Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Amendment to Rule G-8, on Recordkeeping, Relating to Delivery of Customer Agreements Containing Predispute Arbitration Clauses, 31552-31554 [E5-2751]
Download as PDF
<![CDATA[
31552
Federal Register / Vol. 70, No. 104 / Wednesday, June 1, 2005 / Notices
amendments’’), and recommended the
proposed rule change and the additional
draft amendments, if ultimately
approved, be made effective in a
coordinated manner to avoid a two-step
compliance process.
The MSRB’s First Response Letter
stated that the MSRB had approved the
filing with the SEC of the additional
draft amendments to Rule G–21 at its
February meeting, and also stated that
the MSRB would request an effective
date for the additional draft
amendments that coincides with the
effective date for the proposed rule
change.
The MSRB’s First Response Letter
also stated that they understand that, in
many cases, issuers will be involved in
the process of preparing the
disseminated performance data that
dealers will use in their advertisements
and for compliance with the
requirements in the additional draft
amendments. Accordingly, the MSRB’s
First Response Letter stated that they
believe that additional time for the
issuer community to prepare for the
timeframes required under the new
advertising requirements would be
appropriate, and requested that the SEC
amend the proposed rule change to be
effective 180 days after the proposed
rule change is approved. The MSRB’s
Second Response Letter, drafted after
additional discussions with SEC staff,
recommended that all advertisements
for municipal fund securities submitted
or caused to be submitted for
publication by a dealer on or after
September 1, 2005 comply with section
(e) of Rule G–21, as amended by the
proposed rule change, except for
paragraphs (e)(i)(C) and (e)(ii) relating to
calculation and presentation of
performance data and those provisions
of paragraph (e)(i)(D) pertaining to
paragraph (e)(i)(C), and that all
advertisements for municipal fund
securities submitted or caused to be
submitted for publication by a dealer on
or after December 1, 2005 comply with
all provisions of section (e) of Rule G–
21.
Fund Distributors’ Letter stated that
municipal fund securities consist of the
securities of two broad classes of
issuers: local government investment
pools (LGIPs) and what are known as
section 529 college savings plans. Fund
Distributors’ Letter urged the
Commission to decline to adopt the
proposed rule change to the extent that
the amendments apply to the historical
performance data of LGIPs because
those amendments fail to recognize the
unique perspective of the financially
sophisticated municipal governments
which use LGIPs in their cash
VerDate jul<14>2003
16:22 May 30, 2005
Jkt 205001
management programs. The MSRB’s
Second Response Letter stated that
although they agree that many investors
in the LGIP market may be ‘‘financially
sophisticated municipal governments,’’
as characterized by Fund Distributors,
they believe that a large number of LGIP
investors consist of entities such as
small municipalities, school and other
special purpose districts, and various
other governmental entities that may
have only part-time or otherwise limited
financial staffs who may well not be
financially sophisticated. The MSRB’s
Second Response Letter further stated
that they believe that the proposed rule
change will further investor protection
in the LGIP market and therefore should
be approved as submitted.
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to the MSRB 8 and, in
particular, the requirements of Section
15B(b)(2)(C) of the Act and the rules and
regulations thereunder.9 Section
15B(b)(2)(C) of the Act requires, among
other things, that the MSRB’s rules 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, to remove impediments to
and perfect the mechanism of a free and
open market in municipal securities,
and, in general, to protect investors and
the public interest.10 In particular, the
Commission finds that the proposed
rule change will further investor
protection by raising the standards for
advertisements of municipal fund
securities and by making information
provided in such advertisements
comparable for different municipal fund
securities investments and between
municipal fund securities and registered
mutual funds.
The Commission finds that the
MSRB’s recommendation concerning
the effective date of the proposal falls
within the statutory parameters and
therefore agrees that all advertisements
for municipal fund securities submitted
or caused to be submitted for
publication by a dealer on or after
September 1, 2005 must comply with
section (e) of Rule G–21, as amended by
the proposed rule change, except for
8 In approving this rule the Commission notes
that it has considered the proposed rule’s impact on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
9 15 U.S.C. 78o–4(b)(2)(C).
10 Id.
PO 00000
Frm 00142
Fmt 4703
Sfmt 4703
paragraphs (e)(i)(C) and (e)(ii) relating to
calculation and presentation of
performance data and those provisions
of paragraph (e)(i)(D) pertaining to
paragraph (e)(i)(C), and that all
advertisements for municipal fund
securities submitted or caused to be
submitted for publication by a dealer on
or after December 1, 2005 must comply
with all provisions of section (e) of Rule
G–21. These compliance dates also
would apply to the additional draft
amendments, when filed with (and if
approved by) the Commission. In
addition, the Commission believes that
the amendments should be applied to
LGIPs as well as section 529 plans
because investor protection issues may
be raised in connection with the sale by
dealers of interests in local government
pools as well as section 529 plans.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,11 that the
proposed rule change (SR–MSRB–2004–
09) be, and hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2750 Filed 5–31–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51737; File No. SR–MSRB–
2005–07]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Regarding Amendment to Rule
G–8, on Recordkeeping, Relating to
Delivery of Customer Agreements
Containing Predispute Arbitration
Clauses
May 24, 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 April 29,
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 and II below, which
Items have been prepared by the MSRB.
The MSRB has filed the proposal as a
‘‘non-controversial’’ rule change
pursuant to Section 19(b)(3)(A)(iii) of
11 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
12 17
E:\FR\FM\01JNN1.SGM
01JNN1
Federal Register / Vol. 70, No. 104 / Wednesday, June 1, 2005 / Notices
the Act,3 and Rule 19b–4(f)(6)
thereunder,4 which renders the proposal
effective upon filing with the
Commission. However, the MSRB has
set an effective date of May 1, 2005, to
coincide with recent amendments to
NASD Rule 3110(f), on predispute
arbitration agreements with customers.5
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The MSRB is filing with the
Commission a proposed rule change
consisting of an amendment to Rule
G–8, on recordkeeping, to conform to
NASD’s recent amendments to Rule
3110(f). NASD’s amendments conform
its requirements with the Commission’s
recordkeeping rules by extending the
time period for delivery of a copy of a
customer account agreement containing
a predispute arbitration clause from the
time of signing to within 30 days of
signing.6 The MSRB has set an effective
date for the amendments of May 1,
2005, to coincide with the effective date
of the recent amendments to NASD Rule
3110(f), and, consistent with NASD, has
extended the compliance date to June 1,
2005 for the prior amendments to Rule
G–8(a)(xi)(M)(1), on required
disclosures in customer agreements
containing predispute arbitration
clauses.7 The text of the proposed rule
change is available on the MSRB’s Web
site (https://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.
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 SEC Release No. 34–51526 (April 12, 2005).
6 NASD’s filing (File No. SR–NASD–2005–045)
was granted accelerated approval in SEC Release
No. 34–51526 (April 12, 2005).
7 SEC Release 34–51534 (April 12, 2005).
4 17
VerDate jul<14>2003
16:22 May 30, 2005
Jkt 205001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On March 21, 2005, the MSRB filed,
for immediate effectiveness, a proposed
rule change consisting of an amendment
to Rule G–8 to add requirements
governing the use of predispute
arbitration agreements with customers,
consistent with NASD requirements as
set forth in NASD Rule 3110(f).8 Shortly
thereafter, NASD filed an amendment to
Rule 3110(f) to conform to SEC
recordkeeping rules, in particular
Exchange Act Rule 17a–
3(a)(17)(i)(B)(1),9 by extending the time
period for delivery of a copy of a
customer account agreement containing
a predispute arbitration clause from the
time of signing to within 30 days of
signing.10 The NASD amendments also
extend the compliance date of its prior
amendments to Rule 3110(f)(1), on
required disclosures, to June 1, 2005.
As stated previously, it is the MSRB’s
intent to make its requirements
governing the use of predispute
arbitration agreements with customers
consistent with NASD requirements in
this area. Accordingly, the MSRB is
submitting the proposed rule change to
amend Rule G–8, consistent with NASD
Rule 3110(f) as most recently amended.
As noted in NASD’s filing, the purpose
of the proposed rule change regarding
the delivery of customer agreements is
to conform the time period for delivery
of copies of any customer agreement
containing a predispute arbitration
clause to customers with SEC
requirements as set forth in its
recordkeeping rules.11 Specifically, the
proposed rule change would require
8 File No. SR–MSRB–2005–05. The filing also
contained a technical amendment to Rule A–11, on
indemnification, to delete its obsolete references to
arbitrators. On April 1, 2005, the MSRB submitted
Amendment No. 1 to the filing to replace, in its
entirety, the proposed language to Rule G–8 with
new language that conformed with the language of
NASD Rule 3110(f), as amended. See MSRB Notices
2005–18 (March 21, 2005) and 2005–21 (April 1,
2005). The Commission published notice of the
filing for immediate effectiveness in Release No.
34–51534 (April 12, 2005). The effective date for the
amendments to Rule G–8 is May 1, 2005.
9 17 CFR 240.17a–3(a)(17)(b)(1). This SEC rule
requires a broker-dealer, among other things, to
keep a record indicating that the broker-dealer has
furnished to each customer within 30 days of
opening the account a copy of the account record,
or alternate document, containing the customer’s
name, address, telephone number, date of birth,
employment status, annual income, net worth, the
account’s investment objectives, and other
information.
10 The Commission published notice of the NASD
filing and an order granting accelerated approval in
Release No. 34–51526 (April 12, 2005).
11 File No. SR–NASD–2005–045 at 19.
PO 00000
Frm 00143
Fmt 4703
Sfmt 4703
31553
dealers to comply with such delivery
requirements within 30 days of signing
of the customer agreement.
Both NASD and MSRB requirements,
as previously filed, are effective as of
May 1, 2005.12 As part of its most recent
amendments, NASD extended to June 1,
2005 the compliance date for its
provision regarding required disclosures
in any customer agreement containing a
predispute arbitration clause.13 Thus,
the MSRB has set an effective date for
the amendments of May 1, 2005, and
has extended the compliance date for its
prior amendments to Rule G–
8(a)(xi)(M)(1), on required disclosures,
to June 1, 2005. Beginning June 1, 2005,
all customer agreements containing
predispute arbitration clauses must
include the new disclosure required by
Rule G–8(a)(xi)(M)(1).14 The MSRB is
requesting that the Commission waive
the five-day pre-filing notice
requirement and the 30-day delayed
effective date requirement for ‘‘noncontroversial’’ filings submitted
pursuant to Section 19(b)(3)(A) of the
Act and Rule 19b–4(f)(6) thereunder, so
that MSRB effective dates will coincide
with NASD’s for the same requirements.
2. Statutory Basis
The MSRB believes that the proposed
rule change is consistent with Section
15B(b)(2)(C) and (D) of the Act,15 which
provides that MSRB 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, to remove impediments to and
perfect the mechanism of a free and open
market in municipal securities, and, in
general, to protect investors and the public
interest * * * [and] if the Board deems
appropriate, provide for the arbitration of
claims, disputes, and controversies relating
to transactions in municipal securities * * *.
The MSRB believes that the proposed
rule change is consistent with these
provisions in that it would provide for
the protection of investors and the
public interest by ensuring that
customers of brokers, dealers and
municipal securities dealers, including
bank dealers and municipal-only
dealers, receive information regarding
arbitration and predispute arbitration
12 SEC Release No.’s 34–50713 (November 22,
2004) and 34–51534 (April 12, 2005).
13 SEC Release No. 34–51526 (April 12, 2005).
14 However, any dealer that wishes to use
customer agreements containing the new disclosure
language required by MSRB Rule G–8(a)(xi)(M)(1)
may do so prior to the compliance date of June 1,
2005.
15 15 U.S.C. 78o–4(b)(2)(C), (D).
E:\FR\FM\01JNN1.SGM
01JNN1
31554
Federal Register / Vol. 70, No. 104 / Wednesday, June 1, 2005 / Notices
agreements in a timely fashion. The
proposed rule change also would ensure
consistent treatment across the
securities markets regarding these
requirements.
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 not necessary or
appropriate in furtherance of the
purposes of the Act.
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 proposal.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i)
Does not significantly affect the
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; and
(iii) does not become operative for 30
days (or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest) from the date on which
it was filed, the proposed rule change
has become effective pursuant to
Section 19(b)(3)(A) of the Act 16 and
Rule 19b–4(f)(6) thereunder.17
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) permits the Commission
to designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
MSRB has asked the Commission to
waive the 30-day operative delay. The
Commission hereby grants this request.
The Commission believes that waiving
the 30-day operative delay is consistent
with the protection of investors and the
public interest because such waiver will
enable the MSRB to make the effective
date of the proposed rule change
coincide with NASD’s for the same
requirements. The effective date for the
amendments will be May 1, 2005. The
MSRB has extended the compliance
date for its prior amendments to Rule
G–8(a)(xi)(M)(1) to June 1, 2005, to
coincide with NASD’s compliance date
for the same provisions. The MSRB has
also requested that the Commission
waive the pre-filing notice requirement
of at least five business days (or such
16 15
17 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
VerDate jul<14>2003
16:22 May 30, 2005
Jkt 205001
shorter time as designated by the
Commission).18 The Commission hereby
grants the MSRB’s request to waive the
pre-filing requirement.19
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 in furtherance of the
purposes of the Act.20
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–MSRB–2005–07 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
450 Fifth Street, NW., Washington, DC
20549–0609. All submissions should
refer to File Number SR–MSRB–2005–
07. 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
(https://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–2005–07 and should
be submitted on or before June 22, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.21
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2751 Filed 5–31–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51735; File No. SR–NASD–
2004–165]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Proposed Rule Change and
Amendment Nos. 1 and 2 Thereto
Relating to NASD Rule 2790
May 24, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule
19b–4 thereunder,2 notice is hereby
given that on October 29, 2004, the
National Association of Securities
Dealers, Inc. (‘‘NASD’’) 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 NASD. On February 1,
2005, NASD submitted Amendment No.
1 to the proposed rule change.3 On
April 18, 2005, NASD submitted
Amendment No. 2 to the proposed rule
change.4 The Commission is publishing
this notice to solicit comments on the
proposed rule change, as amended, from
interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASD is filing with the Commission
a proposed rule change to amend
subparagraph (i)(9) of NASD Rule 2790
21 17
CFR 240.19b–4(f)(6)(iii).
19 For purposes only of accelerating the operative
date of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
20 See Section 19(b)(3)(C) of the Act, 15 U.S.C.
78s(b)(3)(C).
PO 00000
18 17
Frm 00144
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 included minor changes to
the rule text of the proposed rule change.
4 Amendment No. 2 included minor changes to
the proposed rule change including clarifying that
most REITs have invested assets at the time of their
initial public offering.
1 15
E:\FR\FM\01JNN1.SGM
01JNN1
]]>Agencies
[Federal Register Volume 70, Number 104 (Wednesday, June 1, 2005)]
[Notices]
[Pages 31552-31554]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2751]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51737; File No. SR-MSRB-2005-07]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Regarding Amendment to Rule G-8, on Recordkeeping, Relating to
Delivery of Customer Agreements Containing Predispute Arbitration
Clauses
May 24, 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 April 29, 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 and II below, which Items have been prepared by the MSRB. The
MSRB has filed the proposal as a ``non-controversial'' rule change
pursuant to Section 19(b)(3)(A)(iii) of
[[Page 31553]]
the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the
proposal effective upon filing with the Commission. However, the MSRB
has set an effective date of May 1, 2005, to coincide with recent
amendments to NASD Rule 3110(f), on predispute arbitration agreements
with customers.\5\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ SEC Release No. 34-51526 (April 12, 2005).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB is filing with the Commission a proposed rule change
consisting of an amendment to Rule G-8, on recordkeeping, to conform to
NASD's recent amendments to Rule 3110(f). NASD's amendments conform its
requirements with the Commission's recordkeeping rules by extending the
time period for delivery of a copy of a customer account agreement
containing a predispute arbitration clause from the time of signing to
within 30 days of signing.\6\ The MSRB has set an effective date for
the amendments of May 1, 2005, to coincide with the effective date of
the recent amendments to NASD Rule 3110(f), and, consistent with NASD,
has extended the compliance date to June 1, 2005 for the prior
amendments to Rule G-8(a)(xi)(M)(1), on required disclosures in
customer agreements containing predispute arbitration clauses.\7\ The
text of the proposed rule change is available on the MSRB's Web site
(https://www.msrb.org), at the MSRB's principal office, and at the
Commission's Public Reference Room.
---------------------------------------------------------------------------
\6\ NASD's filing (File No. SR-NASD-2005-045) was granted
accelerated approval in SEC Release No. 34-51526 (April 12, 2005).
\7\ SEC Release 34-51534 (April 12, 2005).
---------------------------------------------------------------------------
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
On March 21, 2005, the MSRB filed, for immediate effectiveness, a
proposed rule change consisting of an amendment to Rule G-8 to add
requirements governing the use of predispute arbitration agreements
with customers, consistent with NASD requirements as set forth in NASD
Rule 3110(f).\8\ Shortly thereafter, NASD filed an amendment to Rule
3110(f) to conform to SEC recordkeeping rules, in particular Exchange
Act Rule 17a-3(a)(17)(i)(B)(1),\9\ by extending the time period for
delivery of a copy of a customer account agreement containing a
predispute arbitration clause from the time of signing to within 30
days of signing.\10\ The NASD amendments also extend the compliance
date of its prior amendments to Rule 3110(f)(1), on required
disclosures, to June 1, 2005.
---------------------------------------------------------------------------
\8\ File No. SR-MSRB-2005-05. The filing also contained a
technical amendment to Rule A-11, on indemnification, to delete its
obsolete references to arbitrators. On April 1, 2005, the MSRB
submitted Amendment No. 1 to the filing to replace, in its entirety,
the proposed language to Rule G-8 with new language that conformed
with the language of NASD Rule 3110(f), as amended. See MSRB Notices
2005-18 (March 21, 2005) and 2005-21 (April 1, 2005). The Commission
published notice of the filing for immediate effectiveness in
Release No. 34-51534 (April 12, 2005). The effective date for the
amendments to Rule G-8 is May 1, 2005.
\9\ 17 CFR 240.17a-3(a)(17)(b)(1). This SEC rule requires a
broker-dealer, among other things, to keep a record indicating that
the broker-dealer has furnished to each customer within 30 days of
opening the account a copy of the account record, or alternate
document, containing the customer's name, address, telephone number,
date of birth, employment status, annual income, net worth, the
account's investment objectives, and other information.
\10\ The Commission published notice of the NASD filing and an
order granting accelerated approval in Release No. 34-51526 (April
12, 2005).
---------------------------------------------------------------------------
As stated previously, it is the MSRB's intent to make its
requirements governing the use of predispute arbitration agreements
with customers consistent with NASD requirements in this area.
Accordingly, the MSRB is submitting the proposed rule change to amend
Rule G-8, consistent with NASD Rule 3110(f) as most recently amended.
As noted in NASD's filing, the purpose of the proposed rule change
regarding the delivery of customer agreements is to conform the time
period for delivery of copies of any customer agreement containing a
predispute arbitration clause to customers with SEC requirements as set
forth in its recordkeeping rules.\11\ Specifically, the proposed rule
change would require dealers to comply with such delivery requirements
within 30 days of signing of the customer agreement.
---------------------------------------------------------------------------
\11\ File No. SR-NASD-2005-045 at 19.
---------------------------------------------------------------------------
Both NASD and MSRB requirements, as previously filed, are effective
as of May 1, 2005.\12\ As part of its most recent amendments, NASD
extended to June 1, 2005 the compliance date for its provision
regarding required disclosures in any customer agreement containing a
predispute arbitration clause.\13\ Thus, the MSRB has set an effective
date for the amendments of May 1, 2005, and has extended the compliance
date for its prior amendments to Rule G-8(a)(xi)(M)(1), on required
disclosures, to June 1, 2005. Beginning June 1, 2005, all customer
agreements containing predispute arbitration clauses must include the
new disclosure required by Rule G-8(a)(xi)(M)(1).\14\ The MSRB is
requesting that the Commission waive the five-day pre-filing notice
requirement and the 30-day delayed effective date requirement for
``non-controversial'' filings submitted pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b-4(f)(6) thereunder, so that MSRB effective
dates will coincide with NASD's for the same requirements.
---------------------------------------------------------------------------
\12\ SEC Release No.'s 34-50713 (November 22, 2004) and 34-51534
(April 12, 2005).
\13\ SEC Release No. 34-51526 (April 12, 2005).
\14\ However, any dealer that wishes to use customer agreements
containing the new disclosure language required by MSRB Rule G-
8(a)(xi)(M)(1) may do so prior to the compliance date of June 1,
2005.
---------------------------------------------------------------------------
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(C) and (D) of the Act,\15\ which provides that MSRB
rules shall:
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78o-4(b)(2)(C), (D).
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, to remove
impediments to and perfect the mechanism of a free and open market
in municipal securities, and, in general, to protect investors and
the public interest * * * [and] if the Board deems appropriate,
provide for the arbitration of claims, disputes, and controversies
---------------------------------------------------------------------------
relating to transactions in municipal securities * * *.
The MSRB believes that the proposed rule change is consistent with
these provisions in that it would provide for the protection of
investors and the public interest by ensuring that customers of
brokers, dealers and municipal securities dealers, including bank
dealers and municipal-only dealers, receive information regarding
arbitration and predispute arbitration
[[Page 31554]]
agreements in a timely fashion. The proposed rule change also would
ensure consistent treatment across the securities markets regarding
these requirements.
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 not necessary or appropriate in
furtherance of the purposes of the Act.
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
proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days (or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest) from the date on which it was filed, the proposed rule change
has become effective pursuant to Section 19(b)(3)(A) of the Act \16\
and Rule 19b-4(f)(6) thereunder.\17\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The MSRB has asked the Commission to
waive the 30-day operative delay. The Commission hereby grants this
request. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest because such waiver will enable the MSRB to make the effective
date of the proposed rule change coincide with NASD's for the same
requirements. The effective date for the amendments will be May 1,
2005. The MSRB has extended the compliance date for its prior
amendments to Rule G-8(a)(xi)(M)(1) to June 1, 2005, to coincide with
NASD's compliance date for the same provisions. The MSRB has also
requested that the Commission waive the pre-filing notice requirement
of at least five business days (or such shorter time as designated by
the Commission).\18\ The Commission hereby grants the MSRB's request to
waive the pre-filing requirement.\19\
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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
in furtherance of the purposes of the Act.\20\
---------------------------------------------------------------------------
\20\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-MSRB-2005-07 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609. All submissions should refer to File Number
SR-MSRB-2005-07. 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 (https://
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-2005-07 and should be
submitted on or before June 22, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2751 Filed 5-31-05; 8:45 am]
BILLING CODE 8010-01-P
