Document ID: SEC-2014-0358-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2014-03-04T05:00Z

[Federal Register Volume 79, Number 42 (Tuesday, March 4, 2014)]
[Notices]
[Pages 12254-12256]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-04681]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71616; File No. SR-MSRB-2013-09]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Granting Approval of Proposed Rule Change, as Modified by 
Amendment No. 1, Consisting of Amendments to MSRB Rules A-12, on 
Initial Fee, G-14, on Reports of Sales or Purchases, and the Facility 
for Real-Time Transaction Reporting and Price Dissemination (``RTRS 
Facility''); Deletion of Rules A-14, on Annual Fee, A-15, on 
Notification to the Board of Change in Status or Change of Name or 
Address, and G-40, on Electronic Mail Contacts; Deletion of References 
to RTRS Testing Requirements Under G-14(b)(v), G-14(c), on RTRS 
Procedures, and in the RTRS Facility; Elimination of MSRB Forms RTRS 
and G-40, and Adoption of a Single, Consolidated Electronic 
Registration Form, New Form A-12

February 26, 2014.

I. Introduction

    On December 24, 2013, the Municipal Securities Rulemaking Board 
(the ``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change consisting of amendments to MSRB 
Rules A-12, on initial fee, G-14, on reports of sales or purchases, and 
the Facility for Real-Time Transaction Reporting and Price 
Dissemination (``RTRS Facility''); deletion of Rules A-14, on annual 
fee, A-15, on notification to the Board of change in status or change 
of name or address, and G-40, on electronic mail contacts; deletion of 
references to RTRS Testing Requirements under G-14(b)(v), G-14(c), on 
RTRS Procedures, and in the RTRS Facility; elimination of MSRB Forms 
RTRS and G-40, and adoption of a single, consolidated electronic 
registration form, new Form A-12. On

[[Page 12255]]

January 7, 2014, the Board submitted Amendment No. 1 to the proposed 
rule change. The proposed rule change, as modified by Amendment No. 1, 
was published for comment in the Federal Register on January 14, 
2014.\3\ The Commission received one comment letter on the proposed 
rule change.\4\ This order approves 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. 71255 (January 8, 
2014), 79 FR 2483 (``Notice'').
    \4\ See letter to Elizabeth M. Murphy, Secretary, Commission, 
from Jeanine Rodgers Caruso, President, National Association of 
Independent Public Finance Advisors (``NAIPFA''), dated February 1, 
2014 (``NAIPFA Letter'').
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II. Description of the Proposed Rule Change

    The MSRB proposes to amend Rule A-12 to create new registration 
procedures for MSRB-regulated brokers, dealers and municipal securities 
dealers (``dealers''), and municipal advisors, which procedures would 
be incorporated into a new Form A-12. The MSRB states in the Notice 
that the proposed rule change would consolidate the MSRB registration 
process in Rule A-12 and delete the rule language under Rules A-14, A-
15, and G-40, eliminate Forms RTRS and G-40, and amend Rule G-
14(b)(iv).\5\
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    \5\ See Notice, supra note 3, at 2484.
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    In addition to consolidating the MSRB registration process, the 
proposed rule change includes new changes to the existing registration 
process. For example, the proposed rule change would require 
registrants to provide contact information (name, title, phone number, 
address, and email address) for several new contact persons on Form A-
12. The proposed rule change would provide a waiver of the annual fee 
for dealers and municipal advisors that register in the last month of 
MSRB's fiscal year. The proposed rule change would impose a late fee on 
those regulated entities that fail to pay MSRB assessments in a timely 
manner. The proposed rule change would eliminate the requirement for 
registrants who submit transaction data to the MSRB to test their 
ability to interface with MSRB systems.

Rule A-12

    Rule A-12(a) would require each dealer, prior to engaging in 
municipal securities activities, and each municipal advisor, prior to 
engaging in municipal advisory activities, to register with the 
MSRB.\6\ Rule A-12(a) also would require registrants to notify, as 
appropriate, a registered securities association or appropriate 
regulatory agency\7\ of their intent to engage in municipal securities 
and/or municipal advisory activities and provide the MSRB, on their 
Form A-12, with a written statement evidencing such notification.\8\ 
Registration with the MSRB would be effective only after the MSRB 
notifies a registrant that its Form A-12 is complete and all fees have 
been received and processed.
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    \6\ As noted by the MSRB, prior to registration with the MSRB, 
each dealer and municipal advisor must first register with and 
receive approval from the Commission. See Notice, supra note 3, at 
2484.
    \7\ According to the MSRB, the term ``appropriate regulatory 
agency,'' as used in proposed Rule A-12(a), means the Comptroller of 
the Currency, Board of Governors of the Federal Reserve System, the 
Federal Deposit Insurance Corporation, or SEC as defined in 15 
U.S.C. 78c(a)(34)(A).
    \8\ This requirement would only be applicable to dealers or 
municipal advisors first registering on or after April 28, 2014. As 
stated in the Notice, registrants would have the flexibility to 
submit any form of documentation, such as a letter on company 
letterhead, evidencing notice to a registered securities association 
or appropriate regulatory agency, as applicable, of their intent to 
engage in municipal securities and/or municipal advisory activities.
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    Rule A-12(b) would provide for the amount and method of payment of 
the initial registration fee. New registrants would continue to be 
required to pay the initial fee of $100 to the MSRB in the manner 
prescribed by the MSRB Registration Manual.\9\ Rule A-12(c) would 
provide that the annual registration fee would continue to be $500 and 
would be paid in accordance with the method described in the MSRB 
Registration Manual. The annual fee would continue to be due by October 
31 each year, but proposed Rule A-12 would provide that a regulated 
entity that registers in September and pays an annual fee at the time 
of registration need not pay the annual fee for the following fiscal 
year, beginning October 1.
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    \9\ The MSRB represents that the MSRB Registration Manual would 
not contain any substantive requirements not contained in MSRB rules 
or fairly and reasonably implied from those rules. See Notice, supra 
note 3, at 2485. The Commission notes that, if the MSRB Registration 
Manual contains any substantive requirements not provided in MSRB 
rules, the MSRB Registration Manual would have to be filed with, or 
filed with and approved by, the Commission.
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    Rule A-12(d) would establish late fees for any assessment due under 
Rules A-12 or A-13. Any registrant that fails to pay any fee due under 
Rules A-12 or A-13 (underwriting, transaction or technology fee) would 
be assessed a monthly late fee computed based on the overdue balance 
and the prime rate plus an additional $25 per month, until paid.
    Rule A-12(e) would permit registrants to use the designation ``MSRB 
registered'' when referencing their registrant status.
    Rule A-12(f), rather than the current requirement to provide only a 
primary electronic mail contact, would require the provision of a 
primary regulatory contact, master account administrator, billing 
contact, compliance contact, and primary data quality contact. MSRB 
registrants could also provide an optional regulatory contact, data 
quality contact and technical contact. For dealers, the primary 
regulatory contact would be required to be a registered principal. It 
would be the responsibility of the primary regulatory contact to 
receive official communications from the MSRB, similar to the role of 
the primary electronic mail contact under current Rule G-40.
    Rule A-12(g) would require dealers, prior to registering with the 
MSRB, to provide trade reporting information so that their trade 
reports can be processed correctly, or notify the MSRB that they are 
exempt from the trade reporting requirements.
    Rule A-12(h) would require dealers and municipal advisors to 
comply, within 15 days or such longer period as may be agreed to by the 
requesting authority, with any request from the MSRB, a registered 
securities association or other appropriate regulatory authority, for 
information required as a function of their registration with the MSRB.
    Sections (i)-(k) of proposed Rule A-12 would establish the 
requirements for completing, updating, and annually affirming the 
information on new electronic Form A-12, as further described below 
under ``Form A-12.'' The proposed rule provides for an annual 
affirmation process, similar to the current process under Rule G-40(c), 
which would require registrants to review, update and affirm the 
information on Form A-12 during the first seventeen business days of 
each calendar year. Similar to the current requirement in Rule A-15, 
registrants would be required to update Form A-12, within 30 days, if 
any information on the form becomes inaccurate or the firm ceases to be 
engaged in municipal securities or municipal advisory activities either 
voluntarily or involuntarily through a regulatory or judicial bar, 
suspension or otherwise. Registrants that involuntarily cease to be 
engaged in municipal securities or municipal advisory activities would 
be required to provide a written explanation, on their Form A-12, of 
the circumstances that lead to, and resulted in, the involuntary 
cessation of such activities. Finally, regulated entities would be 
required to inform the MSRB of the types of municipal securities and 
municipal advisory activities engaged in

[[Page 12256]]

by such firms. Currently, the MSRB collects similar information from 
municipal advisor registrants on Form G-40, and from dealers on Form 
RTRS. Finally, MSRB registrants would be able to withdraw their 
registration, either fully or partially, by amending Form A-12.
    Section (l) of Rule A-12 refers to the MSRB Registration Manual as 
the source of specifications for the reporting of information required 
under Rule A-12, the instructions for submitting Form A-12, and other 
information relevant to payments and reporting under Rule A-12.

Form A-12

    As stated in the Notice, the new Form A-12 would be required to be 
submitted electronically by each registrant through a web portal 
located on the MSRB's Web site. Form A-12 would require the submission 
of the following categories of information: Registration categories; 
general firm information (i.e., firm identifiers; evidence of intent to 
engage in municipal securities and/or municipal advisory activities; 
business information; and form of organization); types of business 
activity; contact information for primary regulatory contact, master 
account administrator, billing contact, compliance contact, data 
quality contact, optional regulatory contact, optional data quality 
contact, and optional technical contact; and trade reporting (i.e., 
submission information, including the manner of reporting transactions 
to the MSRB; feedback information, including the method to receive and 
respond to transaction status and error feedback messages from the 
MSRB; and trade reporting identifiers). A full description of the 
information required to be submitted on Form A-12 is contained in the 
Notice.\10\
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    \10\ See Notice, supra note 3, at 2485-2487.
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Rules A-14, A-15 and G-40

    The MSRB proposes to delete the entire rule language for Rules A-
14, A-15 and G-40.

Forms RTRS and G-40

    The MSRB proposes to discontinue Forms RTRS and G-40.

Rule G-14(b)(iv)

    As stated in the Notice, the proposed amendments to Rule G-
14(b)(iv) would replace a requirement to provide a completed Form RTRS 
with a provision exempting dealers from all of the requirements listed 
in Rule G-14(b), related to trade reporting, if the dealer does not 
effect any municipal securities transactions or if the dealer's 
transactions in municipal securities are limited to (1) transactions in 
securities without assigned CUSIP numbers, (2) transactions in 
municipal fund securities, or (3) inter-dealer transactions for 
principal movement of securities between dealers that are not inter-
dealer transactions eligible for comparison in a clearing agency 
registered with the Commission.\11\ Furthermore, the amended rule would 
require dealers to confirm that they qualified for the exemption as 
provided in proposed Rule A-12(g).\12\
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    \11\ MSRB Rule G-14(b)(vi).
    \12\ In connection with the proposed rules change, as a result 
of the proposed deletion of Form RTRS, the MSRB proposes deleting 
the following sentence in the description of the Facility for Real-
Time Transaction Reporting and Price Dissemination (the ``REAL-TIME 
TRANSACTION REPORTING SYSTEM'' or ``RTRS''): ``The requirement for 
testing and submission of a ``Form RTRS'' with the name of a contact 
person is reflected in Rule G-14.''
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Rule G-14(b)(v)

    The MSRB proposes to delete the entire language from this section.

Rule G-14(c)

    The MSRB proposes to delete the reference to testing procedures 
contained in the RTRS Users Manual.
    A full description of the proposal is contained in the Notice. The 
MSRB requested an effective date for the proposed rule change of April 
28, 2014.

III. Summary of Comments Received

    As noted above, the Commission received one comment letter 
regarding the proposed rule change.\13\ In its comment letter, the 
commenter expressed general support for the proposed rule change.\14\
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    \13\ See NAIPFA Letter, supra note 4.
    \14\ See id.
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IV. Discussion and Commission Findings

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to the MSRB.\15\ Specifically, the Commission 
finds that the proposed rule change is consistent with Section 
15B(b)(2)(C) of the Act,\16\ which provides that the MSRB's rules shall 
be ``designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in municipal securities and municipal 
financial products, to remove impediments to and perfect the mechanism 
of a free and open market in municipal securities and municipal 
financial products, and, in general, to protect investors, municipal 
entities, obligated persons, and the public interest.'' \17\
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    \15\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 78o-4(b)(2)(C).
    \17\ Id.
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    The Commission believes that the proposed rule change is consistent 
with Section 15B(b)(2)(C) of the Act because it helps to remove 
impediments to dealers and municipal advisors by streamlining the 
registration process for new registrants and reduce burdens on 
registrants who currently must complete multiple forms to register with 
the MSRB. As noted by the MSRB, the consolidation into a single rule of 
requirements currently located in multiple rules will help clarify and 
simplify the identification of regulatory requirements. Also as noted 
by the MSRB, the proposed rule change would allow the MSRB to collect 
information on the business activities of registrants, which may assist 
the MSRB and other appropriate regulatory authorities in regulating 
dealers and municipal advisors.

V. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to the MSRB, and in 
particular, Section 15B(b)(2)(C) of the Act.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-MSRB-2013-09), as modified 
by Amendment No. 1, be, and hereby is, approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    For the Commission pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-04681 Filed 3-3-14; 8:45 am]
BILLING CODE 8011-01-P