Document ID: SEC-2014-0123-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2014-01-23T05:00Z

[Federal Register Volume 79, Number 15 (Thursday, January 23, 2014)]
[Notices]
[Pages 3909-3911]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01248]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71326; File No. SR-MSRB-2013-07]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove a Proposed Rule Change Consisting of Proposed MSRB Rule G-
47, on Time of Trade Disclosure Obligations, Proposed Revisions to MSRB 
Rule G-19, on Suitability of Recommendations and Transactions, Proposed 
MSRB Rules D-15 and G-48, on Sophisticated Municipal Market 
Professionals (``SMMPs''), and the Proposed Deletion of Interpretive 
Guidance

January 16, 2014.

I. Introduction

    On September 17, 2013, the Municipal Securities Rulemaking Board 
(the ``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (the ``SEC'' or ``Commission''), pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (the ``Act'') \1\ and 
Rule 19b-4 thereunder,\2\ a proposed rule change consisting of new MSRB 
Rule G-47 (time of trade disclosures), new MSRB Rules D-15 and G-48 
(SMMPs), and amendments to MSRB Rule G-19 (suitability). The proposed 
rule change was published for comment in the Federal Register on 
October 22, 2013.\3\ The Commission received two (2) comment letters in 
response to the proposed rule change.\4\ On January 14, 2014, the MSRB 
responded to the comments.\5\ The Commission is publishing this order 
(``Order'') to solicit comments from interested persons and to 
institute proceedings pursuant to

[[Page 3910]]

Section 19(b)(2)(B) of the Act \6\ to determine whether to approve or 
disapprove the proposed rule change.\7\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 70593 (October 1, 2013), 78 FR 
62867 (October 22, 2013) (Notice of Filing of a Proposed Rule Change 
Consisting of Proposed MSRB Rule G-47, on Time of Trade Disclosure 
Obligations, Proposed Revisions to MSRB Rule G-19, on Suitability of 
Recommendations and Transactions, Proposed MSRB Rules D-15 and G-48, 
on Sophisticated Municipal Market Professionals, and the Proposed 
Deletion of Interpretive Guidance) (``Proposing Release''). The 
comment period closed on November 12, 2013.
    \4\ Letters from Tamara K. Salmon, Senior Associate Counsel, 
Investment Company Institute to Elizabeth M. Murphy, Secretary, SEC, 
dated November 1, 2013 (``ICI Letter'') and David L. Cohen, Managing 
Director/Associate General Counsel, Securities Industry and 
Financial Markets Association, to Elizabeth M. Murphy, Secretary, 
SEC, dated November 12, 2013 (``SIFMA Letter'').
    \5\ See Letter from Michael L. Post, Deputy General Counsel, 
MSRB, to Elizabeth M. Murphy, Secretary, SEC dated January 14, 2014 
(``Response'').
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ The text of the proposed rule change is available on the 
MSRB's Web site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2013-Filings.aspx, at the MSRB's principal office, and at 
the Commission's Public Reference Room.
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    Institution of proceedings does not indicate that the Commission 
has reached any conclusions with respect to the proposed rule change, 
nor does it mean that the Commission will ultimately disapprove the 
proposed rule change. Rather, as discussed below, the Commission seeks 
additional input from interested parties on the MSRB's proposed change 
in its treatment of past interpretive guidance, as discussed in its 
Response, and as described below.

II. Description of Proposal

    As further described in the Proposing Release, the MSRB states that 
it has examined its interpretive guidance related to time of trade 
disclosures, suitability, and SMMPs and proposes to consolidate this 
guidance and codify it into several rules: a new time of trade 
disclosure rule (proposed Rule G-47), a revised suitability rule (Rule 
G-19), and two new SMMP rules (proposed Rules D-15 and G-48). 
Additionally, the proposed revisions to Rule G-19 are designed to 
harmonize the MSRB's suitability rule with the Financial Industry 
Regulatory Authority's (``FINRA'') suitability rule.\8\
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    \8\ See FINRA Rule 2111.
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    In connection with the rule changes described above, the MSRB 
proposed the deletion of certain interpretive guidance affected by 
these rule changes from the MSRB's Rule Book. Additionally, in the 
Proposing Release, the MSRB indicated that it did not intend to 
preserve the relevant guidance, because doing so ``would not advance 
the MSRB's goal to streamline its rulebook.'' \9\ In its Response, as 
discussed in Section III below, the MSRB articulates a different 
approach. Specifically, to address a commenter concern, the MSRB states 
that it will archive on its Web site the existing guidance that is to 
be deleted from the Rule Book in connection with the proposed rule 
change.\10\ Moreover, the MSRB states that ``[t]o the extent that past 
interpretive guidance does not conflict with any MSRB rules or 
interpretations thereof, it remains potentially applicable, depending 
on the facts and circumstances of a particular case'' (together with 
the archiving on its Web site of the existing guidance that is to be 
deleted under the proposed rule change, this approach is referred to 
herein as ``the MSRB's proposed treatment of past interpretive 
guidance.'') The MSRB notes, however, that preserving the guidance at 
issue in the Rule Book itself would undermine the MSRB's goal to 
provide streamlined rule language.

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    \9\ See Proposing Release at 21 (responding to a SIFMA comment 
regarding proposed Rule G-47). See also Proposing Release at 4, 
describing the MSRB's streamlining goals (``The structure of 
Proposed G-47 (rule language followed by supplementary material) is 
the same structure used by FINRA and other self-regulatory 
organizations (``SROs''). The MSRB intends generally to transition 
to this structure for all of its rules going forward in order to 
streamline the rules, harmonize the format with that of other SROs, 
and make the rules easier for dealers and municipal advisors to 
understand and follow.'')
    \10\ See Response at 2.
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III. Summary of Comments Received Regarding Proposed Deletion of 
Existing Interpretive Guidance and the MSRB's Response

    One commenter asked that existing time of trade disclosure 
interpretive notices be archived and preserved, noting that ``there are 
nuances contained in these interpretive notices spanning over 30 years 
of guidance that brokers, dealers, and municipal securities dealers 
have long relied upon''.\11\ The commenter further noted that the 
interpretive guidance should remain accessible for examination and 
enforcement purposes because it governs conduct until the effective 
date of the proposed rule change.
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    \11\ Id.
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    As noted above, the MSRB states that it will archive on its Web 
site the existing guidance that is to be deleted from the MSRB's Rule 
Book in connection with the proposed rule change. The MSRB further 
responds that to the extent that past interpretive guidance does not 
conflict with any MSRB rules or interpretations thereof, it remains 
potentially applicable, depending on the facts and circumstances of a 
particular case.

IV. Proceedings to Determine Whether to Approve or Disapprove SR-MSRB-
2013-07 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act to determine whether the proposed rule change 
should be approved or disapproved.\12\ Institution of such proceedings 
appears appropriate at this time to provide interested parties an 
opportunity to consider the MSRB's proposed treatment of past 
interpretive guidance, as set forth in the Response. As noted above, 
institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the Commission seeks and encourages interested persons to 
comment on the MSRB's proposed treatment of past interpretive guidance 
as discussed in its Response, and provide the Commission with arguments 
to support the Commission's analysis as to whether to approve or 
disapprove the proposal.
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    \12\ 15 U.S.C. 78s(b)(2). Section 19(b)(2)(B) of the Act 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
The time for conclusion of the proceedings may be extended for up to 
an additional 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding or if the self-
regulatory organization consents to the extension.
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    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\13\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. In particular, Section 15B(b)(2)(C) of the Act, among 
other things, provides that the MSRB's rules shall be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in municipal securities and municipal financial products, to remove 
impediments to and perfect the mechanism of a free and open market in 
municipal securities and municipal financial products, and, in general, 
to protect investors, municipal entities, obligated persons, and the 
public interest.\14\
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    \13\ 15 U.S.C. 78s(b)(2)(B).
    \14\ 15 U.S.C. 78o-4(b)(2)(C).
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    The Commission believes that the MSRB's Response, as well as the 
comment to which the MSRB was responding concerning the status of the 
existing MSRB guidance, raise issues about consistency with Section 
15B(b)(2)(C) of the Exchange Act and the rules and regulations issued 
thereunder that are applicable to the self-regulatory organization.

V. Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
MSRB's proposed treatment of past interpretive guidance as well as any 
other comments they may have regarding the proposal or the Response. In 
particular, the Commission invites the written views of interested 
persons concerning whether

[[Page 3911]]

the proposed rule change is inconsistent with Section 15B(b)(2)(C) or 
any other provision of the Exchange Act, or the rules and regulations 
thereunder.
    Although there do not appear to be any issues relevant to approval 
or disapproval that would be facilitated by an oral presentation of 
views, data, and arguments, the Commission will consider, pursuant to 
Rule 19b-4, any request for an opportunity to make an oral 
presentation.\15\ Interested persons are invited to submit written 
data, views, and arguments by February 13, 2014 concerning regarding 
the MSRB's treatment of past interpretive guidance and whether the 
proposed rule change should be approved or disapproved. Any person who 
wishes to file a rebuttal to any other person's submission must file 
that rebuttal by March 6, 2014. Comments may be submitted by any of the 
following methods:
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    \15\ Section 19(b)(2) of the Exchange Act, as amended by the 
Securities Acts Amendments of 1975, Pub. L. 94-29, 89 Stat. 97 
(1975), grants the Commission flexibility to determine what type of 
proceeding--either oral or notice and opportunity for written 
comments--is appropriate for consideration of a particular proposal 
by a self-regulatory organization. See Securities Acts Amendments of 
1975, Report of the Senate Committee on Banking, Housing and Urban 
Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 
30 (1975).
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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-2013-07 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MSRB-2013-07. 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 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 such filing also will be available 
for inspection and copying at the principle office of 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 publicly available.
    All submissions should refer to File Number SR-MSRB-2013-07 and 
should be submitted on or before February 13, 2014. If comments are 
received, any rebuttal comments should be submitted by March 6, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(57).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01248 Filed 1-22-14; 8:45 am]
BILLING CODE 8011-01-P