Document ID: SEC-2014-0086-0001
Agency: sec
Document Type: Rule
Title: Registration of Municipal Advisors
Posted Date: 2014-01-16T05:00Z

[Federal Register Volume 79, Number 11 (Thursday, January 16, 2014)]
[Rules and Regulations]
[Pages 2777-2779]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00740]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249

[Release No. 34-71288; File No. S7-45-10]
RIN 3235-AK86

Registration of Municipal Advisors; Temporary Stay of Final Rule

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; stay.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
staying temporarily Rules 15Ba1-1 through 15Ba1-8 and Rule 15Bc4-1 
(``Rules'') under the Securities Exchange Act of 1934 and Forms MA, MA-
I, MA-W, and MA-NR (``Forms'') until July 1, 2014 and making 
conforming, non-substantive amendments to Rule 15Ba1-8 regarding 
recordkeeping requirements to conform the dates referenced in certain 
provisions of that rule to the July 1, 2014 date (the ``Amendment''). 
The effective date for the Rules and Forms was January 13, 2014. This 
stay of the Rules and Forms means that persons are not required to 
comply with the Rules and Forms until July 1, 2014. The Amendment is 
the only action the Commission is taking in this release with respect 
to the Rules and Forms. Therefore, the phased-in compliance period that 
begins on July 1, 2014, for the requirement to use the Forms to 
register as municipal advisors under the Rules remains unchanged.

DATES: Effective January 13, 2014, 17 CFR 240.15Ba1-1 through 15Ba1-8 
and 240.15Bc4-1 and 17 CFR 249.1300, 249.1310, 249.1320, and 249.1330 
are stayed until July 1, 2014.

FOR FURTHER INFORMATION CONTACT: John Cross, Director; Jessica Kane, 
Senior Special Counsel to the Director; Rebecca Olsen, Attorney Fellow; 
Mary Simpkins, Senior Special Counsel; Edward Fierro, Attorney-Adviser; 
or Cori Shepherd, Attorney-Adviser; Office of Municipal Securities, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-7010. Contact phone number: (202) 551-5680

SUPPLEMENTARY INFORMATION:

I. Discussion

    Section 15B(a)(1) of the Exchange Act,\1\ as amended by Section 
975(a)(1)(B) of the Dodd-Frank Act,\2\ makes it unlawful for a 
municipal advisor to provide advice to or on behalf of a municipal 
entity or obligated person with respect to municipal financial products 
or the issuance of municipal securities, or to undertake a solicitation 
of a municipal entity or obligated person, unless the municipal advisor 
is registered with the Commission. Section 15B(a)(2) of the Exchange 
Act,\3\ as amended by Section 975(a)(2) of the Dodd-Frank Act, provides 
that a municipal advisor may be registered by filing with the 
Commission an application for registration in such form and containing 
such information and documents concerning the municipal advisor and any 
person associated with the municipal advisor as the Commission by rule 
may prescribe as necessary or appropriate in the public interest or for 
the protection of investors.
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    \1\ 15 U.S.C. 78o-4(a)(1).
    \2\ Public Law 111-203, 124 Stat. 1376 (2010).
    \3\ 15 U.S.C. 78o-4(a)(2).
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    On September 20, 2013, the Commission issued Rules and Forms to 
provide for municipal advisor registration under a permanent 
registration regime.\4\ The effective date for the Rules and Forms was 
January 13, 2014. The Commission provided a phased-in compliance 
period, beginning on July 1, 2014, for the requirement to use the Forms 
to register as municipal advisors under the Rules. Municipal advisors 
currently are subject to the statutory regime under Section 15B of the 
Exchange Act, which imposes on municipal advisors a fiduciary duty to 
municipal entities, and the temporary registration regime under which 
municipal advisors are required to

[[Page 2778]]

register with the Commission on Form MA-T under the interim final 
temporary Rule 15Ba2-6T.
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    \4\ See Registration of Municipal Advisors, Release No. 34-70462 
(September 20, 2013), 78 FR 67467 (November 12, 2013), available at 
http://www.sec.gov/rules/final/2013/34-70462.pdf (the ``Adopting 
Release'').
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    Market participants have requested additional time before the Rules 
and Forms apply to them to address a number of issues regarding 
implementation of and compliance with the Rules, including, among other 
things, adapting their policies and procedures, developing supervisory 
practices and internal controls, adapting their account and investment 
tracking systems, developing recordkeeping procedures, adapting their 
business models and practices, educating their personnel with respect 
to this regulatory regime, and developing training programs to 
establish effective compliance with the Rules.\5\
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    \5\ See letters from Mike Nicholas, Chief Executive Officer, 
Bond Dealers of America, dated November 8, 2013; Karen L. Barr, 
General Counsel, Investment Adviser Association; Laura L. Grossman, 
Assistant General Counsel, Investment Adviser Association; Timothy 
W. Cameron, Managing Director, Asset Management Group, Securities 
Industry and Financial Markets Association; and Matthew J. Nevins, 
Managing Director and Associate General Counsel, Asset Management 
Group, Securities Industry and Financial Markets Association, dated 
January 2, 2014; Leslie M. Norwood, Managing Director and Associate 
General Counsel, Securities Industry and Financial Markets 
Association, dated January 9, 2014; and Cristeena Naser, Vice 
President and Senior Counsel, Center for Securities, Trust & 
Investments, American Bankers Association, dated January 10, 2014.
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    Pursuant to the Amendment, the Commission is staying temporarily 
the Rules and Forms until July 1, 2014 and making conforming, non-
substantive amendments to Rule 15Ba1-8 regarding recordkeeping 
requirements to conform the dates referenced in certain provisions of 
that rule to the July 1, 2014 date. The effective date for the Rules 
and Forms was January 13, 2014. This stay of the Rules and Forms means 
that persons are not required to comply with the Rules and Forms until 
July 1, 2014. The Amendment is the only action the Commission is taking 
in this release with respect to the Rules and Forms.\6\
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    \6\ The Commission is not reopening these Rules and Forms, which 
were previously adopted as a result of the new registration 
requirement in Section 975 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (``Dodd-Frank Act'').
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    To provide certainty about the status of the Rules and Forms 
pending publication in the Federal Register of this release fully 
staying the Rules and Forms until July 1, 2014, an exemption from the 
Rules and Forms is hereby ORDERED under Section 36 of the Exchange Act 
until such publication. For the reasons discussed throughout the 
release regarding the need to provide market participants additional 
time to comply with the Rules, the Commission believes that providing 
this temporary exemption is necessary and appropriate in the public 
interest and is consistent with the protection of investors.
    The Amendment will provide market participants with a limited 
amount of additional time to analyze, implement and comply with the 
Rules.\7\ The Commission believes that the temporary stay period 
appropriately balances the goals of protecting municipal entities, 
enhancing the quality of municipal advice, and protecting investors in 
the municipal securities market through an effective municipal advisor 
registration regime while providing appropriate relief to industry 
participants that need additional time to understand the scope and 
application of the Rules and to implement effective compliance with the 
Rules. The Commission also believes that the stay of the Rules and 
Forms until July 1, 2014 pursuant to the Amendment is appropriate since 
July 1, 2014 is the first day of the phased-in compliance period for 
municipal advisors to comply with the requirement to register as 
municipal advisors using the Forms under the Rules.
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    \7\ See Exchange Act Rule 15Ba1-8(a)(3)(ii), (a)(6), (a)(7)(ii), 
and (b)(2). The Commission also notes that, on January 10, 2014, the 
staff in the Office of Municipal Securities provided staff guidance, 
in the form of frequently asked questions (``FAQs''), to address 
certain questions relating to the advice standard in general, the 
exemption for responses to requests for proposals and requests for 
qualifications, the independent registered municipal advisor 
exemption, the registered investment adviser exclusion, the 
underwriter exclusion, advice in situations after a municipal 
securities issuance, remarketing agent services, opinions by 
citizens in public discourse, the effective date for the Rules, and 
the compliance period for registering using the final registration 
forms under the Rules. See Registration of Municipal Advisors 
Frequently Asked Questions (January 10, 2014), available at http://www.sec.gov/info/municipal/mun-advisors-faqs.pdf.
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    The Administrative Procedure Act (``APA'') generally requires an 
agency to publish notice of a proposed rulemaking in the Federal 
Register.\8\ This requirement does not apply, however, if the agency 
``for good cause finds (and incorporates the finding and a brief 
statement of reasons therefor in the rules issued) that notice and 
public procedure thereon are impracticable, unnecessary, or contrary to 
the public interest.'' \9\ The Rules and Forms are effective beginning 
January 13, 2014, but the Commission has been made aware of the need 
for additional time for market participants to analyze, implement, and 
comply with the Rules, and thus is taking immediate action. In 
addition, the Commission notes that the Amendment only stays the Rules 
and Forms until July 1, 2014 and makes conforming, non-substantive date 
changes. It does not substantively change the Rules and Forms that were 
subject to notice and public comment and discussed in the Adopting 
Release. The Amendment merely preserves the status quo until July 1, 
2014, which will provide municipal advisors and other municipal market 
participants with additional time to analyze, implement, and comply 
with the Rules. For these reasons, and the reasons discussed throughout 
this release, the Commission believes that there is good cause to act 
now to stay the Rules and Forms to July 1, 2014 and to make conforming, 
non-substantive date changes, and to find that notice and solicitation 
of comment on the stay is impracticable, unnecessary, or contrary to 
the public interest.\10\
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    \8\ See 5 U.S.C. 553(b).
    \9\ See 5 U.S.C. 553(b)(3)(B).
    \10\ This finding also satisfies the requirements of 5 U.S.C. 
808(2), allowing the rule amendments to become effective 
notwithstanding the requirements of 5 U.S.C. 801 (if a federal 
agency finds that notice and public comment are ``impracticable, 
unnecessary, or contrary to the public interest,'' a rule ``shall 
take effect at such time as the Federal agency promulgating the rule 
determines''). Because the Commission is not publishing the rule 
amendments in a notice of proposed rulemaking, no analysis is 
required under the Regulatory Flexibility Act. See 5 U.S.C. 601(2) 
(for purposes of the Regulatory Flexibility Act, the term ``rule'' 
means any rule for which the agency publishes a general notice of 
proposed rulemaking).
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    The APA also generally requires that an agency publish a 
substantive rule in the Federal Register not less than 30 days before 
its effective date.\11\ This requirement, however, does not apply if 
the agency finds good cause and publishes such cause with the rule.\12\ 
As noted above, the Rules and Forms are effective beginning January 13, 
2014, but there is a need for immediate action by the Commission to 
provide additional time for market participants to analyze, implement, 
and comply with the Rules. In addition, this Amendment only stays the 
Rules and Forms until July 1, 2014 and makes conforming, non-
substantive date changes. For these reasons, and the reasons discussed 
throughout this release, the Commission finds good cause not to delay 
the effective date of the stay.
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    \11\ See 5 U.S.C. 553(d).
    \12\ See 5 U.S.C. 553(d)(3).
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    The Rules and Forms contain ``collection of information'' 
requirements as defined by the Paperwork Reduction Act of 1995, as 
amended (``PRA''), but the Commission believes that the Amendment only 
stays the Rules and Forms until July 1, 2014 and makes conforming, non-
substantive date changes. It does not substantively change the Rules 
and Forms. In this

[[Page 2779]]

regard, the Commission does not believe that this Amendment would 
require any new or additional ``collection of information'' as such 
term is defined in the PRA and will not impose any new burdens or costs 
upon municipal advisors.
    The Commission is sensitive to the costs and benefits of its rules. 
Section 3(f) of the Exchange Act requires the Commission, whenever it 
engages in rulemaking and is required to consider or determine whether 
an action is necessary or appropriate in the public interest, to 
consider, in addition to the protection of investors, whether the 
action would promote efficiency, competition, and capital 
formation.\13\ In addition, Section 23(a)(2) of the Exchange Act 
requires the Commission, when making rules under the Exchange Act, to 
consider the impact such rules would have on competition.\14\ Section 
23(a)(2) of the Exchange Act prohibits the Commission from adopting any 
rule that would impose a burden on competition not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.\15\
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    \13\ See 15 U.S.C. 78c(f).
    \14\ See 15 U.S.C. 78w(a)(2).
    \15\ See 15 U.S.C. 78w(a)(2).
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    As discussed above, the Amendment only stays the Rules and Forms to 
July 1, 2014 and makes conforming, non-substantive date changes. It 
does not substantively change the Rules and Forms. The temporary 
registration regime currently in effect serves as the economic baseline 
against which the costs and benefits, as well as the impact on 
efficiency, competition, and capital formation, of the Amendment are 
measured.
    In the Adopting Release, the Commission discussed the costs and 
benefits of the temporary registration regime and the current state of 
the municipal advisor market.\16\ Since the Commission is only staying 
the Rules and Forms until July 1, 2014 and making conforming, non-
substantive date changes, and is not substantively changing any of the 
Rules or Forms, the Commission believes the discussion of the temporary 
registration regime in the Adopting Release applies and the Commission 
does not expect additional significant costs or effects on efficiency, 
competition, or capital formation to result from the stay. The 
Commission also continues to believe that the Rules and Forms, as 
stayed, will not result in a burden on competition not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.
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    \16\ See Adopting Release, supra note 4, at Section VIII.C.
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    The Commission considered the alternatives of not staying the Rules 
and Forms, or providing a longer or shorter stay period. However, for 
the reasons discussed above, the Commission believes that providing the 
temporary stay until July 1, 2014 appropriately balances the goals of 
protecting municipal entities, enhancing the quality of municipal 
advice, and protecting investors in the municipal securities market 
through an effective municipal advisor registration regime while 
providing appropriate relief to industry participants that need 
additional time to understand the scope and application of the Rules 
and to implement effective compliance with the Rules.

II. Statutory Authority and Text of Rule and Amendments

    Pursuant to the Exchange Act, and particularly Sections 15B (15 
U.S.C. 78o-4,) and Section 36 (15 U.S.C. 78mm(a)), the Commission is 
amending Sec.  240.15Ba1-8 as set forth below.

List of Subjects in 17 CFR Part 240

    Reporting and recordkeeping requirements.

Text of Rule and Amendments

    For the reasons set out above, Title 17, Chapter II of the Code of 
Federal Regulations is amended as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
1. The general authority citation for part 240 continues to read as 
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78p, 78q, 
78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 
80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq.; 18 U.S.C. 1350; and 
12 U.S.C. 5221(e)(3) unless otherwise noted.
* * * * *

Sec.  240.15Ba1-8  [Amended]

0
2. Section 240.15Ba1-8 is amended:
0
a. In paragraph (a)(3)(ii), by removing the phrase ``January 13, 2014'' 
and adding in its place ``July 1, 2014'';
0
b. In paragraph (a)(6), by removing the phrase ``January 13, 2014'' and 
adding in its place ``July 1, 2014'';
0
c. In paragraph (a)(7)(ii), by removing the phrase ``January 13, 2014'' 
and adding in its place ``July 1, 2014'';
0
d. In paragraph (b)(2), by removing the phrase ``January 13, 2014'' and 
adding in its place ``July 1, 2014''.

Sec. Sec.  240.15Ba1-1 through 240.15Ba1-8  [Stayed]

0
3. Sections 240.15Ba1-1 through 240.15Ba1-8 are stayed until July 1, 
2014.

Sec.  240.15Bc4-1  [Stayed]

0
4. Section 240.15Bc4-1 is stayed until July 1, 2014.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
5. The general authority citation for part 249 continues to read as 
follows:

    Authority:  15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *

Sec. Sec.  249.1300, 249.1310, 249.1320, and 249.1330  [Stayed]

0
6. Sections 249.1300, 249.1310, 249.1320, and 249.1330 are stayed until 
July 1, 2014.

    Dated: January 13, 2014.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2014-00740 Filed 1-13-14; 4:15 pm]
BILLING CODE 8011-01-P