocate resources to serve and promote the protection 
of investors, municipal entities, obligated persons and the public 
interest while much uncertainty still remains. In addition, the 
proposed rule change will also alleviate some of the operational 
challenges dealers may be experiencing, which will allow them to more 
effectively allocate resources to the operations that facilitate 
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.\13\
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    \13\ The proposed amendments only create the option for dealers 
to conduct office inspections remotely through December 31, 2022. 
With that in mind, dealers should consider whether, under their 
particular operating conditions, reliance on remote inspections 
would be reasonable under the circumstances.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act requires that MSRB rules be 
designed not to impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.\14\ In fact, 
the MSRB does not believe that the proposed rule change will have any 
burden on competition because the proposed rule change treats all 
dealers equally in that all dealers have the option to elect to conduct 
remote inspections remotely through December 31, 2022. The goal of the 
proposed rule change is to grant additional time for dealers to assess 
their resources, establish office inspection schedules for the second 
half of 2022 and meet their office inspection obligations, under 
Supplementary Material .01 of Rule G-27, while also determining how to 
best implement their return to office plans in a safe and effective 
manner during the exigent circumstances of the COVID-19 pandemic. The 
temporary relief afforded does not alter dealers underlying obligations 
under the rule and with applicable MSRB rules that directly serve 
investor protection.
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    \14\ 15 U.S.C. 78o-4(b)(2)(C).
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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

    Because the foregoing proposed rule change 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) \16\ thereunder. At any time within 60 days of the filing of 
the proposed rule change, the 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.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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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 [email protected]. Please include 
File Number SR-MSRB-2022-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-MSRB-2022-01. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MSRB-2022-01 and should be submitted on 
or before April 5, 2022.

    For the Commission, by the Office of Municipal Securities, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3a(a)(2).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05372 Filed 3-14-22; 8:45 am]
BILLING CODE 8011-01-P