Document ID: SEC-2021-1523-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Municipal Securities Rulemaking Board
Posted Date: 2021-11-02T04:00Z

[Federal Register Volume 86, Number 209 (Tuesday, November 2, 2021)]
[Notices]
[Pages 60522-60524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23809]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93435; File No. SR-MSRB-2021-06]

Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Further Extend the Regulatory Relief and Permit Dealers To 
Conduct Office Inspections Remotely Until June 30, 2022, Pursuant to 
MSRB Rule G-27, on Supervision

October 27, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on October 26, 2021 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 to amend 
Supplementary Material .01, Temporary Relief for Completing Office 
Inspections, of MSRB Rule G-27, on supervision, to further extend the 
regulatory relief and permit brokers, dealers and municipal securities 
dealers (collectively, ``dealers'') to conduct office inspections, due 
to be completed during calendar year 2022, remotely until June 30, 2022 
(the ``proposed rule change'').
    The MSRB has designated the proposed rule change as constituting a 
``noncontroversial'' rule change under Section 19(b)(3)(A) \3\ of the 
Act and Rule 19b-4(f)(6) \4\ thereunder, which renders the proposal 
effective upon receipt of this filing by the Commission. The

[[Page 60523]]

MSRB proposes an operative date of January 1, 2022.
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    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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/2021-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 continues to closely monitor the impact on municipal 
market participants resulting from the coronavirus disease (``COVID-
19'') pandemic. In light of the operational challenges and disruptions 
to normal business functions as a result of the pandemic, the MSRB 
previously filed a proposed rule change for immediate effectiveness 
with the SEC in April 2020 \5\ and a second proposed rule change in 
December 2020 \6\ (``April relief'' and ``December relief''). In 
connection with the April relief, the MSRB provided additional time for 
dealers to complete certain supervisory obligations, including, among 
other things, that office inspections due to be conducted during 
calendar year 2020 could be conducted by March 31, 2021, but with the 
expectation that dealers would conduct their inspections on-site. The 
December relief allowed dealers to conduct their office inspections 
remotely that were due to be completed by March 31, 2021, for calendar 
year 2020 and those for calendar year 2021, subject to certain 
conditions being met.
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    \5\ See Exchange Act Release No. 88694 (April 20, 2020), 85 FR 
23088 (April 24, 2020) (File No. SR-MSRB-2020-01).
    \6\ See Exchange Act Release No. 90621 (December 9, 2020), 85 FR 
81254 (December 15, 2020) (File No. SR-MSRB-2020-09).
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    Through stakeholder engagement, the MSRB has learned that dealers 
have delayed their return to office plans due to the continued pandemic 
and are considering or have implemented hybrid work arrangements 
dependent on functions and regulatory requirements. To that end, in 
order to address ongoing industry-wide concerns regarding having to 
conduct in-person office inspections while safety concerns related to 
the pandemic persist \7\ and to align with pandemic-related regulatory 
relief provided by FINRA,\8\ the MSRB is proposing amendments to 
Supplementary Material .01 of MSRB Rule G-27. The proposed amendments 
to Supplementary Material .01 of MSRB Rule G-27 would allow dealers to 
satisfy their office inspection obligations by permitting dealers to 
conduct calendar year 2022 office inspections remotely until June 30, 
2022, without the need to conduct an on-site visit to such office or 
location.\9\
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    \7\ See The Centers for Disease Control and Prevention 
(``CDC''), What You Need to Know about Variants (stating, in part, 
that ``the Delta variant causes more infections and spreads faster 
than earlier forms of the virus that causes COVID-19'') available at 
https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html 
(updated September 3, 2021).
    \8\ On September 13, 2021, FINRA made a filing with the SEC for 
immediate effectiveness, noting that while some firms have taken 
affirmative steps to develop and implement phased-in office re-entry 
plans based on local conditions, there are many other firms that 
have not. See Release No. 34-93002 (September 15, 2021), 86 FR 52508 
(September 21, 2021) (File No. SR-FINRA-2021-023).
    \9\ As previously noted, a temporary location established in 
response to the implementation of a business continuity plan is not 
deemed an office for purposes of complying with the office 
inspection obligations, under MSRB Rule G-27. See supra note 5.
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    The conditions required to be met for dealers to avail themselves 
of the option to conduct office inspections remotely remain unchanged; 
however, technical amendments are being proposed to paragraphs (b) and 
(d) to reflect the additional extension of time under the proposed rule 
change. Pursuant to paragraphs (b) and (d) of Supplementary Material 
.01 of MSRB Rule G-27, for dealers that elect to conduct their office 
inspections remotely, such dealers must (i) amend or supplement their 
written supervisory procedures as appropriate to provide for remote 
inspections that are reasonably designed to assist in detecting and 
preventing violations of, and achieving compliance with, applicable 
securities laws and regulations, and with applicable Board rules; (ii) 
use remote office inspections as part of an effective supervisory 
system, which would include the ongoing review of activities and 
functions occurring at all offices and locations; and (iii) make and 
maintain the required records related to remote office inspections.
    The regulatory relief provided for under the proposed rule change 
will automatically sunset on June 30, 2022. During this time, the MSRB 
will continue to monitor the effectiveness of remote office inspections 
on dealers' overall supervisory systems and will consider more long-
term regulatory initiatives that align with and promote the evolving 
ways dealers are doing business and supervising the activities of the 
dealer and its associated persons.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Exchange Act,\10\ which provides that the 
MSRB's rules shall:
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    \10\ 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 proposed rule change is designed to provide dealers additional 
time to comply with certain obligations under MSRB rules for a 
temporary period of time; it does not relieve dealers from compliance 
with their core regulatory obligations to establish and maintain a 
system to supervise the activities of each of its associated persons 
that is reasonably designed to achieve compliance with applicable rules 
and regulations, and with applicable MSRB rules, which directly serve 
to protect investors, municipal entities, obligated persons, and the 
public interest. The MSRB believes extending the relief and affording 
dealers the option to conduct remote inspections in calendar year 2022, 
until June 30, 2022, is a prudent regulatory approach while continuing 
to serve the important investor protection objectives of the inspection 
requirements under these unique circumstances.
    In a time when faced with unique challenges resulting from the 
sustained pandemic, the proposed rule change will afford dealers the 
ability to safeguard the health and safety of their personnel and to 
more effectively allocate resources to serve and promote the protection 
of investors, municipal entities, obligated persons and the public 
interest. In addition, the

[[Page 60524]]

proposed rule change will also alleviate some of the operational 
challenges dealers may be experiencing, which will allow them to more 
effectively allocate resources to the operations that facilitate 
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.

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

    Section 15B(b)(2)(C) of the Act requires that MSRB rules be 
designed not to impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.\11\ In fact, 
the MSRB does not believe the proposed rule change will have any burden 
on competition because the proposed rule change treats all dealers 
equally in that all dealers have the option to elect to conduct remote 
inspections remotely through June 30, 2022. The goal of the proposed 
rule change is to grant additional time for dealers to meet their 
office inspection obligations, under Supplementary Material .01 of Rule 
G-27, while also determining how to best implement their return to 
office plans in a safe and effective manner during the exigent 
circumstances of the COVID-19 pandemic. The temporary relief afforded 
does not alter dealers underlying obligations under the rule.
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    \11\ Id.
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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.

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 \12\ and Rule 19b-
4(f)(6) \13\ thereunder. 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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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-2021-06 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MSRB-2021-06. 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-2021-06 and should be submitted on 
or before November 23, 2021.

    For the Commission, by the Office of Municipal Securities, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3a(a)(2).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23809 Filed 11-1-21; 8:45 am]
BILLING CODE 8011-01-P