Document ID: SEC-2006-1119-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Municipal Securities Rulemaking Board
Posted Date: 2006-08-31T04:00Z

[Federal Register: August 31, 2006 (Volume 71, Number 169)]
[Notices]               
[Page 51877-51879]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31au06-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54357; File No. SR-MSRB-2006-06]

 
Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Revisions to the Series 51 Examination Program

August 24, 2006.
    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 August 11, 2006, 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 for the Municipal Fund Securities Limited Principal 
Qualification Examination (Series 51) program.\5\ The proposed 
revisions update the material to reflect changes to the rules and 
regulations covered in the examination, and to provide more explicit 
references to these rules and regulations. The MSRB is not proposing 
any textual changes to its rules.
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    \5\ The MSRB is also proposing corresponding revisions to the 
Series 51 question bank, but based upon instructions from the 
Commission staff, the MSRB is submitting SR-MSRB-2006-06 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.

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 \6\ 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. 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

[[Page 51878]]

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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    \6\ 15 U.S.C. 78o-4(b)(2)(A).
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    MSRB Rule G-3(b)(iv) states that the municipal fund securities 
limited principal has responsibility to oversee the municipal 
securities activities of a securities firm or bank dealer solely as 
such activities relate to transactions in municipal fund securities. In 
this capacity, the municipal fund securities limited principal manages, 
directs or supervises one or more of the following activities relating 
to municipal fund securities: Underwriting, trading or selling 
municipal fund securities; rendering financial advisory or consultant 
services to issuers of municipal fund securities; research or 
investment advice, or communications with customers, about any of the 
activities named heretofore; maintaining records on activities in 
municipal fund securities; processing, clearing, and (in the case of 
securities firms) safekeeping of municipal fund securities; and 
training of principals and representatives.\7\ The only examination 
that qualifies a municipal fund securities limited principal is the 
Municipal Fund Securities Limited Principal Qualification Examination.
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    \7\ A municipal securities principal (Series 53) is also 
qualified to bear these responsibilities.
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    A committee of industry members and MSRB staff recently completed a 
review of the study outline for the Series 51 examination program. As a 
result of this review, the MSRB is proposing to update the content of 
the examination to cover certain rules or provisions of rules that were 
promulgated since the date that the outline was initially published 
(MSRB Rule G-21 and new Rule G-38 on solicitation of municipal 
securities business), and to delete coverage of rules or rule 
provisions that are obsolete (old Rule G-38 on consultants). Technical 
changes have been made to correct the citations for the rules that have 
been amended. The number of questions on each section of the 
examination will not change. The revised examination continues to cover 
areas of knowledge required for effective supervision of municipal fund 
securities activities. A summary of the changes to the study outline is 
provided below.

Part Two--Product Knowledge

     A reference to taxes imposed on withdrawals for non-
qualified uses relating to 529 college savings plans was added.
     The description on deductibility of contributions relating 
to 529 college savings plans was expanded.
     A reference to the federal sunset provisions relating to 
529 college savings plans was removed.

Part Three--General Supervision

     A reference to any recently enacted MSRB interpretations 
was added to the reference to any recently enacted rules governing 
general supervision.

Part Four--Fair Practice and Conflicts of Interest

     References to old Rule G-38, on consultants, were removed.
     New Rule G-38, on solicitation of municipal securities 
business, was added.
     A technical change was made to revise the title of Rule G-
20.
     A rule cite was revised to Rule G-21(f).
     Rule G-21(e) regarding advertisements for municipal fund 
securities was added.
     A reference to any recently enacted MSRB interpretations 
was added to the reference to any recently enacted rules governing fair 
practice and conflicts of interest.

Part Five--Sales Supervision

     A reference to any recently enacted MSRB interpretations 
was added to the reference to any recently enacted rules governing 
sales supervision.

Part Six--Underwriting and Disclosure Obligations

     A reference to any recently enacted MSRB interpretations 
was added to the reference to any recently enacted rules governing 
underwriting and disclosure obligations.

Part Seven--Operations

     A reference to any recently enacted MSRB interpretations 
was added to the reference to any recently enacted rules governing 
operations.
    The examination will continue to consist of 60 multiple-choice 
questions assigned to the seven areas of the examination as follows:

------------------------------------------------------------------------
                                                               Percent
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Regulatory Structure.......................................            5
Product Knowledge..........................................           20
General Supervision........................................           20
Fair Practice and Conflicts of Interest....................           15
Sales Supervision..........................................           20
Underwriting and Disclosure Obligations....................           10
Operations.................................................           10
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    Candidates will continue to be allowed one and one-half hours for 
each testing session. Each question will continue to count one point, 
and each candidate must correctly answer 70 percent of the questions in 
order to receive a passing grade. Also, each candidate must have 
previously or concurrently qualified as a general securities principal 
or investment company/variable contracts limited principal in addition 
to passing the Series 51 Examination in order to gain qualification as 
a municipal fund securities limited principal.
2. Statutory Basis
    The MSRB believes that the proposed revisions to the Series 51 
examination program are consistent with the provisions of Section 
15B(b)(2)(A) of the Act,\8\ 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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    \8\ 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 impose 
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 \9\ and Rule 19b-4(f)(1) thereunder,\10\ 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 51 examination program on 
September 15, 2006. At any time within 60 days of the

[[Page 51879]]

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 in furtherance of the purposes of 
the Act.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(i).
    \10\ 17 CFR 240.19b-4(f)(1).
    \11\ 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-2006-06 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MSRB-2006-06. 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-2006-06 and should be submitted on or before 
September 21, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-14495 Filed 8-30-06; 8:45 am]

BILLING CODE 8010-01-P