Document ID: SEC-2019-0250-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2019-03-06T05:00Z

[Federal Register Volume 84, Number 44 (Wednesday, March 6, 2019)]
[Notices]
[Pages 8141-8146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03992]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85223; File No. SR-MSRB-2019-05]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Amend Rule G-21, on Advertising by Brokers, Dealers and 
Municipal Securities Dealers, Rule G-40, on Advertising by Municipal 
Advisors, and Rule G-8, on Books and Records

February 28, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 26, 2019 the Municipal Securities Rulemaking Board 
(``MSRB'') filed with the Securities and Exchange Commission (``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 (the 
``proposed rule change'') to amend MSRB Rule G-21, on advertising by 
brokers, dealers and municipal securities dealers, (``proposed amended 
Rule G-21'') and MSRB Rule G-40, on advertising by municipal advisors, 
(``proposed amended Rule G-40'') to exempt interactive content that is 
an advertisement and that would be posted or disseminated on an 
interactive electronic forum from the requirement that a municipal 
securities principal, a general securities principal, or a municipal 
advisor principal approve that advertisement prior to first use. The 
proposed rule change would also make a technical amendment to Rule G-8, 
on books and records to be made by brokers, dealers, and municipal 
securities dealers and municipal advisors (``proposed amended Rule G-
8''). The proposed rule change has been filed for immediate 
effectiveness under Section 19(b)(3)(A) of the Exchange Act \3\ and 
Rule 19b-4(f)(6) thereunder.\4\ The effective date of the amendments to 
Rule G-21 and Rule G-40 will be announced in an MSRB Notice to be 
published on the MSRB's website following the effectiveness of this 
proposed rule change. To provide brokers, dealers, municipal securities 
dealers and municipal advisors (collectively, ``regulated entities'') 
with sufficient time to develop supervisory and compliance policies and 
procedures, the effective date to be announced will be no less than 30 
days and no more than 180 days following publication of the MSRB 
Notice.\5\ However, proposed amended Rule G-8 will become operative 30 
days after the date of filing.
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    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ See Exchange Act Release No. 83177 (May 7, 2018), 83 FR 
21794 (May 10, 2018) (File No. SR-MSRB-2018-01). The amendments to 
Rule G-21 and new Rule G-40 were to become effective on February 7, 
2019. However, to provide the industry with sufficient time to 
establish supervisory and compliance policies and procedures, the 
MSRB filed with the SEC for immediate effectiveness an extension of 
that effective date. The new effective date of the amendments to 
Rule G-21 and new Rule G-40 will be announced in an MSRB Notice to 
be published on the MSRB's website. See File No. SR-MSRB-2019-01.
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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/2019-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 proposed rule change would amend Rule G-21 and Rule G-40 (the 
``advertising rules'') to exempt interactive content that is an 
advertisement and that would be posted or disseminated on an 
interactive electronic forum from the requirement that a municipal 
securities principal, a general securities principal, or a municipal 
advisor principal approve that advertisement prior to first use. The 
proposed rule change also would make a technical amendment to Rule G-8.
Background
Interactive and Static Content
    During the development of the recent amendments to Rule G-21 and 
new Rule G-40, the MSRB received requests for guidance regarding the 
applicability of those rules to the use of social media by brokers, 
dealers, and municipal securities dealers (collectively, ``dealers'') 
and municipal advisors in connection with their municipal securities 
activities and municipal advisory activities. The MSRB committed to 
providing that guidance \6\ before the effective date of the

[[Page 8142]]

amendments to the advertising rules,\7\ and developed draft guidance 
regarding the use of social media in the format of frequently asked 
questions (the ``FAQs'').\8\
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    \6\ Letter from Pamela K. Ellis, Associate General Counsel, 
Municipal Securities Rulemaking Board, dated April 30, 2018, 
available at http://msrb.org/~/media/Files/SEC-Filings/2018/MSRB-
2018-01%20MSRB%20Letter%20to%20SEC.ashx?.
    \7\ Exchange Act Release No. 83177 (May 7, 2018), 83 FR 21794 
(May 10, 2018) (File No. SR-MSRB-2018-01).
    \8\ Concurrent with the submission of this proposed rule change, 
the MSRB filed the FAQs with the SEC for immediate effectiveness.
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    To receive the benefit of the expertise and experience of market 
stakeholders, the MSRB requested comment on the draft FAQs.\9\ In 
response, commenters requested \10\ that the MSRB adopt the concepts of 
interactive and static content posted or disseminated in an interactive 
electronic forum, including the corresponding exemption from the 
requirement of principal preapproval of interactive content, as 
provided in connection with FINRA Rule 2210 \11\ and the amendments 
thereto.\12\ Commenters submitted that such guidance would facilitate 
the use of social media by regulated entities in their municipal 
securities activities and municipal advisory activities.\13\ The 
proposed rule change is responsive to those requests.
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    \9\ MSRB Notice 2018-19 (Aug. 14. 2018) (the ``request for 
comment'').
    \10\ Letter from Mike Nicholas, Chief Executive Officer, Bond 
Dealers of America, dated September 14, 2018 (``BDA''); Letter from 
Susan Gaffney, Executive Director, National Association of Municipal 
Advisors, dated September 17, 2018 at 4-5 (``NAMA''); Letter from 
Leslie M. Norwood, Managing Director and Associate General Counsel, 
Securities Industry and Financial Markets Association, dated 
September 14, 2018 at 2 (``SIFMA''); and Letter from Robert J. 
McCarthy, Director, Regulatory Policy, Wells Fargo Advisors, dated 
September 14, 2018 at 4 (``Wells Fargo'') available at http://www.msrb.org/Rules-and-Interpretations/Regulatory-Notices/2018/2018-19.aspx?c=1.
    \11\ See, e.g., FINRA Rule 2210(b)(1)(D)(ii); FINRA Regulatory 
Notice 17-18 (Apr. 2017) at 1; and FINRA Regulatory Notice 11-39 
(Aug. 2011) at 2. The references to FINRA materials set forth in 
this filing are identified for reference, and such reference is not 
intended to suggest that regulated entities that are not subject to 
the guidance issued by FINRA are responsible for compliance with 
that guidance. In addition, the MSRB does not intend for the 
guidance provided by this filing to modify or otherwise affect the 
guidance contained in any of the referenced materials published by 
FINRA.
    \12\ Previously, FINRA Rule 2210, FINRA's rule for 
communications with the public, provided that the definition of a 
``public appearance'' included an unscripted participation in an 
interactive electronic forum (e.g., a non-static real-time 
communication); nevertheless, such a ``public appearance'' did not 
require a registered principal to approve in advance the remarks 
made in that interactive electronic forum. However, those remarks 
would have to be supervised under National Association of Securities 
Dealers (NASD) Rule 3010. See FINRA Regulatory Notice 10-06 (Jan. 
2010) at 4.
    Effective in February 2013, FINRA amended FINRA Rule 2210 (the 
``2013 FINRA Rule 2210 amendments''). See FINRA Regulatory Notice 
12-29 (Jun. 2012). The 2013 FINRA Rule 2210 amendments amended FINRA 
Rule 2210 so that unscripted appearances in interactive electronic 
forums now are considered retail communications. See FINRA Rule 
2210(a)(5). Nevertheless, FINRA Rule 2210 provides that such retail 
communications would not have to be approved by a registered 
principal before their first use. However, under FINRA rules, those 
retail communications must be supervised and reviewed in the same 
manner as required for supervising and reviewing correspondence 
under FINRA Rule 3110. See FINRA Rule 2210(b)(1)(D)(ii).
    \13\ BDA, NAMA at 4-5, SIFMA at 2, and Wells Fargo at 2-3.
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Technical Amendment to Rule G-8
    Rule G-27(e)(iii), on supervision, requires, in part, that each 
dealer retain correspondence of municipal securities representatives 
``relating to its municipal securities activities in accordance with 
Rule[s] G-8(a)(xx).'' However, Rule G-8(a)(xx) omits a cross-reference 
to the correspondence that is required by Rule G-27(e)(iii) to be 
kept.\14\ The proposed rule change would make a technical amendment to 
Rule G-8(a)(xx) to provide that cross-reference.
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    \14\ Rule G-8(a)(xx) provides that ``each broker, dealer and 
municipal securities dealer shall maintain the records required 
under G-27(c) and G-27(d).''
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Proposed Amended Rule G-21
    To facilitate municipal securities activities for dealers, as well 
as to promote regulatory consistency with the advertising or 
communications rules of other financial regulators, proposed amended 
Rule G-21(g) would exempt interactive content that is an advertisement 
and that is posted or disseminated in an interactive electronic forum 
from the requirement for municipal securities principal or general 
securities principal approval prior to first use as set forth in 
proposed amended Rule G-21(f). However, such interactive content would 
be subject to the other requirements, as relevant, of proposed amended 
Rule G-21.
    Interactive content refers to content that is posted or 
disseminated for direct real-time interaction with the audience. 
Examples of interactive content include, but are not limited to, chats 
and messaging.\15\ Interactive content, however, may become static 
content under certain circumstances, such as when interactive content 
is copied and then posted in a static forum.\16\
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    \15\ See FINRA Regulatory Notice 10-06 (Jan. 2010) at 4-5 
(discussing interactive electronic content that allows for non-
static real-time communications). The proposed rule change is 
aligned with FINRA's guidance in this area.
    \16\ See FINRA Regulatory Notice 11-39 (Aug. 2011) at 5 
(providing that interactive content could become static if the 
interactive content was copied and posted in a static forum). The 
proposed rule change is aligned with FINRA's guidance in this area.
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    Static content, by contrast, is content that is posted or 
disseminated to an audience that does not include direct real-time 
interaction with that audience.\17\ An example of static content 
includes, but is not be limited to, social media posts.\18\ Consistent 
with other types of advertisements, static content that is an 
advertisement would be subject to all applicable provisions of proposed 
amended Rule G-21, including proposed amended Rule G-21(f)'s 
requirement for approval by a municipal securities principal or general 
securities principal prior to first use.
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    \17\ See FINRA Regulatory Notice 10-06 (Jan. 2010) at 4-5 
(providing that static content is content that remains posted until 
it is changed by the firm or individual who established the 
account). The proposed rule change is aligned with FINRA's guidance 
in this area.
    \18\ Id.
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    Proposed amended Rule G-21(f) would no longer set forth the 
recordkeeping requirement for advertisements. Instead, such requirement 
would be set forth in proposed amended Rule G-21(h). By so doing, 
proposed amended Rule G-21(h) would apply recordkeeping requirements to 
all advertisements subject to proposed amended Rule G-21, including 
advertisements that include static or interactive content that are 
posted or disseminated in an interactive electronic forum.
    To address the supervision and review of interactive content, 
proposed amended Rule G-21 would include Supplementary Material .04 (SM 
.04). SM .04 would provide that notwithstanding Rule G-21(g), a dealer 
must supervise and review interactive content in the same manner in 
which that dealer supervises and reviews correspondence under Rule G-
27(e), on review of correspondence.
Proposed Amended Rule G-40
    To facilitate municipal advisory activities for municipal advisors, 
as well as to promote regulatory consistency with the advertising or 
communications rules of other financial regulators, proposed amended 
Rule G-40(d), similar to proposed amended Rule G-21, would exempt 
interactive content that is an advertisement and that is posted or 
disseminated in an interactive electronic forum from the requirement 
for municipal advisor principal approval prior to first use as set 
forth in proposed amended Rule G-40(c). However, such interactive 
content would be subject to the other requirements, as relevant, of 
proposed amended Rule G-40.
    Interactive content refers to content that is posted or 
disseminated for direct real-time interaction with the audience.

[[Page 8143]]

Examples of interactive content include, but are not limited to, chats 
and messaging.\19\ Interactive content, however, may become static 
content, under certain circumstances, such as when interactive content 
is copied and then posted in a static forum.\20\
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    \19\ See note 15.
    \20\ See note 16.
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    Static content, by contrast, is content that is posted or 
disseminated to an audience that does not include direct interaction 
with that audience.\21\ An example of static content includes, but is 
not limited to, social media posts.\22\ Consistent with other types of 
advertisements, static content that is an advertisement would be 
subject to all applicable provisions of proposed amended Rule G-40, 
including proposed amended Rule G-40(c)'s requirement for approval by a 
municipal advisor principal prior to first use.
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    \21\ See note 17.
    \22\ Id.
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    Proposed amended Rule G-40(c) would no longer set forth the 
recordkeeping requirement for advertisements. Instead, such requirement 
would be set forth in proposed amended Rule G-40(e). By so doing, 
proposed amended Rule G-40(e) would apply recordkeeping requirements to 
all advertisements subject to proposed amended Rule G-40, including 
advertisements that include static or interactive content that are 
posted or disseminated in an interactive electronic forum.
    To address the potential need to supervise and review interactive 
content, proposed amended Rule G-40 would include Supplementary 
Material .02 (SM .02). SM .02 would provide that notwithstanding Rule 
G-40(d), each municipal advisor shall establish, implement, and 
maintain a system to supervise the municipal advisory activities of the 
municipal advisor and its associated persons, including any municipal 
advisory activities conducted through an interactive electronic forum 
that involve interactive content, that is reasonably designed to 
achieve compliance with applicable securities laws and regulations, 
including applicable Board rules as set forth in Rule G-44(a), on 
supervisory system.
Interactive Content and FINRA Rule 2210
    Commenters requested, as noted above, that the MSRB address 
interactive content similar to how such content is addressed by FINRA, 
and proposed amended Rules G-21 and Rule G-40 are responsive to those 
requests. FINRA addresses interactive content in its communications 
rule, FINRA Rule 2210, and the structure of proposed amended Rules G-21 
and G-40 is consistent with that rule. FINRA Rule 2210:
     Exempts interactive content in retail communications 
posted on an online interactive electronic forum from the requirement 
of approval by a principal prior to first use; \23\
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    \23\ See FINRA Rule 2210(b)(1)(D).
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     requires that such interactive content (retail 
communications posted on an online interactive electronic forum) be 
supervised and reviewed in the same manner as correspondence under 
FINRA's supervision rule, Rule 3110; \24\ and
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    \24\ Id.
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     requires that records be kept regarding those retail 
communications posted on an online interactive electronic forum.\25\
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    \25\ See FINRA Rule 2210(b)(4).
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    Proposed amended Rules G-21 and G-40, as FINRA Rule 2210, would:
     Exempt interactive content that is an advertisement and 
that is posted or disseminated in an interactive electronic forum from 
the requirement of principal approval prior to first use; \26\
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    \26\ Proposed amended Rule G-21(g); proposed amended Rule G-
40(d).
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     require that records be kept relating to that interactive 
content; \27\and
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    \27\ Proposed amended Rule G-21(h); proposed amended Rule G-
40(e).
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     address the supervision and review of interactive content 
under applicable MSRB supervisory rules.
    Specifically, for dealers, Rule G-27(e) requires that a dealer 
establish procedures for the review by a designated principal of 
incoming and outgoing written and electronic correspondence of its 
municipal securities representatives with the public relating to the 
municipal securities activities of the dealer. Consistent with FINRA 
Rule 2210(b)(1)(D), SM .04 would provide that a dealer must supervise 
and review interactive content in the same manner in which that broker, 
dealer, or municipal securities dealer supervises and reviews 
correspondence under Rule G-27(e), on review of correspondence.
    For municipal advisors, Rule G-44(a) requires that the municipal 
advisor establish and implement a supervisory system to supervise the 
municipal advisory activities of the municipal advisor and its 
associated persons that is reasonably designed to achieve compliance 
with applicable securities laws and regulations and Board rules. 
However, Rule G-44, unlike Rule G-21, does not have a specific element 
that addresses the supervision of correspondence. As the MSRB has 
recognized previously, the approach taken to Rule G-44 differs from the 
approach taken to Rule G-27.\28\ Rule G-27 reflects evolving broker-
dealer industry practices and many of Rule G-27's more prescriptive 
elements reflect the fact that many dealers, unlike municipal advisors, 
hold customer funds and securities for safekeeping.\29\ Complete 
parallelism between Rules G-44 and Rule G-27 is not possible given that 
broker-dealers do not owe a fiduciary duty, and therefore, are subject 
to different standards of conduct.\30\ Nevertheless, under Rule G-44, 
depending on the municipal advisor's municipal advisory activities, a 
municipal advisor's supervisory policies and procedures may include 
policies and procedures regarding the supervision and review of 
correspondence to achieve compliance with applicable securities laws 
and regulations, including MSRB rules.
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    \28\ See SR-MSRB-2014-06 (July 24, 2014).
    \29\ Id.
    \30\ Id.
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    Consistent with FINRA Rule 2210(b)(1)(D) and to reflect that the 
review of correspondence is generally conducted as a supervisory 
control by a municipal advisor, SM .02 would provide each municipal 
advisor, shall establish, implement, and maintain a system to supervise 
the municipal advisory activities of the municipal advisor and its 
associated persons, including any municipal advisory activities 
conducted through an interactive electronic forum that involve 
interactive content, that is reasonably designed to achieve compliance 
with applicable securities laws and regulations, including applicable 
Board rules as set forth in Rule G-44(a), on supervisory system. Thus, 
proposed amended Rules G-21 and G-40 and FINRA Rule 2210 would be 
consistent, to the extent practicable, in how interactive content would 
be addressed under their rules.
    Although proposed amended Rules G-21 and G-40 and FINRA Rule 2210 
would address interactive content in a consistent manner, to the extent 
practicable, given the nature of the MSRB's advertising rules and 
FINRA's communications rule, there are differences between proposed 
amended Rules G-21 and Rule G-40 and FINRA Rule 2210. Nevertheless, 
those are not substantive differences in how interactive content would 
be regulated.\31\
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    \31\ FINRA Rule 2210 divides communications into three 
categories and depending on the communication's category, may 
require that the communication be filed with FINRA either before or 
within a set time of first use. By contrast, Rules G-21 and G-40 do 
not require filing and review by the MSRB. The advertising rules 
focus, in part, on the advertisement type and the content and the 
standard of liability for that advertisement type.

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[[Page 8144]]

2. Statutory Basis
    Section 15B(b)(2) of the Exchange Act \32\ provides that: [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 with 
respect to municipal financial products, the issuance of municipal 
securities, and solicitations of municipal entities or obligated 
persons undertaken by brokers, dealers, municipal securities dealers, 
and municipal advisors.
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    \32\ 15 U.S.C. 78o-4(b)(2).
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    Section 15B(b)(2)(C) of the Exchange Act \33\ 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.
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    \33\ 15 U.S.C. 78o-4(b)(2)(C).
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    The MSRB believes that the proposed rule change is consistent with 
Sections 15B(b)(2) \34\ and 15B(b)(2)(C) \35\ of the Exchange Act. The 
proposed rule change would foster coordination with persons engaged in 
regulating transactions in municipal securities.
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    \34\ 15 U.S.C. 78o-4(b)(2).
    \35\ 15 U.S.C. 78o-4(b)(2)(C).
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    The proposed rule change would amend the advertising rules to 
exempt interactive content that is an advertisement and that would be 
posted or disseminated in an interactive electronic forum from the 
requirement that a municipal securities principal, a general securities 
principal, or a municipal advisor principal, as applicable, approve 
that content prior to first use. Nonetheless, the advertising rules 
would continue to require that such interactive content comply with the 
other provisions of the advertising rules, including the content 
standards (and the requirement that advertisement not contain a false 
or misleading statement) and recordkeeping requirements of those rules. 
Thus, regulated entities would be able to provide such interactive 
content though an interactive electronic forum on terms that would be 
consistent with the regulations or guidance of FINRA, as noted under 
``Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change,'' to the extent 
practicable.\36\
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    \36\ See e.g., FINRA Rule 2210(b)(1)(D)(ii).
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    Because the MSRB has endeavored to make the proposed rule change 
consistent with the communications rules and social media guidance 
published by FINRA, to the extent practicable, FINRA staff should be 
familiar with the standards for interactive content. In turn, that 
familiarity should foster efficient examinations by FINRA of the MSRB-
regulated entities that FINRA is charged with examining. Further, a 
regulated entity that is dually registered as a broker or dealer with 
the SEC and/or is part of an organization that includes one or more 
SEC-registered broker-dealers (as many regulated entities are) may be 
able to more easily understand and develop consistent practices across 
business lines and therefore promote compliance with the proposed rule 
change. Nevertheless, a regulated entity that is dually registered with 
the MSRB and with FINRA would be treated the same under the advertising 
rules as a regulated entity that is registered with the MSRB and not 
with FINRA. Thus, because the MSRB has endeavored to make the proposed 
rule change consistent with the communications rules and social media 
guidance of FINRA, the proposed rule change would help ensure that all 
regulated entities are subject to consistent advertising regulation.
    In addition, the proposed rule change would remove a regulatory 
impediment regarding the need for principal pre-approval of interactive 
content in the advertising rules. Nonetheless, the advertising rules 
still would require that such interactive content comply with the other 
provisions of the advertising rules including the content standards and 
recordkeeping requirements of those rules, and generally be subject to 
the regulated entity's supervisory program. Accordingly, the proposed 
rule change would continue to require a regulated entity to present a 
fair statement of the services, products, or municipal securities or 
municipal advisory services advertised, but would facilitate a method 
of communication through an interactive electronic forum. Thus, 
proposed amended Rules G-21 and G-40 would continue to protect 
investors, municipal entities, obligated persons and the public 
interest.\37\
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    \37\ See SR-MSRB-2018-01 (Jan. 24, 2018).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Exchange Act \38\ requires that MSRB 
rules not be designed to impose any burden on competition not necessary 
or appropriate in furtherance of the purposes of the Exchange Act. In 
accordance with the MSRB's policy on the use of economic analysis, the 
MSRB has reviewed the proposed rule change.\39\ Proposed amended Rules 
G-21 and G-40 would specify that interactive content that contains an 
advertisement and that is posted or disseminated in an interactive 
electronic forum would not be required to be approved in writing by a 
principal prior to first use, but still would be subject to 
recordkeeping requirements and the supervisory requirements of Rule G-
27 or Rule G-44, as relevant. The MSRB believes the proposed amended 
Rules G-21 and G-40 are necessary and appropriate to clarify the 
requirements which would be consistent with the regulation and guidance 
provided by other regulators.
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    \38\ 15 U.S.C. 78o-4(b)(2)(C).
    \39\ 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's policy on the use of economic 
analysis limits its applications and focuses exclusively on the 
burden of competition on regulated entities.
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    The need for proposed amended Rules G-21 and G-40 arises from 
MSRB's oversight of dealers' and municipal advisors' advertising 
activities. Since financial service professionals, investors, issuers, 
and other market participants are increasingly using interactive 
electronic forums as a part of their social media activities, the MSRB 
agrees with market participants that it is highly desirable to provide 
regulatory consistency, to the extent practicable, with the 
requirements associated with interactive and static content that 
contains advertisements provided by other financial regulators. 
Proposed amended Rules G-21 and G-40 are intended to reduce impediments 
to the use of interactive content that is an advertisement.
    The MSRB has evaluated alternatives to proposed amended Rules G-21 
and G-40. A reasonable regulatory

[[Page 8145]]

alternative is to subject interactive content posted or disseminated in 
an interactive electronic forum that contains advertisements to the 
same requirements as all other advertisements, including advertisements 
that are posted or disseminated in static forums: namely, content that 
is an advertisement would require approval in writing from a principal 
prior to first use. However, the MSRB believes with increased 
interactive content postings in the marketplace, this alternative is 
not practical and is less preferable since this would not reflect 
recent changes in the social media environment and could add 
significant burden on dealers, municipal advisors and their associated 
compliance professionals.
    A reasonable baseline for evaluating the proposed rule change are 
the current requirements of Rule G-21 and Rule G-40. The main benefit 
of proposed amended Rules G-21 and G-40 for dealers and municipal 
advisors is the explicit elimination of the requirement of receiving 
prior approval for interactive content that is an advertisement and 
that will be posted or disseminated in an interactive electronic forum. 
Proposed amended Rule G-21 should reduce the burden placed on dealers, 
brokers and municipal securities dealers who presently must request 
approval to post or disseminate interactive content that is an 
advertisement on an interactive electronic forum. Proposed amended Rule 
G-40 should also reduce the potential burden on municipal advisors that 
otherwise would have to seek approval to distribute interactive 
advertising content on an interactive electronic forum when Rule G-40 
becomes effective.\40\
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    \40\ Interactive content that contains an advertisement on 
interactive electronic forums would be subject to the recordkeeping 
requirements under Rule G-8 for both dealers and municipal advisors.
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Effect on Competition, Efficiency and Capital Formation
    As noted under ``Statutory Basis,'' a regulated entity that is 
dually registered with the MSRB and with FINRA would be treated the 
same under the advertising rules as a regulated entity that is 
registered with the MSRB and not with FINRA. Thus, because the MSRB has 
endeavored to make the proposed rule change consistent with the 
communications rules and social media guidance of FINRA, the proposed 
rule change would help ensure that all regulated entities are subject 
to consistent advertising regulation. That consistent regulation should 
improve competition among regulated entities.
    In addition, the MSRB believes that proposed amended Rules G-21 and 
G-40 would clarify that dealer and municipal advisor responsibility 
regarding interactive content that is an advertisement and that is 
posted or disseminated in an interactive electronic forum that is 
consistent with the regulation and guidance provided by other 
regulators, to the extent practicable. Since dealers and municipal 
advisors would now be permitted to distribute advertisements on real-
time electronic forums without prior principal approval, it is probable 
there would be a reduction in burden on dealers and an improvement in 
their operation efficiency. At present, the MSRB is unable to 
quantitatively evaluate the magnitude of the efficiency gains or the 
reduction in burden, but proposed amended Rules G-21 and G-40 would 
eliminate the requirement that a principal pre-approve interactive 
content that is an advertisement and that would be posted or 
disseminated in an interactive electronic forum, and therefore, should 
improve operation efficiency and capital formation.
    Section 15B(b)(2)(L)(iv) of the Exchange Act \41\ provides that 
MSRB rules may ``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.'' The MSRB believes that proposed amended Rules G-21 and G-40 
would not impose an unnecessary or inappropriate regulatory burden on 
small regulated entities, as the potential reduced burden on dealers 
and municipal advisors would be applicable to all regulated entities 
and should be proportionate to each regulated entity's use of 
interactive content that is an advertisement. The proposed rule change 
therefore should not affect the competition.
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    \41\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received on the 
proposed rule change. Nevertheless, as discussed under ``Self-
Regulatory Organization's Statement of the Purpose of, and Statutory 
Basis for, the Proposed Rule Change,'' the proposed rule change was 
undertaken in response to the comments that the MSRB received from its 
request for comment on the draft FAQs.\42\
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    \42\ See notes 6-13 and accompanying text.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \43\ and Rule 19b-
4(f)(6) thereunder.\44\
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    \43\ 15 U.S.C. 78s(b)(3)(A).
    \44\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2019-05 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-2019-05. 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

[[Page 8146]]

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-2019-05 and should be 
submitted on or before March 27, 2019.

    For the Commission, pursuant to delegated authority.\45\
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    \45\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03992 Filed 3-5-19; 8:45 am]
 BILLING CODE 8011-01-P