Document ID: SEC-2018-1692-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2018-11-02T04:00Z

[Federal Register Volume 83, Number 213 (Friday, November 2, 2018)]
[Notices]
[Pages 55214-55219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-23966]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84496; File No. SR-MSRB-2018-08]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change Concerning Certain 
Data Elements on Form G-45 Under MSRB Rule G-45, on Reporting of 
Information on Municipal Fund Securities

October 29, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on October 15, 2018 the Municipal 
Securities Rulemaking Board (the ``MSRB'' or ``Board'') filed with the 
Securities and Exchange Commission (the ``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the MSRB. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to amend 
Form G-45 under MSRB Rule G-45, on reporting of information on 
municipal fund securities,\3\ to clarify a data element concerning the 
program management fee, to add a data element concerning the investment 
option closing date, and to delete data elements concerning annualized 
three-year performance information (the ``proposed rule change''). The 
MSRB requests that the proposed rule change become effective on June 
30, 2019.
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    \3\ Form G-45 is an electronic form on which submissions of the 
information required by Rule G-45 are made to the MSRB.
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    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2018-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
    The MSRB proposes to refine and enhance certain of the investment 
option data that the MSRB collects under Rule G-45 from underwriters to 
529 savings plans \4\ and ABLE programs.\5\ Specifically, the MSRB 
proposes to amend Form G-45 to (i) clarify a data element concerning 
the program management fee, (ii) add a data element concerning the 
investment option closing date, and (iii) delete data elements 
concerning annualized three-year performance information. As discussed 
under ``Statutory Basis,'' the proposed rule change would provide 
information that would enhance the MSRB's and other regulators' ability 
to effectively and efficiently analyze 529 savings plans and ABLE 
programs to assess the impact of each 529 savings plan and ABLE program 
on the market, to evaluate trends and differences, and to gain an 
understanding of the aggregate risk taken by investors.
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    \4\ Section 529 of the Internal Revenue Code of 1986, as amended 
(the ``Code'') established savings plans (``529 savings plans'') to 
encourage saving for future education costs. 26 U.S.C. 
529(b)(1)(A)(ii). The SEC has determined that interests offered by 
such 529 savings plans are municipal securities under Section 
3(a)(29) of the Exchange Act. Exchange Act Release No. 70462 (Sept. 
20, 2013), 78 FR 67468, 67472-73 (Nov. 12, 2013).
    Section 529 also established prepaid tuition plans. 26 U.S.C. 
529(b)(1)(A)(i). Under a prepaid tuition plan, an investor may 
purchase tuition credits or certificates on behalf of a designated 
beneficiary, which entitle the beneficiary to the waiver or payment 
of qualified higher education expenses. Such credits or certificates 
generally are not viewed as being municipal securities, and dealers 
generally do not participate in the marketing of prepaid tuition 
plans.
    Thus, the term ``529 plans'' includes 529 saving plans and 
prepaid tuition plans.
    \5\ ABLE programs are programs designed to implement Section 
529A to the Code. 26 U.S.C. 529A. Section 529A of the Code permits a 
state, or an agency or instrumentality thereof, to establish and 
maintain a tax-advantaged savings program to help support 
individuals with disabilities in maintaining health, independence, 
and quality of life.
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Background
    Rule G-45 requires brokers, dealers and municipal securities 
dealers (``dealers'') acting in the capacity as underwriters to 529 
savings plans or ABLE programs to submit on a semi-annual or annual 
basis (in the case of performance data) certain information about the 
plans or programs they underwrite. That information includes plan or 
program descriptive information, assets, asset allocation information 
(at the investment option level), contributions, withdrawals, fee and 
cost structure, performance, and other information. Beginning with the 
reporting period ending June 30, 2015 (in the case of 529 savings 
plans) and June 30, 2018 (in the case of ABLE programs), underwriters 
to 529 savings plans or ABLE programs have reported such information 
electronically to the MSRB.
    The collection of information under Rule G-45 is intended to 
protect investors, municipal entities and the public interest and 
prevent fraudulent and manipulative acts and practices.\6\ 
Specifically, collecting this information enhances the MSRB's 
understanding of 529 savings plans and ABLE programs. Such information 
informs the MSRB's regulatory activities and also the activities of 
those other financial regulators (i.e., the SEC, the Financial

[[Page 55215]]

Industry Regulatory Authority, Inc., and banking regulators) that are 
charged with examining and enforcing MSRB rules.
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    \6\ Exchange Act Release No. 71598 (Feb. 21, 2014), 79 FR 11161, 
11167 (Feb. 27, 2014) (SR-MSRB-2013-04) (stating ``to fulfill its 
statutory responsibilities to investors and municipal entities in 
the context of 529 plans, the Commission believes that it is 
appropriate for the MSRB to possess basic, reliable information 
regarding 529 plans, including the underlying investment options''). 
The MSRB believes that the collection of data about ABLE programs is 
equally important for the MSRB to fulfill its statutory 
responsibilities to investors and municipal entities.
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Enhancements to Rule G-45
A. Clarification of Program Management Fee Data Element
    Throughout the seven reporting periods during which the MSRB has 
analyzed data submitted on Form G-45, the MSRB has observed anomalies 
in the data submitted under Investment Option information. Those 
anomalies related to the program management fee and, as discussed below 
under ``New Investment Option Closing Date Data Element,'' to 
investment options that closed during the reporting period. Form G-45, 
under the Investment Option information subsection ``Program Management 
Fee,'' requires that an underwriter report the program management fee 
(expressed as an annual percentage of 529 savings plan or ABLE program 
assets) assessed by the 529 savings plan or ABLE program. The program 
management fee typically is a separately identifiable percentage that 
is shown in the fee table for the 529 savings plan or ABLE program, but 
for some 529 savings plans and ABLE programs, this is not the case. 
Instead for those 529 savings plans or ABLE programs, the program 
management fee is assessed by the underlying mutual fund in which the 
investment option invests (this is typically done through a 529 or ABLE 
share class of the mutual fund). Underwriters for those 529 savings 
plans or ABLE programs generally report the program management fee as 
zero on Form G-45, and then may add explanatory information in the 
notes section of the form about the fee. That explanatory information, 
however, may or may not actually disclose the program management fee in 
a format that is typically used for comparison--i.e., as an annual 
percentage of 529 savings plan or ABLE program assets. The proposed 
rule change would clarify that the underwriter must report the program 
management fee as an annual percentage of assets (e.g., x.xx%) no 
matter whether the program management fee is assessed by the underlying 
mutual fund or by the 529 savings plan or ABLE program itself. The 
underwriter would not be able to report the program management fee as 
zero and then explain in a note that it is assessed by the underlying 
mutual fund. Thus, the proposed rule change would allow the MSRB, as 
well as other regulators, to analyze data in a uniform format that 
would facilitate (i) comparison among 529 savings plans and ABLE 
programs, (ii) the evaluation of trends and differences, and (iii) the 
identification of potential risks to investors that may affect those 
529 savings plans and ABLE programs.
B. New Investment Option Closing Date Data Element
    From time to time, an investment option offered in a 529 savings 
plan may close to new investors, but allow current account owners who 
have allocated account value to an investment option to continue to 
invest in that ``closed'' investment option. Alternatively, the 529 
savings plan may close an investment option completely.\7\ In either 
case, the investment option data submitted for that investment option 
on Form G-45 can be contrary to what the MSRB would have expected for 
the investment option when compared to prior reporting periods, and the 
MSRB may not be able to easily determine why such variance occurred. To 
address this issue, the proposed rule change would add check-the-box 
items to Form G-45 that would alert the MSRB about whether an 
investment option has closed to new investors, but allows current 
account owners to contribute funds, or whether the investment option 
has closed to all investors.
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    \7\ As noted previously, with the reporting period ending June 
30, 2018, underwriters to ABLE programs began to submit information 
about the ABLE programs they underwrite on Form G-45. The MSRB 
believes that, similar to the investment options offered in 529 
savings plans, investment options in ABLE programs may close to 
investors.
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C. Deletion of Three-Year Annualized Performance Data Requirement
    The MSRB sought public comment about providing additional data 
concerning the investment options offered in 529 savings plans and ABLE 
programs.\8\ In response, the MSRB received the suggestion that the 
MSRB no longer require that an underwriter submit three-year annualized 
performance information for an investment option on Form G-45.
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    \8\ MSRB Notice 2017-17 (Aug. 22, 2017) (the ``Request for 
Comment''). Specifically, the MSRB sought comment on a possible 
clarification to the data it currently receives about the program 
management fee and about requiring underwriters to submit additional 
data relating to (i) performance data--i.e., to provide additional 
information about the benchmark return percent and to provide 
performance data by asset class and (ii) the investment option 
closing date. The Board determined not to proceed with the 
collection of additional performance data.
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    Form G-45 requires that underwriters annually report (i) total 
returns, including sales charges, (ii) total returns, excluding sales 
charges, and (iii) benchmark return percent for specified periods, 
including annualized or annual three-year percent. At the time the MSRB 
approved Form G-45, the College Savings Plans Network's (CSPN) 
voluntary disclosure principles that provide recommendations to the 
state entities that establish and maintain 529 savings plans (the 
``disclosure principles'') \9\ and which commenters stated were the 
industry norm in other rulemakings, recommended that such disclosure be 
made.\10\ However, since that time, CSPN has updated the disclosure 
principles, and CSPN no longer recommends that a 529 savings plan 
include three-year performance information.\11\ Further, three-year 
annualized performance information is not required by the SEC for 
mutual funds.
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    \9\ CSPN, a non-profit organization, was established as an 
affiliate to the National Association of State Treasurers, to make 
higher education more attainable and to serve as a clearinghouse for 
information among state-administered college savings programs.
    According to CSPN, CSPN, the states that administer 529 plans 
(i.e., 529 savings plans and prepaid tuition plans) and their 
private sector partners are committed to clarifying and enhancing 
disclosure and offering materials for 529 plans. CSPN stated that it 
adopted voluntary disclosure principles to enhance the comparability 
of information that investors should consider when investing in 529 
savings plans. See College Savings Plan Network Disclosure 
Principles Statement No. 6 (adopted July 1, 2017).
    \10\ See File No. SR-MSRB-2013-04 (proposed rule change 
consisting of new MSRB Rule G-45, on reporting of information on 
municipal fund securities, and Form G-45, and amendments to Rule G-
8, on books and records, and Rule G-9, on preservation of records); 
College Savings Plans Network Disclosure Principles Statement No. 5 
(adopted May 3, 2011).
    \11\ College Savings Plans Network Disclosure Principles 
Statement No. 6 (adopted July 1, 2017).
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    The MSRB has determined that Form G-45, even without the three-year 
performance data, would continue to provide the MSRB with sufficient 
performance information to assist the MSRB with its analysis of 529 
savings plans and ABLE programs. Therefore, because the MSRB believes 
that it will have sufficient performance information, it is no longer 
an appropriate regulatory burden and should be eliminated to avoid 
unnecessary costs.
2. Statutory Basis
    The MSRB Section 15B(b)(2) of the Exchange Act \12\ provides that:
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    \12\ 15 U.S.C. 78o-4(b)(2).

[t]he Board shall propose and adopt rules to effect the purposes of 
this title with respect to transactions in municipal securities 
effected by brokers, dealers, and municipal securities dealers and 
advice provided to or on behalf of municipal entities or obligated 
persons by brokers, dealers, municipal securities dealers, and 
municipal advisors

[[Page 55216]]

with respect to municipal financial products, the issuance of 
municipal securities, and solicitations of municipal entities or 
obligated persons undertaken by brokers, dealers, municipal 
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securities dealers, and municipal advisors.

    Section 15B(b)(2)(C) of the Exchange Act \13\ provides that the 
MSRB's rules shall:
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    \13\ 15 U.S.C. 78o-4(b)(2)(C).

be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in municipal securities and 
municipal financial products, to remove impediments to and perfect 
the mechanism of a free and open market in municipal securities and 
municipal financial products, and, in general, to protect investors, 
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municipal entities, obligated persons, and the public interest.

The MSRB believes that the proposed rule change is consistent with 
Sections 15B(b)(2) \14\ and 15B(b)(2)(C) \15\ of the Exchange Act. The 
proposed rule change would help prevent fraudulent and manipulative 
acts and practices, promote just and equitable principles of trade, and 
foster cooperation and coordination with persons engaged in regulating 
transactions in municipal securities.
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    \14\ 15 U.S.C. 78o-4(b)(2).
    \15\ 15 U.S.C. 78o-4(b)(2)(C).
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    The proposed rule change would help prevent fraudulent and 
manipulative acts and practices. The proposed rule change would allow 
the MSRB to analyze data in a uniform format that would facilitate the 
(i) efficient and effective comparison among 529 savings plans and ABLE 
programs, (ii) evaluation of trends and differences, and (iii) 
identification of potential risks to investors that may affect those 
529 savings plans and ABLE programs. The ability to identify trends and 
differences, also would enable the regulators that are charged with 
inspecting for compliance with and enforcing the MSRB's rules, as noted 
above, to better determine whether the 529 savings plan or ABLE program 
disclosure documents and marketing materials, which underwriters 
generally draft or participate in drafting, are consistent with the 
data submitted to the MSRB. Further, the ability to identify potential 
risks to investors from the Form G-45 data analysis would inform the 
MSRB with its development of rulemaking and interpretive guidance 
priorities with respect to MSRB regulated entities. Further, the 
ability to identify potential risks to investors from the Form G-45 
data would inform other regulators with their development of their 
priorities for risk-based compliance examinations for such regulated 
entities. These enhanced oversight abilities, in turn, would help 
prevent fraudulent and manipulative acts and practices.
    The proposed rule change also would promote just and equitable 
principles of trade. For the same reasons that the proposed rule change 
would help prevent fraudulent and manipulative acts and practices, the 
proposed rule change also would promote just and equitable principles 
of trade.
    In addition, the proposed rule change would foster cooperation and 
coordination with persons engaged in regulating municipal securities 
transactions. For the same reasons that the proposed rule change would 
help prevent fraudulent and manipulative acts and practices, the 
proposed rule change also would foster cooperation and coordination 
with persons engaged in regulating municipal securities transactions. 
In addition, as discussed under ``Deletion of Three-Year Annual 
Performance Data Requirement,'' the proposed rule change would make the 
collection of performance data under Form G-45 more consistent with 
what is required by other financial regulators and with current 
industry norms, and thereby also would foster regulatory coordination 
with persons engaged in regulating municipal securities transactions.
    Moreover, the MSRB believes that the proposed rule change is 
consistent with the MSRB's statutory obligation to protect investors 
and municipal entities. To fulfill this responsibility, it is necessary 
for the MSRB to have a complete and reliable data set about 529 savings 
plans and ABLE programs, including the investment options offered in 
those 529 savings plans and ABLE programs. The proposed rule change 
would provide the MSRB with additional meaningful data about the 
investment options offered in those plans or programs--specifically, 
the proposed rule change would clarify an existing data element 
relating to the program management fee and would add a data element in 
the form of a check the box to alert the MSRB about the closing of an 
investment option during the reporting period. This clarification and 
additional data element would facilitate the MSRB's ability to 
efficiently and effectively analyze the market for 529 savings plans 
and ABLE programs as well as to evaluate trends and differences among 
529 savings plans and the ABLE programs. The MSRB believes that 
understanding the investment options and the costs associated with 529 
savings plans and ABLE programs as well as the other data collected 
under Rule G-45 are basic requirements for regulation and necessary to 
assist the MSRB with its evaluation as to whether its regulatory scheme 
for dealers that sell interests in or underwrite ABLE programs and/or 
529 savings plans is sufficient, or whether additional rulemaking is 
necessary to protect investors. Further, as previously noted, the 
information that would be collected by the proposed rule change would 
help the MSRB and other regulators that examine dealers prioritize 
their efforts with respect to those dealers that sell interests in or 
underwrite ABLE programs and 529 savings plans. Those other regulators 
may use this information to determine the nature or timing of risk-
based dealer examinations. In addition, under the proposed rule change, 
the MSRB would no longer collect three-year performance data about the 
investment options and their related benchmarks, if any. As discussed 
under ``Deletion of Three-Year Annual Performance Data Requirement,'' 
the proposed rule change thereby would make the collection of 
performance data under Form G-45 more consistent with what is required 
by other financial regulators and with current industry norms. Thus, 
the MSRB believes that the information to be collected by the proposed 
rule change would better enable the MSRB to protect investors in these 
programs and plans and the municipal entities that offer 529 savings 
plans and ABLE programs.

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

    Section 15B(b)(2)(C) of the Exchange Act \16\ requires that MSRB 
rules be designed to not impose any burden on competition not necessary 
or appropriate in furtherance of the purposes of the Act. In accordance 
with the Board's policy on the use of economic analysis, the Board has 
reviewed the proposed rule change.\17\ To fulfill its responsibility to 
protect investors, the MSRB must have current and reliable information 
about the fees and expenses assessed under such programs or plans and 
the market for 529 savings plans and ABLE programs as a whole. The 
proposed rule change is

[[Page 55217]]

necessary for the MSRB to gather relevant data required to ensure the 
MSRB's regulatory scheme is sufficient and/or to determine whether 
additional rulemaking is necessary to protect investors.
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    \16\ Id.
    \17\ Policy on the Use of Economic Analysis in MSRB Rulemaking, 
available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. For those rule changes which the MSRB seeks 
immediate effectiveness, the MSRB usually focuses exclusively its 
examination on the burden of competition on regulated entities.
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    The need for the proposed rule change to Form G-45 arises from the 
MSRB's oversight of dealers acting as underwriters to 529 savings plans 
and ABLE programs. The MSRB believes that this information is required 
to ensure effective regulation of dealers that sell interests in and 
underwriters to 529 savings plans and ABLE programs. Since certain data 
elements are not disclosed or readily available in some instances, 
rulemaking is required to bring the information to light. Specifically,
    1. In certain instances, the program management fee is included in 
the total fund operating expenses assessed by the underlying mutual 
fund and thus is not separately disclosed. This makes comparing and 
analyzing program management fees across plans difficult; and
    2. From time to time, an investment option may either close to new 
investors but allow current account owners to continue to invest or may 
close to new investors or all investors completely. Therefore, 
investment data submitted for that investment option may not accurately 
portray the real annualized return.
    The proposed rule change to Form G-45 would clarify the requirement 
of an existing data element, the program management fee, and the 
collection of an additional data element (check-the-boxes) about the 
investment option closing date information to remedy the above 
concerns. The MSRB can therefore remove the burden on submitters of 
unnecessary follow-ups for what is, in reality, accurate albeit 
incomplete data. In addition, the proposed rule change would delete the 
requirements to report three-year annualized performance data for each 
investment option and any related benchmark.
    The MSRB has evaluated alternatives to the proposed rule change 
with regard to obtaining some of the above information without the 
proposed rule change to Form G-45. However, none of these alternatives 
is preferable to the proposed requirements. For example, the program 
management fee, as an annual percentage of assets, is already submitted 
by the underlying mutual funds in disclosure documents to the SEC. 
However, to obtain the total program management fee for an entire 
municipal security fund through a review of disclosure documents, the 
MSRB would have to manually sift through the disclosures for all 
underlying funds and calculate the total program management fee based 
on a weighted-average of assets under management for each fund. For 
regulatory purposes, the MSRB needs to efficiently obtain a consistent 
set of uniform, reliable and relevant information about 529 savings 
plans and ABLE programs in order to compare across plans. Another 
alternative to the proposed rule change to Form G-45 is a manual review 
of information in plan disclosure documents submitted to the MSRB's 
Electronic Municipal Market Access (EMMA[supreg]) \18\ website or on 
529 savings plan or ABLE program websites. A manual review of 
information would be insufficient and inefficient.
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    \18\ EMMA is a registered trademark of the MSRB.
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    The benefits from collecting program management fee and investment 
option closing date data should exceed the costs. These benefits 
include enhanced regulatory oversight of underwriters to 529 savings 
plans and ABLE programs and improved understanding of the 529 savings 
plan and ABLE program marketplace. More importantly, since the 
remaining data elements are readily available to submitters, the costs 
associated with the current recommendation would be relatively 
minor.\19\
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    \19\ Commenters confirmed that there is limited burden 
associated with providing investment option closing date information 
to the MSRB. As to the program management fee, commenters generally 
agree that it is not burdensome to report.
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    Specifically, the program management fee expressed as an annual 
percentage of assets for each share class is already disclosed to the 
SEC, as the SEC-registered underlying mutual fund in which an 
investment option invests is required to disclose the percentage of the 
program management fee in the disclosure documents that it submits to 
the SEC. The costs of the submission process would be minor. Likewise, 
the costs of submitting the investment option closing date would be 
negligible as the issuer supplements the disclosure documents for the 
529 savings plan with that information.\20\ Consequently, the benefits 
should exceed the costs after the proposed rule change would be 
implemented by the industry.
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    \20\ As noted previously, the MSRB believes that issuers of ABLE 
programs also would supplement their disclosure documents with an 
investment option's closing date.
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    In addition to voicing their opinions on the MSRB's proposed 
clarification of and new data element requirements, commenters also 
requested that the MSRB consider eliminating the current requirement to 
report three-year annualized performance information under Rule G-45, 
as the industry standard no longer includes the three-year returns 
information as a part of the performance disclosure.\21\ The MSRB 
concurs that omitting the three-year annualized performance data would 
not materially change the MSRB's regulatory capability in this area, 
and submitters should benefit from a reduced burden when they no longer 
need to report this information. The MSRB believes the cost savings 
from no longer requiring the three-year annualized performance data 
should outweigh the benefit provided by the data.
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    \21\ In addition to the three-year performance data, the MSRB 
currently requires the performance data for year-to-date, one-year, 
five-years, ten-years and since inception.
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    In the aggregate, the MSRB believes that the proposed rule change 
would provide a range of benefits, including reducing regulatory 
inefficiencies to facilitate an efficient and effective regulatory 
oversight of relevant underwriters and dealers. Although the proposed 
rule change may impose some costs on underwriters and/or require them 
to revise certain business practices and spend additional resources. 
The MSRB believes that the total costs would be less than the aggregate 
benefits that would accrue over time to the market.
Effect on Competition, Efficiency and Capital Formation
    The MSRB believes that the proposed rule change would facilitate 
regulatory oversight of the municipal fund security market and promote 
capital formation by informing rulemaking, preventing fraud, and 
protecting investors. At present, the MSRB is unable to quantitatively 
evaluate the magnitude of efficiency gains or losses, or the impact on 
capital formation, but believes that the benefits outweigh the costs 
over the long term, as the costs of compliance are expected to be 
minor. Additionally, in the MSRB's view, the proposed rule change does 
not result in an undue burden on competition since it would apply to 
all underwriters of 529 savings plans and ABLE programs equally.\22\
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    \22\ The proposed rule change would not impose any burden on 
non-underwriting dealers that only sell interests in either 529 
savings plans or ABLE programs.
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    Competition, however, may be adversely affected if, to compensate 
for costs and regulatory burden, underwriters would raise the fees 
charged to issuers, resulting in issuers refraining from using dealers 
to engage directly with potential investors, or

[[Page 55218]]

passing on some portion of the higher fee amount to investors.
    The MSRB believes that the proposed rule change would not impose an 
unnecessary or inappropriate regulatory burden on small regulated 
entities, as the burden on underwriters should be proportional to their 
business activities in relation to 529 savings plans and ABLE programs.

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

    The MSRB sought public comment about providing additional data 
concerning the investment options offered in 529 savings plans and ABLE 
programs.\23\ In response to the Request for Comment, the MSRB received 
six comment letters.\24\ Commenters generally opposed providing 
additional data to the MSRB. However, commenters suggested that they 
could more easily provide data relating to two of the items about which 
the MSRB sought comment (a clarification concerning the program 
management fee and data concerning the investment option closing date) 
than the other two items with which the MSRB sought comment but with 
which the Board determined not to proceed. Further, one commenter 
suggested that the MSRB amend Form G-45 to delete the requirement that 
an underwriter submit investment option annualized three-year 
performance information \25\ and another commenter specifically 
supported that suggestion.\26\
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    \23\ See note 8, supra.
    \24\ The MSRB received letters from the State of West Virginia: 
Letter from John D. Perdue, West Virginia State Treasurer, dated 
September 18, 2017 (``West Virginia''); American Funds Distributors, 
Inc.: Letter from Maria Manotok, Senior Counsel, dated September 21, 
2017 (``American Funds''); Ascensus College Savings: Letter from 
Sandra Madden, General Counsel, dated September 21, 2017 
(``Ascensus''); College Savings Plans Network and College Savings 
Foundation: Letter from Richard J. Polimeni, Chairman, College 
Savings Foundation, and Young Boozer, Chairman, College Savings 
Plans Network, dated September 21, 2017 (``CSPN and CSF''); 
Investment Company Institute: Letter from Tamara K. Salmon, Senior 
Associate Counsel, dated September 21, 2017 (``ICI''); Securities 
Industry and Financial Markets Association: Letter from Leslie M. 
Norwood, Managing Director and Associate General Counsel, and 
Bernard Canepa, Vice President and Assistant General Counsel, dated 
September 21, 2017 (``SIFMA'').
    \25\ See ICI letter.
    \26\ See SIFMA letter.
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Additional Investment Option Data
i. Program Management Fee
    Although commenters generally opposed any amendment to Form G-45, 
one commenter, SIFMA, stated that it generally supports the proposed 
rule change relating to the program management fee, however, SIFMA gave 
this support while also sharing the concerns about this item expressed 
by the ICI. Other commenters stated that the program management fee 
could be proprietary,\27\ costly to report separately due to 
programming costs,\28\ and that reporting the percentage of the fee 
separately could lead to the MSRB ``double counting'' the amount of the 
program management fee.\29\
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    \27\ See Ascensus letter.
    \28\ See ICI letter.
    \29\ Id.
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    The MSRB continues to believe that it is important to receive 
information about the program management fee in a uniform manner. With 
its adoption of Rule G-45 and Form G-45, the MSRB recognized the 
importance of receiving consistent and reliable information about 529 
savings plans for the MSRB to fulfill its mission to protect investors. 
This information allows the MSRB, as well as other regulators, to 
analyze the data in a format that can be sorted to foster a better 
understanding of the 529 savings plan industry. Without that 
information, the analytical process is not as efficient as it otherwise 
could be.
    Moreover, the SEC-registered underlying mutual fund in which an 
investment option invests is required to disclose the percentage of the 
program management fee in the disclosure documents that it submits to 
the SEC. The MSRB has obtained this information through such a review. 
The MSRB submits that the percentage of the program management fee is 
not proprietary, as it is disclosed to the SEC in public documents. For 
that same reason, the MSRB believes that underwriters would incur 
minimal costs, if any, if they were to report the percentage of the 
program management fee separately.
    As far as the double counting of the program management fee, the 
MSRB currently has the analytical tools necessary to ensure that the 
percentage of the program management fee is not double counted. 
Underwriters could simply continue to alert the MSRB in the notes 
section of Form G-45, that the program management fee is assessed by 
the underlying mutual fund in which the investment option invests. The 
MSRB then would take the note into consideration when it analyzes the 
underlying fund expenses for an investment option.
ii. Investment Option Closing Date
    Four commenters submitted comments about providing information 
about an investment option closing date. In general, commenters stated 
that they did not oppose the proposal, and that the information would 
be easily reportable, but that reporting such information may increase 
costs to the 529 savings plan, and they were not certain why the 
information would be meaningful to the MSRB.\30\ Commenters explained 
that the increased costs could result because the 529 savings plan 
would not be able to use the data it submits to other regulators on 
Form G-45.\31\
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    \30\ See American Funds letter (``[a]though we do not oppose the 
requirement that 529 plan underwriters report whether an investment 
option has closed to new investors, we are concerned that the 
Proposal would require 529 plan underwriters to collect and provide 
to the MSRB new information''); Ascensus letter (``w]e have the 
investment option closing dates and can provide this information if 
applicable''); ICI letter (``[t]o the extent the MSRB revises Form 
G-45 to elicit this information in an easy-to-disclose format (e.g., 
as a ``check-the-box'' question), it is information that our members 
could easily report''); and SIFMA letter (``[w]e generally support 
the draft amendments pertaining to the program management fee and 
investment option closing data elements; however, we concur with the 
ICI on these points'').
    \31\ See, e.g., American Funds letter and ICI letter.
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    The MSRB believes that having information about the investment 
option closing date would enhance the ability of the MSRB to analyze 
investment option data in a timely and efficient manner. As commenters 
acknowledged, underwriters have this information (a 529 savings plan 
must supplement its program disclosure booklet with this information in 
a timely manner to comply with its obligations under the federal 
securities laws). As noted under ``Self-Regulatory Organization's 
Statement on Burden on Competition,'' the MSRB believes that providing 
an investment option closing date should not materially increase costs 
for underwriters.
iii. Three-Year Annualized Performance Information
    As noted under ``Self-Regulatory Organization's Statement of the 
Purpose of, and Statutory Basis for, the Proposed Rule Change,'' Form 
G-45 requires that underwriters annually report (i) total returns, 
including sales charges, (ii) total returns, excluding sales charges, 
and (iii) benchmark return percent for specified periods, including 
annualized or annual three-year percent. At the time the MSRB approved 
Form G-45, the disclosure principles which commenters stated were the 
industry norm in other rulemakings, recommended that such disclosure be 
made.\32\ However, since that time, CSPN has updated the disclosure 
principles,

[[Page 55219]]

and CSPN no longer recommends that a 529 savings plan include three-
year performance information.\33\ Commenters suggested that the MSRB 
harmonize Form G-45 with the disclosure principles,\34\ and that 
continuing to provide this information to the MSRB would not be helpful 
to investors and would be burdensome to produce.\35\ In addition, 
three-year performance information is not required by the SEC for 
mutual funds.
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    \32\ See note 10.
    \33\ See note 11.
    \34\ See ICI letter and SIFMA letter.
    \35\ See SIFMA letter.
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    The MBRB agrees with commenters' suggestion, and the proposed rule 
change would delete this requirement. Form G-45, even without the 
three-year performance data, would continue to provide the MSRB with 
sufficient performance information to assist the MSRB with its analysis 
of the 529 savings plan and ABLE program industries. Further, the 
suggestion would result in cost savings for those industries.
iv. Economic Analysis
    Commenters confirmed that there is limited burden associated with 
providing investment option closing date information to the MSRB. As to 
the program management fee, commenters generally agree that it would be 
less burdensome to report than the benchmark performance and investment 
return data elements. While the MSRB agrees with ICI and other 
commenters \36\ that expenses may be incurred by underwriters to 
redesign the current reporting system to report the program management 
fee separately, the MSRB believes the incurred expenses would likely be 
one-time only and should not be too burdensome for the industry. In 
addition, the percentage of the program management fee itself is 
already disclosed to the SEC, as the underlying mutual fund in which an 
investment option invests is required to disclose the percentage of the 
program management fee in the disclosure documents that it submits to 
the SEC.
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    \36\ See the Letters from Ascensus College Savings and American 
Funds.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period of up to 90 days (i) as 
the Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MSRB-2018-08 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-2018-08. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the MSRB. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MSRB-2018-08 and should be submitted on 
or before November 23, 2018.

    For the Commission, pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-23966 Filed 11-1-18; 8:45 am]
 BILLING CODE 8011-01-P