Document ID: SEC-2023-1009-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2023-09-18T04:00Z

[Federal Register Volume 88, Number 179 (Monday, September 18, 2023)]
[Notices]
[Pages 63984-63993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20077]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98353; File No. SR-MSRB-2023-05]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Granting Approval of a Proposed Rule Change To Amend MSRB 
Rule G-3 To Create an Exemption for Municipal Advisor Representatives 
From Requalification by Examination and Remove Waiver Provisions and To 
Amend MSRB Rule G-8 To Establish Related Books and Records Requirements

September 12, 2023.

I. Introduction

    On July 21, 2023, the Municipal Securities Rulemaking Board 
(``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to: (1) amend MSRB 
Rule G-3 (``Rule G-3''), on professional qualification requirements, to 
(i) remove the waiver provisions with respect to municipal advisor 
representative and municipal advisor principal qualification 
requirements; (ii) establish a new, criteria-based exemption to permit 
certain individuals to requalify as a municipal advisor representative

[[Page 63985]]

without reexamination; (iii) retitle and replace Supplementary Material 
.02, on extraordinary waivers, with text specifying the means for 
electronic delivery of the requisite notice to the MSRB regarding 
satisfaction of the criteria-based exemption; and (iv) make technical 
changes to the rule to update certain phrases and clauses; and (2) 
amend MSRB Rule G-8 (``Rule G-8''), on books and records, to establish 
accompanying recordkeeping requirements (collectively, the ``proposed 
rule change'').
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    The MSRB requested that the proposed rule change be approved with a 
compliance date of no more than 30 days following the Commission 
approval date.\3\
---------------------------------------------------------------------------

    \3\ See Exchange Act Release No. 97984 (July 25, 2023), 88 FR 
49528, 49529 (July 31, 2023) (File No. SR-MSRB-2023-05) 
(``Notice'').
---------------------------------------------------------------------------

    The proposed rule change was published for comment in the Federal 
Register on July 31, 2023.\4\ The Commission received one comment 
letter on the proposed rule change.\5\ On August 31, 2023, the MSRB 
responded to the comment letter.\6\ As further described below, the 
Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \4\ See id. at 49528.
    \5\ See Letter from Susan Gaffney, Executive Director, National 
Association of Municipal Advisors, dated August 21, 2023 (``NAMA 
Letter'').
    \6\ See Letter to Secretary, Commission, from Ernesto A. Lanza, 
Chief Regulatory and Policy Officer, MSRB, dated August 31, 2023 
(``MSRB Letter'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

A. Background

    The MSRB explained that it is charged with setting professional 
qualification standards for brokers, dealers, and municipal securities 
dealers (collectively, ``dealers,'' and each individually, a 
``dealer''), as well as municipal advisors.\7\ Specifically, the MSRB 
stated that Section 15B(b)(2)(A) of the Act \8\ authorizes the Board to 
prescribe standards of training, experience, competence, and such other 
qualifications as it finds necessary or appropriate in the public 
interest or for the protection of investors and municipal entities or 
obligated persons.\9\ The MSRB also stated that Sections 
15B(b)(2)(A)(i) \10\ and 15B(b)(2)(A)(iii) \11\ of the Act provide that 
the Board may appropriately classify associated persons of dealers and 
municipal advisors and require persons in any such class to pass tests 
prescribed by the Board.\12\ The MSRB explained that, accordingly, it 
has adopted professional qualification standards to ensure that 
associated persons of dealers and municipal advisors attain and 
maintain specified levels of competence and knowledge for each 
qualification category.\13\
---------------------------------------------------------------------------

    \7\ Notice, 88 FR at 49529.
    \8\ 15 U.S.C. 78o-4(b)(2)(A).
    \9\ Notice, 88 FR at 49529.
    \10\ 15 U.S.C. 78o-4(b)(2)(A)(i).
    \11\ 15 U.S.C. 78o-4(b)(2)(A)(iii).
    \12\ Notice, 88 FR at 49529.
    \13\ Id.
---------------------------------------------------------------------------

    With respect to associated persons of municipal advisors, the MSRB 
noted that Rule G-3(d)(i)(A) defines the term ``municipal advisor 
representative'' to mean a natural person associated with a municipal 
advisor who engages in municipal advisory activities on the municipal 
advisor's behalf, other than a person performing only clerical, 
administrative, support, or similar functions.\14\ The MSRB explained 
that Rule G-3(d)(ii)(A) requires all persons meeting the definition of 
a municipal advisor representative to be qualified in that capacity by 
taking and passing the Municipal Advisor Representative Qualification 
Examination (``Series 50 examination'') prior to being qualified as a 
municipal advisor representative.\15\ The MSRB further explained that, 
under current Rule G-3(d)(ii)(B), any person who, after qualifying as a 
municipal advisor representative, ceases to be associated with a 
municipal advisor firm for two or more years shall retake and pass the 
Series 50 examination, unless a waiver is granted from the Board in 
``extraordinary cases'' pursuant to current Rule G-3(h)(ii).\16\
---------------------------------------------------------------------------

    \14\ Id. at 49529 n.3. The MSRB further stated that, pursuant to 
Section 15B(e)(4)(A)(i) and (ii) of the Exchange Act (15 U.S.C. 78o-
4(e)(4)(A)(i) and (ii)) and MSRB Rules D-13, G-3(d)(i)(A), and G-
3(d)(ii)(A), municipal advisory activities requiring qualification 
as a municipal advisor representative include providing 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; or undertaking a solicitation of a municipal entity or 
obligated person. Id. at 49530 n.9.
    \15\ Id. at 49529 n.3.
    \16\ Id.
---------------------------------------------------------------------------

    In contrast, as MSRB guidance affirms, Rule G-3(e)(i) defines the 
term ``municipal advisor principal'' to mean a natural person 
associated with a municipal advisor who is directly engaged in the 
management, direction, or supervision of the municipal advisory 
activities of the municipal advisor and its associated persons; Rule G-
3(e)(ii) requires all persons meeting the definition of municipal 
advisor principal to be qualified in that position by, among other 
things, taking and passing both the Series 50 examination and the 
Municipal Advisor Principal Qualification Examination (``Series 54 
examination''); and Rule G-3(e)(iii) requires every municipal advisor 
firm to have at least one municipal advisor principal.\17\ In the 
Notice, the MSRB stated that, under current Rule G-3(e)(ii)(B), any 
person who ceases to be associated with a municipal advisor for two or 
more years after having qualified as a municipal advisor principal, in 
accordance with the rule, must retake and pass both the Series 50 
examination and Series 54 examination prior to being qualified as a 
municipal advisor principal, unless a waiver is granted from the Board 
in ``extraordinary cases'' pursuant to current Rule G-3(h)(ii).\18\ The 
MSRB also stated that Rule G-3(e)(ii)(C) affords temporary relief to an 
individual who is qualified as a municipal advisor representative, but 
is functioning in the capacity of a municipal advisor principal, for a 
period of 120 days after becoming designated as a municipal advisor 
principal, to take and pass the Series 54 examination.\19\
---------------------------------------------------------------------------

    \17\ See MSRB, ``FAQs on Municipal Advisor Professional 
Qualification and Examination Requirements,'' at Questions 3 & 19 
(Dec. 2021), available at https://www.msrb.org/sites/default/files/FAQ-MSRB-Series-50-Exam.pdf (``MSRB Series 50 Examination FAQs'').
    \18\ Notice, 88 FR at 49530.
    \19\ Id. at 49537.
---------------------------------------------------------------------------

    The MSRB indicated that, as part of its rule book modernization 
initiative and in light of an industry-wide continuing education 
(``CE'') transformation initiative for broker-dealers,\20\ it undertook 
a review of Rule G-3 to identify opportunities to provide individuals 
associated with municipal advisor firms increased regulatory 
flexibility with respect to maintaining their professional 
qualifications.\21\ The MSRB indicated that it filed the proposed rule 
change to that end.\22\
---------------------------------------------------------------------------

    \20\ The MSRB indicated that, as industry and market practices 
evolved in recent years, the MSRB, in coordination with other self-
regulatory organizations, advanced rulemaking initiatives to 
modernize applicable professional qualification and continuing 
education program requirements for dealers (``CE Transformation''). 
Id. at 49529 n.7 (citing, as an example, Exchange Act Release No. 
95684 (Sept. 7, 2022), 87 FR 56137 (Sept. 13, 2022) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Amend MSRB Rule G-3 Continuing Education Program Requirements to 
Harmonize with Industry-Wide Transformation) (File No. SR-MSRB-2022-
07)).
    \21\ Id. at 49529.
    \22\ Id.
---------------------------------------------------------------------------

B. Summary of the Proposed Rule Change

    The MSRB explained that the proposed rule change would: (1) create 
a one-time, criteria-based exemption, under Rule G-3, for former 
municipal advisor representatives to, without reexamination, requalify 
in that capacity

[[Page 63986]]

no later than one year after their two-year lapse in qualification; (2) 
remove language from Rule G-3 that currently permits the Board, in 
extraordinary cases, to waive the reexamination requirements for 
municipal advisor representatives and municipal advisor principals; (3) 
make certain clarifying amendments to Rule G-3 to address an 
interpretive question pertaining to a lapse in qualification for an 
individual associated with a dually registered firm that is both a 
dealer and a municipal advisor; (4) retitle and replace the current 
text of Supplementary Material .02 of Rule G-3 with text specifying the 
means for electronic delivery of the requisite notice to the MSRB 
regarding satisfaction of the criteria-based exemption; (5) make 
technical amendments to Rule G-3 to update certain phrases, clauses, 
and referenced provisions to, among other things, improve the overall 
readability of the rule; and (6) amend Rule G-8 to require municipal 
advisors to make and keep certain books and records relating to the 
exemption to be created under the proposed rule change, as prescribed 
under Rule G-3(h)(ii)(I).\23\
---------------------------------------------------------------------------

    \23\ Id.
---------------------------------------------------------------------------

    The MSRB explained that the proposed rule change is intended to 
offer flexibility, provide additional certainty, and eliminate the 
extraordinary nature of the waiver process for individuals and 
municipal advisor firms without reducing protection for municipal 
entity and obligated person clients who expect that municipal advisor 
professionals have satisfied professional qualification standards.\24\
---------------------------------------------------------------------------

    \24\ Id. at 49535.
---------------------------------------------------------------------------

    The MSRB further explained that the proposed rule change is 
specific to the professional qualification obligations of municipal 
advisors, including associated persons thereof, under Rule G-3, and 
does not modify any requirements to firms registered solely as dealers, 
or associated persons thereof.\25\
---------------------------------------------------------------------------

    \25\ Id. at 49529.
---------------------------------------------------------------------------

    A more detailed description of the proposed rule change follows.
i. Proposed Amendments to Rule G-3(d)(ii)(B)
    The MSRB noted that currently, pursuant to Rule G-3(d)(ii)(B), on 
qualification requirements for municipal advisor representatives, any 
person who ceases to be associated with a municipal advisor \26\ for 
two or more years after having qualified as a municipal advisor 
representative, in accordance with the rule, must take and pass the 
Series 50 examination prior to being qualified as a municipal advisor 
representative, unless a waiver is granted.\27\ The MSRB stated that 
its proposed amendments to this provision would provide that any person 
who ceases to be associated with ``or engaged in municipal advisory 
activities on behalf of'' a municipal advisor for two or more years 
after having qualified by examination as a municipal advisor 
representative (i.e., experiences a ``lapse in qualification'') must 
take and pass the Series 50 examination unless exempt from such 
requirement pursuant to Rule G-3(h)(ii), as amended by the proposed 
rule change.\28\
---------------------------------------------------------------------------

    \26\ For purposes of this Order, when the term ``municipal 
advisor'' is used it refers only to the firm and not associated 
persons of the firm. See also id. at 49529 n.8 (same, for purposes 
of the Notice and Exhibit 5 thereto).
    \27\ Id. at 49529.
    \28\ Id. at 49529-30.
---------------------------------------------------------------------------

    The proposed amendments to Rule G-3(d)(ii)(B) would add the new 
language ``or engaged in municipal advisory activities on behalf of,'' 
which the MSRB stated is intended to provide clarity on the requirement 
for an individual associated with a firm that is dually registered as a 
dealer and municipal advisor.\29\ The MSRB explained that if an 
individual associated with such firm ceases to be engaged in activity 
requiring qualification as a municipal advisor representative and 
instead engages only in municipal securities business on behalf of the 
firm for a period of two or more years, then that individual's 
municipal advisor representative qualification would have lapsed, 
notwithstanding the fact that such person remains associated with a 
firm that is also a registered municipal advisor.\30\ The MSRB noted 
that the proposed amendments to Rule G-3(d)(ii)(B) also would delete 
the mention of a waiver (i.e., the clause ``a waiver is granted'') 
because, subsequent to the proposed rule change, such persons would 
need to qualify by examination as municipal advisor representatives, 
unless obtaining the one-time criteria-based exemption.\31\
---------------------------------------------------------------------------

    \29\ Id. at 49530.
    \30\ Id. The MSRB stated that, under Exchange Act Rule 15Ba1-2 
(17 CFR 240.15Ba1-2), SEC Form MA-I: Information Regarding Natural 
Persons Who Engage in Municipal Advisory Activities (``SEC Form MA-
I'' or ``Form MA-I'') is filed with the Commission to indicate 
natural persons who are associated with the municipal advisor and 
engaged in municipal advisory activities on its behalf. Id. at 49530 
n.10. The MSRB further stated that firms are required to promptly 
amend SEC Form MA-I, pursuant to Exchange Act Rule 15Ba1-5 (17 CFR 
240.15Ba1-5), in such cases where an individual ceases to engage in 
municipal advisory activities on behalf of a firm. Id.
    \31\ Id. at 49530.
---------------------------------------------------------------------------

ii. Proposed Amendments to Rule G-3(e)(ii)(A) and (B)
    The MSRB noted that currently, pursuant to Rule G-3(e)(ii)(A), as a 
pre-requisite to becoming qualified as a municipal advisor principal a 
person must take and pass the Series 50 examination.\32\ The MSRB 
stated that its proposed amendments to this provision would provide 
that taking and passing the Series 50 examination is the pre-requisite 
to becoming qualified as a municipal advisor principal ``unless exempt 
from taking the Municipal Advisor Representative Qualification 
Examination pursuant to paragraph (h)(ii) of this rule,'' \33\ which 
the MSRB stated is intended to allow for individuals previously 
qualified as municipal advisor principals to use the criteria-based 
exemption to obtain requalification with the Series 50 examination and 
explicitly provide for its application to such individuals.\34\ The 
MSRB explained that, notwithstanding the availability of the criteria-
based exemption from requalification with the Series 50 examination, 
such municipal advisor principals would still need to take and pass the 
Series 54 examination.\35\
---------------------------------------------------------------------------

    \32\ Id.
    \33\ Id.
    \34\ Id.
    \35\ Id.
---------------------------------------------------------------------------

    In addition, the MSRB noted that currently, pursuant to Rule G-
3(e)(ii)(B), any person who ceases to be associated with a municipal 
advisor for two or more years after having qualified as a municipal 
advisor principal, in accordance with the rule, must take and pass the 
Series 50 examination and the Series 54 examination prior to being 
qualified as a municipal advisor principal, unless a waiver is granted 
under current subparagraph (h)(ii) of this rule.\36\ The MSRB stated 
that its proposed amendments to this provision would provide that any 
person who ceases to be associated with ``or engaged in municipal 
advisory activities on behalf of'' a municipal advisor for two or more 
years after having qualified by examination as a municipal advisor 
principal must take and pass the Series 50 examination unless exempt 
from such requirement pursuant to Rule G-3(h)(ii), as amended by the 
proposed rule change.\37\
---------------------------------------------------------------------------

    \36\ Id.
    \37\ Id.
---------------------------------------------------------------------------

    The proposed amendments to Rule G-3(e)(ii)(B) would add the new 
language

[[Page 63987]]

``or engaged in municipal advisory activities on behalf of,'' which the 
MSRB stated is intended to provide clarity on the requirement for an 
individual associated with a firm that is dually registered as a dealer 
and municipal advisor.\38\ For example, the MSRB explained that if an 
individual associated with such firm ceases to be engaged in activity 
requiring qualification as a municipal advisor principal and instead 
engages only in municipal securities business on behalf of the firm for 
a period of two or more years, then that individual's municipal advisor 
representative and municipal advisor principal qualifications would 
have lapsed, notwithstanding the fact that such person remains 
associated with a firm that is also a registered municipal advisor.\39\ 
The proposed amendments to Rule G-3(e)(ii)(B) would also delete the 
mention of a waiver (i.e., the clause ``a waiver is granted''), which 
the MSRB stated is intended to specify that such persons would need to 
qualify by examination as municipal advisor principals.\40\
---------------------------------------------------------------------------

    \38\ Id.
    \39\ Id.
    \40\ Id.
---------------------------------------------------------------------------

iii. Proposed Removal of Extraordinary Waiver Provisions Under Rule G-
3(h)(ii)
    The MSRB stated that its proposed amendments to Rule G-3(h)(ii) 
would remove references, in their entirety, to the ability to obtain a 
waiver in extraordinary cases for a former municipal advisor 
representative or municipal advisor principal and would replace such 
language with a criteria-based exemption for former municipal advisor 
representatives.\41\ The MSRB indicated it believes that this standard 
set forth within the four corners of the rule would provide greater 
flexibility to municipal advisor firms and their associated persons 
while simultaneously providing greater certainty for firms and such 
individuals who may wish to seek an exemption from the obligation to 
requalify as a municipal advisor representative by reexamination.\42\ 
The MSRB also indicated it believes, at this time, that the objective 
nature of the criteria-based exemption is preferable to the subjective 
nature of the waiver provisions in current Rule G-3(h)(ii).\43\ 
Additionally, the MSRB stated that the removal of the ability to seek 
and obtain a waiver for municipal advisor principals furthers municipal 
entity and obligated person protection by ensuring, through 
requalification by reexamination, that individuals have demonstrated 
knowledge and skills necessary to discharge the responsibilities of a 
municipal advisor principal, including the vested authority for the 
supervision, oversight, and management of firms' municipal advisory 
activities and that of its associated persons.\44\
---------------------------------------------------------------------------

    \41\ Id. at 49531.
    \42\ Id.
    \43\ Id.
    \44\ Id. The MSRB indicated it has previously stated that the 
Series 54 examination is intended to ensure that a person seeking to 
qualify as a municipal advisor principal satisfies a specified level 
of competency and knowledge by measuring a candidate's ability to 
apply the applicable federal securities laws, including MSRB rules, 
to the municipal advisory activities of a municipal advisor. Id. at 
49531 n.11 (citing Exchange Act Release No. 84341 (Oct. 2, 2018), 83 
FR 50708, 50710 (Oct. 9, 2018) (Notice of Filing of a Proposed Rule 
Change To Amend MSRB Rule G-3, on Professional Qualification 
Requirements, To Require Municipal Advisor Principals To Become 
Appropriately Qualified by Passing the Municipal Advisor Principal 
Qualification Examination) (File No. SR-MSRB-2018-07)). In contrast, 
the MSRB indicated it has previously stated that the Series 50 
examination ensures a minimum level of knowledge of the job 
responsibilities and regulatory requirements by passing the general 
qualification examination. Id. (citing Exchange Act Release No. 
73708 (Dec. 1, 2014), 79 FR 72225, 72227 (Dec. 5, 2014) (Notice of 
Filing of a Proposed Rule Change Consisting of Proposed Amendments 
to MSRB Rules G-1, on Separately Identifiable Department or Division 
of a Bank; G-2, on Standards of Professional Qualification; G-3, on 
Professional Qualification Requirements; and D-13, on Municipal 
Advisory Activities) (File No. SR-MSRB-2014-08)).
---------------------------------------------------------------------------

iv. Proposed Rule Change To Adopt Rule G-3(h)(ii)(A)-(I) To Establish 
Conditions for Obtaining the Criteria-Based Exemption
    The MSRB stated that the proposed rule change would amend Rule G-
3(h)(ii) to prescribe that an individual shall be exempt from the 
requirements of subparagraph (d)(ii)(B) if the specified conditions 
under proposed Rule G-3(h)(ii)(A)-(I) are met.\45\ Specifically, the 
MSRB stated that the proposed amendments to adopt Rule G-3(h)(ii)(A)-
(I) would establish nine specified criteria-based conditions that must 
be met in order for an individual (and the municipal advisor firm with 
which such individual is associated \46\ or seeks to be associated) to 
take advantage of the exemption.\47\
---------------------------------------------------------------------------

    \45\ Id. at 49531.
    \46\ The MSRB noted that an individual who has associated with a 
municipal advisor firm would be prohibited from engaging in any 
municipal advisory activities, as defined under Rule D-13 and 
described in Section 15B(e)(4)(A)(i) and (ii) of the Act (15 U.S.C. 
78o-4(e)(4)(A)(i) and (ii)) and the rules and regulations 
promulgated thereunder (i.e., activities involving the provision of 
advice to or on behalf of a municipal entity or obligated person 
with respect to municipal financial products or the issuance of 
municipal securities or undertaking a solicitation of a municipal 
entity or obligated person), until such time that the individual has 
satisfied the conditions set forth under the proposed rule change. 
Id. at 49531 n.12.
    \47\ Id. at 49531.
---------------------------------------------------------------------------

    The MSRB described the criteria-based conditions that would be 
required to be met in order to qualify for the exemption as follows: 
\48\
---------------------------------------------------------------------------

    \48\ Id. at 49531-32.
---------------------------------------------------------------------------

    (1) The individual was previously qualified as a municipal advisor 
representative by taking and passing the Series 50 examination.
    (2) The individual maintained the municipal advisor representative 
qualification for a period of at least three consecutive years while 
associated with and engaging in municipal advisory activities on behalf 
of one or more municipal advisor firm(s).
    (3) Such qualification lapsed pursuant to proposed amended Rule G-
3(d)(ii)(B) and no more than one year has passed since such lapse in 
qualification.
    (4) The individual has not engaged in activities requiring 
qualification as a municipal advisor representative \49\ during the 
individual's lapse in qualification.
---------------------------------------------------------------------------

    \49\ See id. at 49531 n.13 (citing Rule G-3(d)(i)(A)).
---------------------------------------------------------------------------

    (5) The individual is not subject to any events or proceedings that 
resulted in a regulatory action disclosure report, civil judicial 
action disclosure report, customer complaint/arbitration/civil 
litigation disclosure report, criminal action disclosure report, or 
termination disclosure report on SEC Form MA-I.\50\
---------------------------------------------------------------------------

    \50\ The MSRB explained that it included these types of 
disclosures in the proposed exemption criteria, as opposed to other 
types of disclosures required by SEC Form MA-I, because these relate 
most closely to violations of municipal advisor-related or 
investment-related regulations, rules, or industry standards of 
conduct. Id. at 49531 n.14.
---------------------------------------------------------------------------

    (6) The individual has not previously obtained the exemption from 
requalification by examination described in the proposed amended Rule 
G-3(h)(ii).\51\
---------------------------------------------------------------------------

    \51\ The MSRB noted that, should an individual's municipal 
advisor representative qualification lapse again after such person 
obtains the criteria-based exemption under the proposed rule change, 
that individual would be required to requalify by taking and passing 
the Series 50 examination. Id. at 49531 n.15.
---------------------------------------------------------------------------

    (7) Prior to engaging in municipal advisory activities on behalf of 
the municipal advisor firm with which the individual is to associate 
(or reassociate), as evidenced by the filing of SEC Form MA-I, the 
municipal advisor firm provided, and the individual completed, CE 
covering, at minimum, the subject areas of: (i) the principles of fair 
dealing; (ii) the applicable regulatory obligations under MSRB Rules G-
20, on gifts and gratuities, G-37, on political contributions and 
prohibitions on municipal securities business and

[[Page 63988]]

municipal advisory business, G-40, on advertising by municipal 
advisors, and G-8, on books and records to be made and maintained; 
(iii) for non-solicitor municipal advisors, the core conduct standards 
under MSRB Rule G-42, including the fiduciary duty obligations owed to 
municipal entity clients, or for solicitor municipal advisors, the core 
obligations of MSRB Rule G-46; and (iv) any changes to applicable 
securities laws and regulations, including applicable MSRB rules, that 
were adopted since the individual was last associated with a municipal 
advisor.
    (8) Prior to engaging in municipal advisory activities on behalf of 
the municipal advisor firm with which the individual is to associate 
(or reassociate), as evidenced by the filing of an SEC Form MA-I, the 
municipal advisor firm provided, and the individual reviewed, the 
compliance policies and procedures of the municipal advisor firm.
    (9) Upon satisfaction of the conditions set forth in the paragraphs 
above, the municipal advisor firm filed a completed SEC Form MA-I with 
the Commission with respect to such individual. Within 30 days of the 
acceptance \52\ of a completed SEC Form MA-I identifying such 
individual as engaging in municipal advisory activities on behalf of 
the municipal advisor firm, the municipal advisor firm provided the 
notification (``affirmation notification'') electronically to the MSRB 
that the individual met the criteria in order to be exempt from the 
requalification requirements of Rule G-3(d)(ii)(B) following a lapse in 
qualification.
---------------------------------------------------------------------------

    \52\ The MSRB noted that the Commission currently does not make 
the form acceptance date publicly available, but this information is 
made available to the form submitter as part of the form filing 
process. Id. at 49532 n.16.
---------------------------------------------------------------------------

    The MSRB stated that the affirmation notification would be required 
to be on firm letterhead and include the following information: \53\
---------------------------------------------------------------------------

    \53\ Id. at 49532.
---------------------------------------------------------------------------

    1. The municipal advisor firm's MSRB ID number;
    2. The first and last name of the individual seeking to obtain the 
exemption;
    3. The individual's Financial Industry Regulatory Authority 
(``FINRA'') Central Registration Depository (``CRD'') number if 
applicable;
    4. The start date of the individual's association (or 
reassociation) with the municipal advisor firm;
    5. An affirmative statement that the municipal advisor has 
undertaken a diligent effort to reasonably conclude that the individual 
met the applicable requirements set forth in proposed amended Rule G-
3(h)(ii);
    6. An affirmative statement attesting that the municipal advisor 
firm provided both the requisite CE and the municipal advisor's 
compliance policies and procedures to the individual for review along 
with the date the individual completed the CE and review of the 
municipal advisor's compliance policies and procedures provided by the 
municipal advisor firm;
    7. The date the municipal advisor firm filed SEC Form MA-I (and the 
date of its acceptance) on behalf of the individual as required under 
proposed amended Rule G-3(h)(ii)(I); and
    8. A signature by the individual seeking to obtain the criteria-
based exemption and a signature by a municipal advisor principal of the 
municipal advisor firm each attesting the accuracy of certain content 
set forth in the affirmation notification. Specifically, the individual 
must sign the affirmation notification attesting that the conditions 
outlined in proposed amended Rule G-3(h)(ii)(A) through (H) were met. 
And, a municipal advisor principal must sign the affirmation 
notification, on behalf of the municipal advisor firm, attesting that, 
based on the exercise of reasonable diligence, the conditions outlined 
in proposed amended Rule G-3(h)(ii)(A) through (I) were met.\54\
---------------------------------------------------------------------------

    \54\ The MSRB noted that the respective individual and firm 
signature requirements are intended to differentiate and confirm the 
distinct responsibilities and obligations of the individual seeking 
to obtain the criteria-based exemption and those of the municipal 
advisor firm itself, as evidenced by the signature of a municipal 
advisor principal on behalf of the municipal advisor firm. Id. at 
49532 n.17.
---------------------------------------------------------------------------

    According to the MSRB, the proposed conditions were designed to 
ensure that individuals seeking to obtain the exemption (i.e., 
requalification without reexamination) have obtained and maintained the 
baseline level of knowledge and experience, and have exhibited conduct 
aligned with being a fiduciary, which the MSRB indicated is in 
furtherance of municipal entity and obligated person protection.\55\ 
The MSRB indicated it believes that the criteria outlined above balance 
the goal of providing reasonable regulatory flexibility with the 
demands of the fiduciary standard applicable to municipal advisors.\56\ 
For example, the MSRB explained that the requirement that individuals 
be duly qualified as a municipal advisor representative for at least 
three consecutive years prior to, for example, seeking other career 
opportunities in related capacities (e.g., working for a dealer or 
municipal entity) or stepping away for family obligations ensures that 
a reasonable level of professional experience has been established 
before an individual can obtain the exemption.\57\ In contrast, the 
MSRB noted that this period is not so long as to hinder the ability, at 
a given point, for an individual to, for example, temporarily engage in 
other meaningful roles within the municipal securities industry or to 
step away from their position due to family obligations.\58\
---------------------------------------------------------------------------

    \55\ Id. at 49532.
    \56\ Id.
    \57\ Id.
    \58\ Id.
---------------------------------------------------------------------------

    According to the MSRB, these conditions were also designed to 
enhance an individual's familiarity with regulatory and business 
developments that occurred while they were not associated with a 
municipal advisor firm, before reengaging in municipal advisory 
activities, but not be so unduly burdensome as to hinder 
reassociation.\59\ The MSRB explained that the proposed requirement to 
provide the MSRB with notice of individuals who have obtained the 
exemption (i.e., by submitting the affirmation notification to the 
MSRB) is designed to facilitate transparency and provide an audit trail 
regarding an individual's status as a municipal advisor 
representative.\60\ The MSRB indicated that it will use the affirmation 
notification, as described in the proposed amended Rule G-3(h)(ii)(I), 
to help identify qualified municipal advisor representatives and keep 
the list of such representatives updated on its website.\61\ 
Additionally, the MSRB stated that the conditions pertaining to 
requisite filings with the SEC would also provide an audit trail and 
permit the entities charged with examination and enforcement authority 
to confirm compliance with relevant obligations.\62\
---------------------------------------------------------------------------

    \59\ Id.
    \60\ Id.
    \61\ The MSRB noted that it currently publishes a list of 
registered municipal advisors and qualified municipal advisor 
professionals at https://www.msrb.org/Municipal-Advisors. Id. at 
49532 n.18.
    \62\ Id. at 49532.
---------------------------------------------------------------------------

v. Proposed Amendments to Supplementary Material .02, on Waivers, Under 
Rule G-3
    Relatedly, the MSRB stated that the proposed rule change would 
amend Supplementary Material .02, on waivers, under Rule G-3 to retitle 
the paragraph header from ``Waivers'' to ``Affirmation Notification.'' 
\63\ The MSRB stated that the proposed rule change would also delete 
the entirety of that

[[Page 63989]]

supplementary material, which currently pertains to extraordinary 
waivers, and replace it with text that specifies how the firm would be 
required to submit to the MSRB the affirmation notification asserting 
that the criteria-based exemption has been met.\64\ Specifically, the 
MSRB stated that the affirmation notification would be required to be 
sent to [email protected].\65\
---------------------------------------------------------------------------

    \63\ Id. at 49531, 49532.
    \64\ Id. at 49531, 49532.
    \65\ Id. at 49532.
---------------------------------------------------------------------------

vi. Proposed Amendments to Rule G-8, on Books and Records To Be Made 
and Maintained
    The MSRB stated that its proposed amendments to Rule G-8, on books 
and records, would add recordkeeping obligations designed to help 
facilitate and document compliance with its proposed amendments to Rule 
G-3.\66\ Specifically, the MSRB stated that the proposed rule change 
would add new paragraph (C) to subsection (h)(vii) of Rule G-8 
requiring municipal advisor firms to make and maintain certain records 
to evidence compliance with the requirements of Rule G-3(h)(ii)(A)-
(I).\67\ The MSRB described these records as follows: \68\
---------------------------------------------------------------------------

    \66\ Id. at 49533.
    \67\ Id.
    \68\ Id.
---------------------------------------------------------------------------

     A record evidencing that the individual seeking to obtain 
the exemption was previously duly qualified as a municipal advisor 
representative (e.g., a copy of the print-out of the individual 
examination results \69\ or examination result certification letter 
provided by the MSRB);
---------------------------------------------------------------------------

    \69\ The MSRB stated that Question 11 of the MSRB Series 50 
Examination FAQs reminds individuals that the test center will 
provide a print-out of their examination results. Id. at 49533 n.23.
---------------------------------------------------------------------------

     Documentation supporting the municipal advisor firm's 
exercise of reasonable diligence in determining that the conditions 
outlined in proposed amended Rule G-3(h)(ii)(A) through (I) were met in 
making the required affirmation notification in accordance with 
proposed amended Rule G-3(h)(ii)(I)(8) (e.g., copies of relevant SEC 
form filings reviewed; records related to CE provided and completed; 
compliance policies and procedures provided and reviewed; and 
attestations or other documentation to support such a determination);
     A copy of the affirmation notification sent to the MSRB as 
required by proposed amended Rule G-3(h)(ii)(I); and
     A record evidencing that the affirmation notification was 
made in the prescribed manner and within the required period of time as 
described in proposed amended Rule G-3(h)(ii)(I) (e.g., automatic email 
delivery receipt).
    The MSRB noted that the proposed rule change outlining the specific 
recordkeeping requirements supports the municipal advisor principal's 
supervision, review, and sign-off that the conditions for the exemption 
have been met, which supports regulatory compliance.\70\
---------------------------------------------------------------------------

    \70\ Id. at 49533.
---------------------------------------------------------------------------

vii. Proposed Technical Amendments to Rule G-3 and Rule G-8
    Finally, the MSRB stated that the proposed rule change would make 
the following technical amendments to Rule G-3 and Rule G-8 (the 
``technical amendments''):
     With respect to Rule G-3(d)(ii)(B), the MSRB stated that 
the proposed rule change would: (i) add the phrase ``lapse in 
qualification'' to define for purposes of the rule when a person ceases 
to be associated with a municipal advisor for two or more years at any 
time after having qualified as a municipal advisor representative; (ii) 
replace the phrase ``a waiver is granted'' with ``exempt'' to make 
clear that the waiver provision for extraordinary cases is being 
deleted and replaced with a criteria-based exemption; (iii) change the 
word ``shall'' to ``must,'' which is intended to add clarity without 
changing the meaning of the term; and (iv) replace the reference to 
``subparagraph'' (h)(ii) with ``paragraph'' (h)(ii) to create better 
uniformity across Rule G-3; \71\
---------------------------------------------------------------------------

    \71\ Id. at 49530.
---------------------------------------------------------------------------

     With respect to Rules G-3(e)(ii)(A)(1) and G-3(e)(ii)(B), 
the MSRB stated that the proposed rule change would: (i) to clarify the 
qualification requirements specific to municipal advisor principals, as 
prescribed under Rule G-3(e)(ii)(A)(1), add the phrase ``unless exempt 
from taking the Municipal Advisor Representative Qualification 
Examination pursuant to paragraph (h)(ii) of this rule'' to make clear 
municipal advisor principals have to requalify by reexamination unless 
such individuals have obtained the one-time exemption; (ii) delete the 
phrase ``a waiver is granted'' and replace with the clause ``exempt 
from taking the Municipal Advisor Representative Qualification 
Examination'' to make clear that the waiver provision for extraordinary 
cases is being deleted and replaced with an exemption-based criteria 
for municipal advisor principals to use for requalification without 
reexamination for the Series 50 examination; (iii) replace the word 
``shall'' with ``must'' to promote clarity; and (iv) replace the 
reference to ``subparagraph'' (h)(ii) with ``paragraph'' (h)(ii) to 
create better uniformity across Rule G-3; \72\
---------------------------------------------------------------------------

    \72\ Id. at 49530-31.
---------------------------------------------------------------------------

     With respect to Rule G-3(h), the MSRB stated that the 
proposed rule change would retitle the header from ``Waiver of 
Qualification Requirements'' to ``Waiver of and Exemption from 
Qualification Requirements'' to promote clarity; \73\
---------------------------------------------------------------------------

    \73\ Id. at 49532.
---------------------------------------------------------------------------

     With respect to Rule G-3(h)(ii), the MSRB stated that the 
proposed rule change would replace the introductory sentence ``The 
requirements of paragraph (d)(ii)(A) and (e)(ii)(A) may be waived by 
the Board in extraordinary cases for a municipal advisor representative 
or municipal advisor principal'' with the new introductory sentence 
``An individual shall be exempt from the requirements of subparagraph 
(d)(ii)(B) if all of the following conditions are met'' for purposes of 
setting forth the enumerated criteria outlined under the provision; 
\74\ and
---------------------------------------------------------------------------

    \74\ Id.
---------------------------------------------------------------------------

     With respect to Rule G-8(h)(vii), the MSRB stated that the 
proposed rule change would: (i) retitle the paragraph header from 
``Records Concerning Compliance with Continuing Education 
Requirements'' to ``Records Concerning Compliance with Professional 
Qualification Requirements of Rule G-3'' to clarify the broader 
recordkeeping obligations and documentation requirements proposed in 
draft amendments to Rule G-8(h)(vii) that are accompanying proposed 
rule changes to Rule G-3(h)(ii); and (ii) reposition the word ``and'' 
and make other minor grammatical changes to the items in the series to 
aid readability.\75\
---------------------------------------------------------------------------

    \75\ Id. at 49533.
---------------------------------------------------------------------------

III. Summary of Comments Received to the Proposed Rule Change

    The Commission received one comment letter \76\ on the proposed 
rule change, as well as a response \77\ from the MSRB to the comment 
letter. The commenter expressed support for the proposed rule 
change.\78\ Among other things, the commenter stated that ``the 
requirements specified in the amendments are reasonable and helpful for 
MAs to navigate and implement.'' \79\
---------------------------------------------------------------------------

    \76\ See NAMA Letter.
    \77\ See MSRB Letter.
    \78\ NAMA Letter at 1.
    \79\ Id. For purposes of the comment letter, the commenter 
defined the term ``MA'' to include ``municipal advisory firms and 
individual municipal advisors.'' Id.

---------------------------------------------------------------------------

[[Page 63990]]

    In addition to expressing support for the proposed rule change, the 
commenter addressed certain content that it believes should be included 
in a compliance resource that the MSRB represented it anticipates 
publishing in close proximity to the compliance date of the rule which 
would highlight the regulatory obligations for municipal advisors (and 
dealers) with respect to professional qualification standards, CE 
requirements, and related registration matters.\80\ The commenter 
stated that this MSRB compliance resource should, among other things: 
(i) address remaining questions about ``the sequence of events that 
need to occur for an MA to take advantage of the amendments'' in the 
proposed rule change; (ii) address longstanding questions on ``how a MA 
new to the profession and yet to be associated with a firm can take the 
Series 50 exam[ination];'' and (iii) because the MSRB's proposed 
exemption for the Series 50 examination does not also apply to the 
Series 54 examination as the commenter desired, ``clearly explain how a 
MA will be able to utilize and MA firms comply with the Series 50 
exemption and meet the Series 54 requirements to engage in MA 
activity.'' \81\
---------------------------------------------------------------------------

    \80\ Id. See Notice, 88 FR at 49538.
    \81\ NAMA Letter at 1.
---------------------------------------------------------------------------

    The MSRB responded that it had outlined, within the Notice itself, 
the sequence of events and timing for satisfying the criteria-based 
exemption, including as applied to solo-practitioners.\82\ With respect 
to the compliance resource that the MSRB anticipates publishing in 
close proximity to the rule's compliance date, the MSRB stated that the 
resource will: (i) restate the sequence of events that must be 
undertaken to satisfy the criteria-based exemption; (ii) include 
additional materials related to Rule G-3(e)(ii)(C), which the MSRB 
stated permits an individual who is duly qualified as a municipal 
advisor representative and has been designated by the municipal advisor 
firm as a municipal advisor principal a period of 120 days, after being 
designated, to take and pass the Series 54 examination, thereby 
allowing individuals qualified as municipal advisor representatives, 
including those seeking to be solo-practitioners, to function in the 
principal-level capacity for a limited time before taking and passing 
the Series 54 examination; and (iii) address additional questions 
outside the scope of the present proposal related to professional 
qualification and CE standards, and registration requirements for 
municipal advisors and dealers.\83\ Finally, with respect to the 
commenter's desire to extend the MSRB's proposed exemption for the 
Series 50 examination to the Series 54 examination, the MSRB reiterated 
its belief that extending the proposed rule change to municipal advisor 
principals is not warranted because, as set forth in the Notice: (i) 
such an extension would be inappropriate due to the heightened 
supervisory, oversight, and management responsibilities of municipal 
advisor principals; and (ii) even if such relief were appropriate, 
additional, more stringent requirements would be necessary in 
consideration of these broader obligations, resulting in two different 
standards and additional regulatory complexity.\84\
---------------------------------------------------------------------------

    \82\ MSRB Letter at 2. The MSRB also restated that sequence of 
events in its response. See id. at 2-3. With respect to solo-
practitioners, the MSRB stated in part that such individuals 
``should,'' ``in the following order,'' complete and file SEC Form 
MA-I and then complete and file SEC Form MA: Application for 
Municipal Advisor Registration (``SEC Form MA'' or ``Form MA''). 
Notice, 88 FR at 49533; MSRB Letter at 2. Pursuant to Exchange Act 
Rule 15Ba1-2(c) (17 CFR 250.15Ba1-2(c)), Form MA shall be considered 
filed with the Commission upon submission of a completed Form MA, 
together with all additional required documents, including all 
required filings of Form MA-I. However, Exchange Act Rule 15Ba1-2(c) 
does not specify an order in which Forms MA and MA-I must be 
submitted.
    \83\ MSRB Letter at 3.
    \84\ Id.; see Notice, 88 FR at 49534, 49537, 49539.
---------------------------------------------------------------------------

IV. Discussion and Commission's Findings

    The Commission has carefully considered the proposed rule change, 
the comment letter received, and the MSRB's response thereto. 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.
    In particular, the Commission has reviewed Section 15B(b)(2)(A) of 
the Act, which provides, in part, that: (1) the MSRB's rules shall 
provide that a municipal advisor's ability to provide advice to or on 
behalf of a municipal entity or obligated person with respect to 
municipal financial products or the issuance of municipal securities is 
conditioned on meeting such 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; and (2) in 
connection with the definition and application of such standards, the 
MSRB may appropriately classify municipal advisors and their associated 
persons, specify that all or any portion of such standards shall be 
applicable to any such class, and require persons in any such class to 
pass examinations.\85\ The Commission also has reviewed Section 
15B(b)(2)(C) of the Act, which provides, in part, 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 
municipal securities and municipal financial products, and, in general, 
to protect investors, municipal entities, obligated persons, and the 
public interest; and not be designed to impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.\86\ Additionally, the Commission has considered 
Section 15B(b)(2)(G) of the Act, which provides, in part, that the 
MSRB's rules shall prescribe records to be made and kept by municipal 
advisors.\87\ Finally, the Commission has reviewed Section 
15B(b)(2)(L)(iv) of the Act, which provides that the MSRB's rules shall 
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.\88\
---------------------------------------------------------------------------

    \85\ 15 U.S.C. 78o-4(b)(2)(A).
    \86\ 15 U.S.C. 78o-4(b)(2)(C).
    \87\ 15 U.S.C. 78o-4(b)(2)(G).
    \88\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
---------------------------------------------------------------------------

    After such review, the Commission believes that the proposed rule 
change is appropriate in the public interest and for the protection of 
municipal entities and obligated persons consistent with Section 
15B(b)(2)(A) of the Act, designed to prevent fraudulent and 
manipulative acts and practices consistent with Section 15B(b)(2)(C) of 
the Act, and will: (i) foster cooperation and coordination among 
regulators consistent with Section 15B(b)(2)(C) of the Act; (ii) 
promote just and equitable principles of trade consistent with Section 
15B(b)(2)(C) of the Act; (iii) protect municipal entities, obligated 
persons, and the public interest consistent with Section 15B(b)(2)(C) 
of the Act; and (iv) not impose an inappropriate impact or burden on 
efficiency, competition, or capital formation, including with respect 
to small municipal advisors, consistent with Sections 15B(b)(2)(C) and 
15B(b)(2)(L)(iv) of the Act.

[[Page 63991]]

A. Appropriate in the Public Interest and for the Protection of 
Municipal Entities and Obligated Persons

    The Commission believes that, consistent with Section 15B(b)(2)(A) 
of the Act,\89\ the proposed rule change is appropriate in the public 
interest and for the protection of municipal entities and obligated 
persons. In particular, the new, criteria-based exemption from 
requalification by reexamination applicable to municipal advisor 
representatives (including the increase in the amount of time in which 
an individual may maintain their qualification as a municipal advisor 
representative without reexamination) will likely result in fewer 
individuals being required to retake the Series 50 examination, which 
would expand the potential number of municipal advisor representative 
candidates. A broader municipal advisor representative applicant pool 
is in the public interest and may help protect municipal entities and 
obligated persons by offering firms a greater choice in hiring 
qualified individuals who could potentially draw upon their diverse 
perspectives, experience, education, and/or institutional knowledge to 
enhance the informed advice provided to a municipal advisor firm's 
municipal entity and obligated person clients.
---------------------------------------------------------------------------

    \89\ 15 U.S.C. 78o-4(b)(2)(A).
---------------------------------------------------------------------------

    For example, as the MSRB noted, individuals that may disassociate 
with a municipal advisor firm may determine to associate with a dealer 
in a public finance capacity or to work for a municipal entity.\90\ 
Such individuals may receive valuable and directly applicable 
experience from a different vantage point in the industry that would 
augment their prior and future experience as a municipal advisor 
representative upon reassociating with a municipal advisor firm.\91\ 
Similarly, the proposed rule change provides flexibility for certain 
individuals to step away from their position to pursue higher education 
and then return to the municipal advisory industry. This diversity of 
perspective, experience, education, and/or institutional knowledge 
could put such municipal advisor representative candidates in a 
position to provide more informed advice than they may otherwise have 
provided.
---------------------------------------------------------------------------

    \90\ Notice, 88 FR at 49533.
    \91\ Id. at 49533-34.
---------------------------------------------------------------------------

    Furthermore, the proposed rule change reduces uncertainty for 
individuals seeking to requalify by providing clarity on the specific 
criteria needed to requalify without reexamination, and therefore 
expedites the process by which such individuals can begin to engage in 
municipal advisory activities. In addition, municipal advisor firms 
would be better positioned to assess a potential hire's qualifications 
by evaluating the conditions specified in the proposed rule change.
    At the same time, and as further described in Sections IV.B. and 
IV.E. below, the proposed rule change requires the satisfaction of 
conditions that establish safeguards and help ensure that only 
qualified candidates may obtain the criteria-based exemption from 
requalification, thereby furthering municipal entity and obligated 
person protection and the public interest.
    Because the proposed rule change would likely lead to a broader 
municipal advisor representative applicant pool, improve the quality of 
municipal advisor representative candidates, and increase diversity in 
the municipal advisory industry--all while requiring the satisfaction 
of conditions that establish safeguards and help ensure that only 
qualified candidates may obtain the criteria-based exemption from 
requalification--the Commission finds that the proposed rule change is 
appropriate in the public interest and for the protection of municipal 
entities and obligated persons consistent with Section 15B(b)(2)(A) of 
the Act.

B. Prevention of Fraudulent and Manipulative Acts and Practices

    The Commission believes that, consistent with Section 15B(b)(2)(C) 
of the Act,\92\ Rule G-3 would continue to prevent fraudulent and 
manipulative acts and practices by ensuring that municipal advisor 
representatives meet competence, training, experience, and 
qualification standards, and such protections would not be diminished 
by the proposed rule change. The stated criteria of at least three 
years of experience before eligibility for the exemption, and no more 
than three years since ceasing to be associated with a municipal 
advisor firm, provide for a baseline level of experience and competence 
for individuals availing themselves of the exemption. In addition, the 
proposed rule change would require individuals seeking to obtain the 
exemption to, upon associating (or reassociating) with a municipal 
advisor firm, receive relevant and updated core training pertaining to 
regulatory obligations under applicable securities laws and 
regulations, including MSRB rules, which furthers the prevention of 
manipulative acts and practices because such trainings serve to educate 
individuals about the avoidance of such manipulative acts and 
practices.
---------------------------------------------------------------------------

    \92\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    Because the three-year thresholds coupled with the more robust CE 
requirements would continue to support municipal advisor 
representatives in meeting competence, training, experience, and 
qualification standards, and such protections would not be diminished 
by the proposed rule change, the Commission finds that the proposed 
rule change is designed to prevent fraudulent and manipulative acts and 
practices consistent with Section 15B(b)(2)(C) of the Act.

C. Foster Cooperation and Coordination Among Regulators

    In accordance with Section 15B(b)(2)(G) of the Act,\93\ the 
proposed amendments to Rule G-8(h)(vii)(C) would prescribe specific 
records to be made and kept by municipal advisors. The Commission 
believes that, consistent with Section 15B(b)(2)(C) of the Act,\94\ 
those amendments would foster cooperation and coordination with persons 
engaged in regulating municipal securities and municipal financial 
products. In particular, they would provide all relevant examining and 
enforcement authorities with the same documentation containing the 
information necessary to assist them in examining for, investigating, 
and evaluating compliance with the new, criteria-based exemption under 
Rule G-3.
---------------------------------------------------------------------------

    \93\ 15 U.S.C. 78o-4(b)(2)(G).
    \94\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    The Commission further believes that an in-concert review by all 
relevant examining and enforcement authorities of the same 
documentation under the prescribed recordkeeping obligations of the 
proposed rule change would foster municipal entity and obligated person 
protection. In particular, municipal advisor firms would be 
incentivized to take due care to ensure compliance with the 
qualification standards under the criteria-based exemption and that 
only such individuals that satisfy such exemption are engaging in 
municipal advisor activities.
    Because the books and records requirements would facilitate 
efficiency among regulators by providing all relevant examining and 
enforcement authorities with the same documentation containing the 
information necessary to assist them in examining for, investigating, 
and evaluating compliance with the new, criteria-based exemption, the 
Commission finds that the proposed rule change would foster cooperation 
and coordination with persons engaged

[[Page 63992]]

in regulating municipal securities and municipal financial products 
consistent with Section 15B(b)(2)(C) of the Act.

D. Promote Just and Equitable Principles of Trade

    The Commission also believes that, consistent with Section 
15B(b)(2)(C) of the Act,\95\ the various technical amendments 
enumerated above \96\ promote just and equitable principles of trade. 
Specifically, the Commission believes the technical amendments would 
ensure that Rules G-3 and G-8 remain accurate, clear, and 
understandable for the municipal advisory community. If the MSRB's 
rules are accurate, clear, and understandable, MSRB registrants, 
including municipal advisors and associated persons, will better be 
able to comply with the MSRB's rules and apply them in a consistent 
matter. Accordingly, the Commission finds that the technical amendments 
promote just and equitable principles of trade consistent with Section 
15B(b)(2)(C) of the Act.
---------------------------------------------------------------------------

    \95\ Id.
    \96\ Supra, Section II.B.vii.
---------------------------------------------------------------------------

E. Protect Municipal Entities, Obligated Persons, and the Public 
Interest

    The Commission believes that, consistent with Section 15B(b)(2)(C) 
of the Act \97\ and the above discussion, the proposed rule change 
would continue to protect municipal entities, obligated persons, and 
the public interest because municipal advisor representatives would be 
required to obtain CE pertaining to specified topics and regulatory 
obligations under applicable securities laws and regulations, including 
MSRB rules, in order to requalify as a municipal advisor professional. 
Additionally, such individuals would not be able to obtain the 
criteria-based exemption if they either engaged in activities requiring 
qualification as a municipal advisor representative during their lapse 
in qualification or they are subject to any events or proceedings that 
resulted in a regulatory action disclosure report, civil judicial 
action disclosure report, customer complaint/arbitration/civil 
litigation disclosure report, criminal action disclosure report, or 
termination disclosure report on SEC Form MA-I. These conditions help 
ensure that basic municipal entity and obligated person protections 
remain in place while also providing municipal advisor representatives 
flexibility to pursue other meaningful roles within the securities 
industry or to step away from their position for other reasons; and 
benefits municipal advisor firms by providing the increased ability to 
attract qualified talent.
---------------------------------------------------------------------------

    \97\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    Finally, as noted above, a broader municipal advisor representative 
applicant pool is in the public interest and will help protect 
municipal entities and obligated persons because it can improve the 
quality of municipal advisor representative candidates and increase 
diversity in the municipal advisory industry, both of which could 
enhance the quality of advice provided to municipal entity and 
obligated person clients.
    Because the proposed rule change requires the satisfaction of 
conditions that establish safeguards and ensure that only qualified 
municipal advisor representative candidates may obtain the criteria-
based exemption from requalification--while also leading to a broader 
municipal advisor representative applicant pool, improving the quality 
of municipal advisor representative candidates, and increasing 
diversity in the municipal advisory industry--the Commission finds that 
the proposed rule change protects municipal entities, obligated 
persons, and the public interest consistent with Section 15B(b)(2)(C) 
of the Act.

F. No Inappropriate Impact or Burden on Efficiency, Competition, or 
Capital Formation

    In approving the proposed rule change, the Commission has 
considered the proposed rule change's impact on efficiency, 
competition, and capital formation.\98\ Section 15B(b)(2)(C) of the Act 
\99\ requires that MSRB rules not be designed to impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. Furthermore, Section 15B(b)(2)(L)(iv) of the Act 
\100\ requires that MSRB rules 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.
---------------------------------------------------------------------------

    \98\ 15 U.S.C. 78c(f).
    \99\ 15 U.S.C. 78o-4(b)(2)(C).
    \100\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
---------------------------------------------------------------------------

    With respect to impact on efficiency, the Commission believes that 
the proposed rule change would improve the municipal securities 
market's operational efficiency and promote regulatory certainty by 
providing individuals with a specific exemption process to requalify as 
municipal advisor representatives and to begin engaging in municipal 
advisory activities on behalf of municipal advisor firms. Moreover, as 
discussed above,\101\ the Commission believes that the proposed 
amendments to Rule G-8 would facilitate efficiency among regulators by 
providing all relevant examining and enforcement authorities with the 
same documentation containing the information necessary to assist them 
in examining for, investigating, and evaluating compliance with the 
new, criteria-based exemption under Rule G-3.
---------------------------------------------------------------------------

    \101\ Supra, Section IV.C.
---------------------------------------------------------------------------

    With respect to impact on capital formation, as discussed 
above,\102\ the proposed amendments to Rule G-3 would make it easier 
for individuals seeking to requalify as municipal advisor 
representatives to reassociate with a municipal advisor firm and for 
municipal advisor firms to recruit experienced professionals. The 
Commission believes that the potential increased number of skilled 
professionals furthers capital formation because municipal entity and 
obligated person clients would have ranging areas of expertise to 
select from when utilizing the services of municipal advisor 
representatives.
---------------------------------------------------------------------------

    \102\ Supra, Section IV.A.
---------------------------------------------------------------------------

    Finally, with respect to competition, the Commission does not 
believe that the proposed amendments to Rule G-3 and Rule G-8 would 
impose any unnecessary or inappropriate burden or impact on 
competition, as they would provide additional flexibility and certainty 
to those seeking to associate with municipal advisor firms as municipal 
advisor representatives and to municipal advisor firms, thereby 
enhancing the hiring of qualified, experienced individuals; and they 
would also support evidencing compliance with the criteria-based 
exemption. The Commission notes that individuals who are away from 
their municipal advisor representative capacity (or cease to be engaged 
in activity requiring qualification as a municipal advisor 
representative) for more than three years would be required to take and 
pass the Series 50 examination again under the proposed rule change, as 
the waiver request provisions, available only in extraordinary cases, 
would no longer be available; however, given the limited use of the 
waiver process currently, the Commission does not believe the 
elimination of this option would have a significant impact on 
individuals seeking to reassociate in a municipal advisor 
representative capacity.

[[Page 63993]]

    Although the proposed amendments to Rule G-3 and Rule G-8 would 
benefit, and be applied equally to, all individuals seeking to 
associate with municipal advisor firms and all such municipal advisor 
firms, the Commission believes that there are potential burdens on 
competition for small municipal advisor firms, and solo-practitioners 
in particular. However, as described below, the Commission believes 
that these potential burdens are mitigated.
    First, the Commission believes that there is a potential burden on 
competition for solo-practitioners looking to establish a municipal 
advisor firm because, unlike larger firms, such solo-practitioners may 
not have developed CE materials addressing all of the prescribed 
subject matters necessary to meet the exemption's CE requirements. 
However, the Commission believes that this potential burden is 
mitigated because the MSRB has indicated that such firms would be able 
to utilize ``off-the-shelf content'' or widely available industry 
educational materials (to the extent such materials meet the 
requirements set forth in the proposed rule change), which would be a 
less burdensome approach than creating new CE materials.\103\ The MSRB 
noted that sources of such educational materials may include industry 
trade associations, in addition to podcasts, webinars, and educational 
materials developed by the MSRB.\104\
---------------------------------------------------------------------------

    \103\ Notice, 88 FR at 49537.
    \104\ Id. at 49537 n.43.
---------------------------------------------------------------------------

    Second, the Commission believes that there is a potential burden on 
competition for solo-practitioners and smaller municipal advisory firms 
because the new, criteria-based exemption would not extend to those 
seeking to associate and function in a municipal advisor principal 
capacity and, as noted above, Rule G-3(e)(iii) requires every municipal 
advisor firm to have at least one municipal advisor principal. 
Accordingly, individuals seeking to act as a municipal advisor 
principal (e.g., a solo-practitioner) would still have to take and pass 
the Series 54 examination in order to engage in principal-level 
activities. As a result, although all firms would benefit from the 
proposed rule change for municipal advisor representatives, smaller 
municipal advisor firms and solo-practitioners in particular may 
experience a smaller benefit than larger municipal advisor firms.
    The Commission believes that this potential burden is mitigated, 
however, because the MSRB has indicated that current Rule G-3(e)(ii)(C) 
permits solo-practitioners (or individuals associating or reassociating 
with a firm and designated as a principal) who are qualified as 
municipal advisor representatives to function as municipal advisor 
principals for up to 120 days before having to take and pass the Series 
54 examination.\105\ The MSRB noted that, in concert with the proposed 
rule change, these provisions would allow such individuals to start 
their own firm, requalify as municipal securities representatives 
without reexamination, and then qualify as municipal advisor 
principals.\106\ As a result, all such persons, including those persons 
seeking to be solo-practitioners and seeking to associate with small 
(or larger) municipal advisor firms would be able to function in the 
principal-level capacity for several months before having to take and 
pass the Series 54 examination.\107\
---------------------------------------------------------------------------

    \105\ Id. at 49534 n.29; MSRB Letter at 3.
    \106\ Notice, 88 FR at 49534 n.29.
    \107\ The Commission believes this potential burden may also be 
mitigated, in part, because the MSRB represented that it anticipates 
publishing a compliance resource in close proximity to the 
compliance date of the rule which would highlight the regulatory 
obligations for municipal advisors (and dealers) with respect to 
professional qualification standards, CE requirements, and related 
registration matters. See id. at 49538; MSRB Letter at 3. In 
addition, in the Notice itself, the MSRB addressed the timing and 
sequence of satisfying the exemption's criteria, the filing of SEC 
Form MA-I (and SEC Form MA, as applicable), and the submission of 
the affirmation notification to the MSRB, including for solo-
practitioners. See Notice, 88 FR at 49532-33; MSRB Letter at 2-3.
---------------------------------------------------------------------------

    Ultimately, municipal advisor principals are subject to additional 
regulatory standards given their supervisory, oversight, and management 
duties. The process of reexamination for municipal advisor principals 
helps to ensure that the specified level of competency and knowledge of 
the applicable securities laws and regulations, including MSRB rules, 
is sufficiently demonstrated.
    For the foregoing reasons, the Commission finds that, consistent 
with Sections 15B(b)(2)(C) and 15B(b)(2)(L)(iv) of the Act, the 
proposed rule change would not impact or impose any additional burdens 
on efficiency, competition, or capital formation that are not necessary 
or appropriate in furtherance of the purposes of the Act.
    As noted above, the Commission received one comment letter on the 
filing. The Commission believes that the MSRB, through its response, 
addressed the commenter's concerns. For the reasons noted above, the 
Commission believes that the proposed rule change is consistent with 
the Exchange Act.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\108\ that the proposed rule change (SR-MSRB-2023-05) be, 
and hereby is, approved.
---------------------------------------------------------------------------

    \108\ 15 U.S.C. 78s(b)(2).

    For the Commission, pursuant to delegated authority.\109\
---------------------------------------------------------------------------

    \109\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20077 Filed 9-15-23; 8:45 am]
BILLING CODE 8011-01-P