Document ID: SEC-2015-1684-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2015-10-20T04:00Z

[Federal Register Volume 80, Number 202 (Tuesday, October 20, 2015)]
[Notices]
[Pages 63595-63598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26516]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76146; File No. SR-MSRB-2015-11]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Provide a Web-Based Delivery Method for Completing the 
Regulatory Element of the Continuing Education Requirements Pursuant to 
Rule G-3(i)(i)

October 14, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on September 29, 2015, the Municipal 
Securities Rulemaking Board (the ``MSRB'' or ``Board'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the MSRB. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission proposed amendments to Rule G-
3(i)(i), Continuing Education Requirements, Regulatory Element, to 
facilitate the Web-based delivery method for meeting the requirements 
of Rule G-3(i)(i) (the ``proposed rule change''). The proposed rule 
change, which is based on Financial Industry Regulatory Authority 
(``FINRA'') Rule 1250, has been filed for immediate effectiveness.\3\ 
In order to align the MSRB's implementation for Web-based delivery of 
the Regulatory Element with FINRA's, which begins on October 1, 2015, 
the MSRB requests that the Commission waive the 30 day operative 
requirement under Rule 19b-4(f)(6) and the proposed rule change become 
operative on October 1, 2015. The proposed rule change is not making 
any changes to the Firm Element component of the Continuing Education 
Requirements (Rule G-3(i)(ii)).
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    \3\ See Securities Exchange Act Release No. 58092 (July 3, 
2008), 73 FR 40144 (July 11, 2008): The Commission believes that a 
proposed rule change appropriately may be filed as an immediately 
effective rule so long as it is based on and similar to another 
SRO's rule and each policy issue raised by the proposed rule (i) has 
been considered previously by the Commission when the Commission 
approved another exchange's rule (that was subject to notice and 
comment), and (ii) the rule change resolves such policy issue in a 
manner consistent with such prior approval.
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    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2015-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose
Background
    The MSRB has established a professional qualifications program that 
establishes competency standards for municipal securities brokers and 
municipal securities dealers (collectively, ``dealers'') and their 
associated persons. Section 15B(b)(2)(A) of the Act provides that the 
rules of the MSRB shall require associated persons of dealers to meet 
such standards of training, experience, competence, and such other 
qualifications as the MSRB finds necessary or appropriate in the public 
interest or for the protection of investors and municipal entities or 
obligated persons.\4\ The purpose of the continuing education 
requirements (``CE requirements'') is to keep registered persons of 
dealers informed of issues that affect their job responsibilities and 
of product and regulatory developments. MSRB Rule G-3(i) sets forth a 
two-pronged approach for CE requirements consisting of a Regulatory 
Element and a Firm Element; the proposed rule change would amend only 
the Regulatory Element.
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    \4\ 15 U.S.C. 78o-4(b)(2)(A).
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    The requirements for compliance with the Regulatory Element 
component of the MSRB's CE requirements are identical to the 
requirements for the Regulatory Element component of FINRA's CE 
requirements. Both the MSRB and FINRA require certain registered 
persons,\5\ subsequent to their initial qualification and registration 
with a registered securities association, to complete a periodic 
computer-based training program within 120 days of the second 
anniversary of their registration approval dates and every three years 
thereafter. The computer-based training program is developed by the 
Securities Industry Regulatory Council on Continuing Education (``CE 
Council''), of which both the MSRB and FINRA are members.\6\ The 
training developed by the CE Council is focused on compliance, 
regulatory, ethical and sales practice standards. The Regulatory 
Element's content is derived from

[[Page 63596]]

industry rules and regulations, as well as widely accepted standards 
and practices within the industry. Although the specific requirements 
of certain rules may differ slightly among the various self-regulatory 
organizations (``SROs''), the programs are based on standards and 
principles applicable to all.\7\ Currently, the Regulatory Element 
computer-based training may be delivered in a test center or in-firm 
subject to specified procedures.
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    \5\ The MSRB defines a registered person as any individual 
associated with a dealer maintaining a registration category 
pursuant to MSRB Rule G-3.
    \6\ The CE Council is composed of up to 20 industry members from 
broker-dealers, representing a broad cross section of industry 
firms, and representatives from the MSRB and other SROs as well as 
liaisons from the SEC and the North American Securities 
Administrators Association. See http://www.cecouncil.com.
    \7\ There are currently four different Regulatory Element 
Programs developed by the CE Council, the Supervisor Program for 
Registered Principals and Supervisors (S201), the Series 6 Program 
for Investment Company Products/Variable Contracts Representatives 
(S106), the General Program for Series 7 Registered Persons and all 
other registrations (S101), and the Operations Professional Program 
for Series 99 Registered Persons. See http://www.cecouncil.com/regulatory-element/.
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    On June 11, 2015 FINRA proposed changes to its CE requirements 
under FINRA Rule 1250(a)(6) to permit the Regulatory Element program to 
be administered through Web-based delivery or such other technological 
manner and format as specified by FINRA and to eliminate the 
requirements for in-firm and test center delivery of the Regulatory 
Element.\8\ After notice and comment, FINRA's proposed rule was 
approved by the SEC.\9\
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    \8\ See FINRA's rule filing proposing Web-based delivery of the 
Regulatory Element component of CE filed under Section 19(b)(2) of 
the Exchange Act. Securities Exchange Act Release No. 75154 (June 
11, 2015), 80 FR 34777 (June 17, 2015) (File No. SR-FINRA-2015-015) 
(``Proposing Release'').
    \9\ See Order Approving a Proposed Rule Change to Provide a Web-
Based Delivery Method for Completing the Regulatory Element of the 
Continuing Education Requirements. Securities Exchange Act Release 
No. 75581 (July 31, 2015), 80 FR 47018 (August 6, 2015) (File No. 
SR-FINRA-2015-015) (``SEC Approval Order'').
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Proposal
    The CE Council believes that, with the advances in Web-based 
technology, in-firm delivery can be stream-lined, making it easier for 
registered persons to complete the Regulatory Element without having to 
travel to a testing center. The Board supports the CE Council's 
initiative and accordingly approved the proposed rule change. The 
proposed rule change is wholly consistent with FINRA's rule proposal 
amending FINRA Rule 1250 (Continuing Education Requirements) to provide 
a Web-based delivery method for completing the Regulatory Element of 
the CE Requirements, which was filed with the SEC on June 4, 2015 and 
approved by the SEC on July 31, 2015.\10\
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    \10\ See SEC Approval Order. The Commission received four 
comment letters. All commenters supported FINRA's proposed rule 
change. In particular, the commenters noted that the proposal would 
modernize the CE requirements, remove burdens associated with the 
test center delivery method (e.g., the time spent traveling to a 
test center), and reduce the fees and other costs associated with 
the Regulatory Element.
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    The proposed Web-based delivery method will provide registered 
persons the flexibility to meet the Regulatory Element requirement of 
MSRB Rule G-3(i)(i) at a location of their choosing, including their 
private residence, at any time during their 120-day window for 
completion of the Regulatory Element.\11\ The MSRB believes that the 
same time constraints and rigorous security measures taken at the 
testing centers, while appropriate for qualification examinations, are 
not warranted for the completion of the Regulatory Element. The 
proposed rule change would remove burdens associated with the test 
center delivery method (e.g., the time spent traveling to a test center 
and the cost for time spent at a test center). The Web-based format of 
the Regulatory Element program, which will be administered by FINRA, is 
designed with safeguards to authenticate the identities of the CE 
candidates. For instance, prior to commencing a Web-based session, the 
candidate will be asked to provide a portion of their Social Security 
number (either first five or last four digits) and their date of birth. 
This information will only be used by FINRA for matching data in the 
CRD system for authentication purposes and the Web CE system will 
discard this information after the matching process.\12\
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    \11\ Although the proposed rule change provides for flexibility, 
firms may impose additional conditions upon registered persons based 
on the firm's supervisory obligations and compliance controls.
    \12\ See Proposing Release.
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    In its rule filing, FINRA outlined a timeline for phasing in Web-
based delivery and guidance for any firms that currently utilize in-
firm delivery for CE delivery.\13\ After the SEC's approval of FINRA's 
rule change, FINRA announced that it will launch the first phase of the 
Web-based delivery of Regulatory Element (``CE Online''), which will 
include the S106, S201 and S901 Regulatory Element programs, on October 
1, 2015 and will launch the second phase of CE Online, which will 
include the S101 Regulatory Element program, on January 4, 2016.\14\ 
Before commencing a Web-based session, each candidate will be required 
to agree to the Rules of Conduct for Web-based delivery. Among other 
things, the Rules of Conduct will require each candidate to attest that 
he or she is in fact the person who is taking the Web-based session and 
attest to compliance with the Rules of Conduct.
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    \13\ Id.
    \14\ See Continuing Education, SEC Approves Amendments Relating 
to Web-based Delivery of the Regulatory Element, FINRA Regulatory 
Notice 15-28 (August 2015). S106 is for Investment Company and 
Variable Contracts Representatives, the S201 is for registered 
principals and supervisors, and the S101 is for all other 
registration categories.
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    The MSRB endorses FINRA's timeline for phasing in the new Web-based 
delivery method and phasing-out the in-firm delivery of the Regulatory 
Element.\15\ The Board requests that the proposed rule change to the 
Regulatory Element CE Requirements pursuant to Rule G-3(i)(i) become 
operative on October 1, 2015 to coincide with the launch of the first 
Web-based modules for the Regulatory Element. In accordance with 
FINRA's rule proposal, delivery of the Regulatory Element at a test 
center would be phased out by no later than six months after January 4, 
2016. Registered persons will continue to have the option of completing 
the Regulatory Element in a test center until the phase out of the test 
center delivery method, but they will be required to use the Web-based 
system after that date. Firms will not be able to establish new in-firm 
delivery programs after October 1, 2015. Moreover, firms that have pre-
existing in-firm delivery programs established prior to October 1, 2015 
would not be able to use that delivery method for the S106, S201 and 
S901 Regulatory Element programs after October 1, 2015, which is the 
anticipated launch date of the Web-based delivery for these programs. 
However, firms may continue to use their pre-existing in-firm delivery 
programs for the S101 Regulatory Element program until January 4, 2016, 
which is the anticipated launch date of Web-based delivery for the S101 
program. The MSRB is not proposing any changes to the Firm Element CE 
Requirements under MSRB Rule G-3(i)(ii).
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    \15\ Id. FINRA is proposing to phase out test-center delivery by 
no later than six months after January 4, 2016. Registered persons 
will continue to have the option of completing the Regulatory 
Element in a test center until the phase out of the test center 
delivery method, but they will be required to use the FINRA CE 
Online System after that date. Further, FINRA is proposing to phase 
out the current option for ``in-firm delivery on a rolling basis as 
each Regulatory Element program becomes available for CE Online.'' 
FINRA CE Online System is accessible through the internet.
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
the provisions of Section 15B(b)(2)(A) of the Act,\16\ which authorizes 
the MSRB, in part, to prescribe for municipal securities brokers or 
municipal

[[Page 63597]]

securities dealers and their associated persons ``standards of 
training, experience, competence, and such other qualifications as the 
Board finds necessary or appropriate in the public interest or for the 
protection of investors and municipal entities or obligated persons.'' 
Section 15B(b)(2)(A) of the Act \17\ also provides, in part, that the 
Board may appropriately classify municipal securities brokers and 
municipal securities dealers and persons associated with such municipal 
securities brokers and municipal securities dealers to meet such 
standards of training, experience, competence, and such other 
qualifications as the MSRB finds necessary or appropriate in the public 
interest or for the protection of investors and municipal entities or 
obligated persons.
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    \16\ 15 U.S.C. 78o-4(b)(2)(A).
    \17\ Id.
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    The MSRB believes that the proposed rule change will permit 
registered persons to utilize the time saved attending test centers to 
focus on the content and learning objectives set-forth in the CE 
modules, potentially leading to a better understanding of the modules 
and thus enhanced investor protections. The proposed rule change is 
designed to preserve the integrity of the Regulatory Element of the CE 
requirements while making compliance with the Regulatory Element less 
burdensome on firms by giving them and their covered associated persons 
additional flexibility and, as a result, a reduction in the cost of the 
Regulatory Element requirement.

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

    The MSRB does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The MSRB notes that the 
proposed rule change is specifically intended to reduce the burden on 
firms while preserving the integrity of the Regulatory Element program. 
Web-based delivery will allow registered persons the flexibility to 
complete the Regulatory Element at any location and at any time during 
their 120-day window for completion of the Regulatory Element and 
offers cost savings over test centers.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A) \18\ of the Act and Rule 19b-
4(f)(6) \19\ thereunder, the MSRB has designated the proposed rule 
change as one that affects a change that does not: (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate. A proposed rule change filed under Rule 
19b-4(f)(6) normally does not become operative until 30 days after the 
date of filing.\20\ However, Rule 19b-4(f)(6)(iii) permits the 
Commission to waive the 30 day operative delay if such action is 
consistent with the protection of investors and the public 
interest.\21\ The MSRB has requested that the Commission designate the 
proposed rule change operative on October 1, 2015, which is less than 
30 days after the date of filing of the proposed rule change, as 
specified in Rule 19b-4(f)(6)(iii).\22\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ Id.
    \21\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file a proposed rule change, along with a brief 
description and text of such proposed rule change, at least five 
business days prior to the date of filing, or such shorter time as 
designated by the Commission. The Commission has designated a 
shorter time for delivery of such written notice.
    \22\ See SR-MSRB-2015-11 (filed with the Commission on September 
29, 2015).
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    The MSRB has provided that the proposed rule change is based on 
FINRA Rule 1250, which was filed for effectiveness commencing October 
1, 2015 and approved by the Commission on July 31, 2015.\23\ The MSRB 
believes that an October 1, 2015 implementation date of the proposed 
rule change is necessary in order to align the MSRB's implementation 
for Web-based delivery of the Regulatory Element with FINRA's, which 
begins on October 1, 2015. The MSRB has stated that the Regulatory 
Element component of the MSRB's CE requirements is identical to the 
Regulatory Element component of FINRA's CE requirements and that the 
proposed rule change will provide registered persons with time and cost 
savings by eliminating the need to visit test centers to complete the 
Regulatory Element. The Commission believes that waiving the 30 day 
operative delay is consistent with the protection of investors and the 
public interest because it will allow for the consistent implementation 
of the Regulatory Element of the MSRB's CE requirements with FINRA's 
and permit persons registered with both the MSRB and FINRA to fulfill 
their respective CE requirements in a uniform manner. Therefore, the 
Commission hereby waives the 30 day operative delay and designates the 
proposed rule change operative on October 1, 2015.\24\
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    \23\ See supra note 14.
    \24\ For purposes only of waiving the 30-day operative delay for 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2015-11 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MSRB-2015-11. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be

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available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the MSRB. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-MSRB-2015-11 and should be submitted on or before 
November 10, 2015.

    For the Commission, pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26516 Filed 10-19-15; 8:45 am]
BILLING CODE 8011-01-P