Document ID: SEC-2005-0186-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Municipal Securities Rulemaking Board
Posted Date: 2005-11-02T05:00Z

[Federal Register: November 2, 2005 (Volume 70, Number 211)]
[Notices]               
[Page 66478-66480]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no05-144]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52684; File No. SR-MSRB-2005-15]

 
Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Revisions to the Series 9/10 Examination Program

October 26, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 18, 2005, the Municipal Securities Rulemaking Board 
(``MSRB'' or ``Board''), filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change as 
described in Items I, II and III below, which Items have been prepared 
by the MSRB. The MSRB has designated the proposed rule change as 
constituting a stated policy, practice, or interpretation with respect 
to the meaning, administration, or enforcement of an existing rule of 
the self-regulatory organization pursuant to Section 19(b)(3)(A)(i) of 
the Act,\3\ and Rule 19b-4(f)(1) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing with the Commission revisions to the study 
outline and selection specifications for the Limited Principal--General 
Securities Sales Supervisor (Series 9/10) examination program.\5\ The 
proposed revisions update the material to reflect changes to the laws, 
rules, and regulations covered by the examination, as well as modify 
the content of the examination program to track more closely the 
functional workflow of a Series 9/10 limited principal. The MSRB is not 
proposing any textual changes to the rules of the MSRB.
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    \5\ The MSRB is also proposing corresponding revisions to the 
Series 9/10 question bank, but based upon instructions from the 
Commission staff, the MSRB is submitting SR-MSRB-2005-15 for 
immediate effectiveness pursuant to Section 19(b)(3)(A)(i) of the 
Act and Rule 19b-4(f)(1) thereunder, and is not filing the question 
bank for Commission review. See letter to Diane G. Klinke, General 
Counsel, MSRB, from Belinda Blaine, Associate Director, Division of 
Market Regulation, SEC, dated July 24, 2000. The question bank is 
available for Commission review.
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    The revised study outline is available on the MSRB's Web site 
(http://www.msrb.org), at the MSRB's principal office, and at the 

Commission's Public Reference Room. However, the MSRB has omitted the 
Series 9/10 selection specifications from this filing and has submitted 
the specifications under separate cover to the Commission with a 
request for confidential treatment pursuant to Rule 24b-2 under the 
Act.\6\
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    \6\ 17 CFR 240.24b-2.
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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
    Section 15B(b)(2)(A) of the Act \7\ authorizes the MSRB to 
prescribe standards of training, experience, competence, and such other

[[Page 66479]]

qualifications as the Board finds necessary or appropriate in the 
public interest or for the protection of investors. The MSRB has 
developed examinations that are designed to establish that persons 
associated with brokers, dealers and municipal securities dealers that 
effect transactions in municipal securities have attained specified 
levels of competence and knowledge. The MSRB periodically reviews the 
content of the examinations to determine whether revisions are 
necessary or appropriate in view of changes pertaining to the subject 
matter covered by the examinations.
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    \7\ 15 U.S.C. 78o-4(b)(2)(A).
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    MSRB Rule G-3(c) states that the Municipal Securities Sales 
Supervisor may only supervise those activities and functions relating 
directly to customer sales and purchases of municipal securities. The 
activities over which a Municipal Securities Sales Principal may have 
responsibility include: approving transactions with customers; 
approving the opening of customer accounts; approving discretionary 
accounts and related transactions; reviewing all customer accounts 
regularly and frequently; supervising the handling of written customer 
complaints; and reviewing correspondence with customers in the 
solicitation or execution of municipal securities transactions. The 
supervision of activities such as trading, underwriting, research, and 
providing financial advice and counseling to issuers cannot be the 
responsibility of the Municipal Securities Sales Principal; such 
activities must be supervised by a person qualified as a Municipal 
Securities Principal. MSRB rules do not specify that a broker, dealer 
or municipal securities dealer must maintain any Municipal Securities 
Sales Principals on its staff.
    The only examination that qualifies a Municipal Securities Sales 
Principal is the General Securities Sales Supervisor Qualification 
Examination (Series 9/10). The Series 9/10 examination is an industry-
wide examination and tests a candidate's knowledge of securities 
industry rules and regulations and certain statutory provisions 
pertinent to the supervision of sales activities.
    The Series 9/10 examination program is shared by the MSRB and the 
following self-regulatory organizations (``SROs''): the American Stock 
Exchange LLC; the Chicago Board Options Exchange, Incorporated; the 
National Association of Securities Dealers, Inc. (``NASD''); the New 
York Stock Exchange, Inc. (``NYSE''); the Pacific Exchange, Inc.; and 
the Philadelphia Stock Exchange, Inc.
    A committee of industry representatives, together with the staff of 
the MSRB and the SROs, recently undertook a periodic review of the 
Series 9/10 examination program. As a result of this review, the MSRB 
is proposing to update the content of the examination to cover 
Regulation S-P;\8\ MSRB Rules G-37 and G-38; SRO research analyst and 
anti-money laundering rules; municipal fund securities (e.g., 529 
college savings plans); and exchange traded funds. MSRB is further 
proposing revisions to the study outline to reflect the SEC short sale 
requirements. In addition, as part of an ongoing effort to align the 
examination more closely to the supervisory duties of a Series 9/10 
limited principal, MSRB is proposing to modify the content of the 
examination to track the functional workflow of a Series 9/10 limited 
principal. Also, MSRB is proposing to include questions related to 
parallel rules of the MSRB, the options exchanges, NASD, and the NYSE 
in the same section of the examination.
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    \8\ 17 CFR 248.1-18; 17 CFR 248.30; and 17 CFR 248, Appendix A.
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    As a result of the revisions, MSRB is proposing to modify the main 
section headings and the number of questions on each section of the 
Series 9/10 study outline as follows: Section 1--Hiring, 
Qualifications, and Continuing Education, 9 questions; Section 2--
Supervision of Accounts and Sales Activities, 94 questions; Section 3--
Conduct of Associated Persons, 14 questions; Section 4--Recordkeeping 
Requirements, 8 questions; Section 5--Municipal Securities Regulation, 
20 questions; and Section 6--Options Regulation, 55 questions. Section 
6, which covers options, constitutes the Series 9 portion of the 
examination. Series 10 covers general securities and municipal 
securities. The revised examination continues to cover the areas of 
knowledge required for the supervision of sales activities.
    The MSRB is proposing these changes to the entire content of the 
Series 9/10 examination, including the selection specifications and 
question bank. The number of questions on the Series 9/10 examination 
will remain at 200, and candidates will continue to have four hours to 
complete the Series 10 portion and one and one-half hours to complete 
the Series 9 portion. Also, each question will continue to count one 
point, and each candidate must correctly answer 70 percent of the 
questions on each series, 9 and 10, to receive a passing grade.
    As noted below, the MSRB understands that the other SROs also will 
file with the Commission similar proposed rule changes reflecting the 
revisions to the Series 9/10 examination program.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(A) of the Act,\9\ which authorizes the MSRB to 
prescribe standards of training, experience, competence, and such other 
qualifications as the Board finds necessary or appropriate in the 
public interest or for the protection of investors. Section 
15B(b)(2)(A) of the Act also provides that the Board may appropriately 
classify municipal securities brokers and municipal securities dealers 
and their associated personnel and require persons in any such class to 
pass tests prescribed by the Board.
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    \9\ 15 U.S.C. 78o-4(b)(2)(A).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \10\ and Rule 19b-4(f)(i) thereunder,\11\ in 
that the proposed rule change constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule of the self-regulatory organization. 
MSRB proposes to implement the revised Series 9/10 examination program 
no later than November 30, 2005. At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate 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

[[Page 66480]]

in furtherance of the purposes of the Act.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(i).
    \11\ 17 CFR 240.19b-4(f)(i).
    \12\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-MSRB-2005-15 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-MSRB-2005-15. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, 

all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the MSRB. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-MSRB-2005-15 and should be submitted on or before 
November 23, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6052 Filed 11-1-05; 8:45 am]

BILLING CODE 8010-01-P