Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to MSRB Rule G-21, on Advertising, and MSRB Rule G-27, on Supervision, 31122-31126 [E7-10767]

Download as PDF 31122 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices B. Self-Regulatory Organization’s Statement on Burden on Competition DTC 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments relating to the proposed rule change have been solicited or received. DTC will notify the Commission of any written comments received by the DTC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(ii) of the Act 7 and Rule 19b– 4(f)(2) 8 thereunder because it is establishing or changing a due, fee, or other charge applicable only to a participant. At any time within sixty days of the filing of such 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. 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: jlentini on PROD1PC65 with NOTICES 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–DTC–2006–20 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–DTC–2006–20. 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 Section, 100 F Street, NE., Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of DTC and on DTC’s Web site, https:// www.dtcc.com. 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–DTC– 2006–20 and should be submitted on or before June 26, 2007. For the Commission by the Division of Market Regulation, pursuant to delegated authority.9 J. Lynn Taylor, Assistant Secretary. [FR Doc. E7–10768 Filed 6–4–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55830, File No. SR–MSRB– 2006–09] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to MSRB Rule G–21, on Advertising, and MSRB Rule G–27, on Supervision May 30, 2007. On November 21, 2006, the Municipal Securities Rulemaking Board (‘‘MSRB’’), filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change consisting of (i) Amendments to Rule G–21, on 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 7 15 U.S.C. 78s(b)(3)(A)(ii). 8 17 CFR 240.19b–4(f)(2). VerDate Aug<31>2005 17:28 Jun 04, 2007 1 15 Jkt 211001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 advertising, and Rule G–27, on supervision, and (ii) an interpretation (the ‘‘proposed interpretive notice’’) on general advertising disclosures, blind advertisements and annual reports relating to municipal fund securities. The MSRB amended the proposed rule change on February 12, 2007 (‘‘Amendment No. 1’’). The proposed rule change and Amendment No. 1 thereto were published for comment in the Federal Register on February 23, 2007.3 The Commission received one comment letter regarding the proposal.4 On May 14, 2007, the MSRB filed a response to the comment letter.5 This order approves the proposed rule change as modified by Amendment No. 1. The proposed rule change consists of (i) Amendments to Rule G–21, on advertising, and Rule G–27, on supervision, and (ii) an interpretation (the ‘‘proposed interpretive notice’’) on general advertising disclosures, blind advertisements and annual reports relating to municipal fund securities. In 2005, the MSRB adopted new section (e) of Rule G–21 that established specific standards for advertisements by brokers, dealers and municipal securities dealers of municipal fund securities, including interests in 529 college savings plans.6 This section of the rule was modeled in part on Rule 482 adopted by the SEC under the Securities Act of 1933, as amended, and also codified previous MSRB interpretive guidance on advertisements of municipal fund securities. On May 12, 2006, the MSRB published interpretive guidance on certain elements of amended Rule G–21 as they apply to advertisements of 529 plans.7 3 See Securities Exchange Act Release No. 55302 (February 15, 2007), 72 FR 8222 (February 23, 2007) (‘‘Commission’s Notice’’). 4 See letter from Jacqueline T. Williams, Chair, College Savings Plans Network, dated March 16, 2007. 5 See letter from Ernesto A. Lanza, Senior Associate General Counsel, MSRB, to Nancy M. Morris, Secretary, Commission, dated May 14, 2007 (‘‘MSRB’s Response Letter’’). 6 Municipal fund securities are defined in Rule D–12. 529 college savings plans are established by states under Section 529(b)(A)(ii) of the Internal Revenue Code as ‘‘qualified tuition programs’’ through which individuals make investments for the purpose of accumulating savings for qualifying higher education costs of beneficiaries. Section 529 of the Internal Revenue Code also permits the establishment of so-called prepaid tuition plans by states and higher education institutions. All references to 529 plans are intended to encompass only 529 college savings plans established under Section 529(b)(A)(ii). 7 See Rule G–21 Interpretive Letter—529 College Savings Plan Advertisements, MSRB Interpretation of May 12, 2006, published in MSRB Notice 2006– 13 (May 15, 2006) (the ‘‘May 2006 Interpretation’’). The proposed rule change supersedes this May 2006 Interpretation. E:\FR\FM\05JNN1.SGM 05JNN1 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices jlentini on PROD1PC65 with NOTICES The proposed rule change further harmonizes the MSRB’s advertising rule with the rules of the SEC and NASD relating to investment company advertising. The proposed rule change also provides certain clarifications of and exceptions to existing standards that the MSRB believes more closely tailor the provisions of the rule to the specific characteristics of the municipal fund securities market without reducing the investor protections afforded by the rule. Although most of the amendments effected by the proposed rule change relate specifically to advertisements of municipal fund securities, certain provisions apply to advertisements of all types of municipal securities, including bonds and notes. The MSRB proposed an effective date for the proposed rule change of April 1, 2007 to coincide with the effective date of NASD Rule 2210(d)(3). A full description of the proposal is contained in the Commission’s Notice. The College Savings Plans Network (‘‘CSPN’’) stated in its comment letter that, in general, they believe that the proposed rule change may be feasibly implemented. However, CSPN stated that they believe several provisions and interpretive statements in the proposed rule change remain unclear, would be unduly costly to implement or would overly restrict their ability to make college savings information available to specific populations, such as existing account owners or potential account owners who have responded to a blind advertisement. CSPN also requested a delay in the effective date of the proposed rule change. Transaction Confirmations and Periodic Statements CSPN asked for clarification of the definition of ‘‘form letter’’ that would be added as new subsection (ii) to Section (a) of Rule G–21 to establish that transaction confirmations and periodic statements sent to account owners (along with any messages printed thereon, enclosed therewith or attached thereto) constitute ‘‘form letters’’ for purposes of Rule G–21. The MSRB stated in its Response Letter that ‘‘Provisions relating to transaction confirmations and periodic statements in lieu of such confirmations are set forth in MSRB Rule G–15(a). Information provided to customers in connection with transactions in municipal fund securities in satisfaction of the requirements of Rule G–15(a), or as reasonably contemplated thereunder to be included in a confirmation or periodic statement, is treated for purposes of MSRB rules in the same manner as confirmations sent to VerDate Aug<31>2005 17:28 Jun 04, 2007 Jkt 211001 customers in connection with transactions in any other type of municipal security, such as municipal bonds or notes. A determination of the status of information provided to customers beyond such items of information required under or reasonably contemplated by Rule G– 15(a) (whether such information is physically attached to or otherwise included within a traditional confirmation or periodic statement, or is included in a separate writing or data file), such as whether such additional information would be treated as a form letter under proposed Rule G–21(a)(ii), generally should be based on a consideration of the specific nature of such additional information and any other relevant facts and circumstances.’’ The Commission agrees that whether any additional information not reasonably contemplated to be included in a confirmation or periodic statement by Rule G–15(a) should be treated as a form letter under proposed Rule G– 21(a)(ii) should be based on the specific nature of such additional information and any other relevant facts and circumstances. Form Letters Regarding Related Municipal Fund Securities CSPN also asked for clarification regarding the intended operation of proposed Rule G–21(e)(i)(B)(3) concerning certain form letters to existing customers. Proposed Rule G– 21(e)(i)(B)(3) provides, in part, that a form letter relating to municipal fund securities that is distributed by a dealer solely to its existing customers to whom the dealer has previously provided an official statement for any municipal fund securities issued by the same issuer as the issuer of the municipal funds securities that are the subject of the form letter is not required to include certain disclosures under Rule G– 21(e)(i)(A). CSPN stated that the MSRB’s discussion of this provision in the Commission’s Notice and in the MSRB’s Notice 8 may be interpreted in an unduly restrictive manner because of the use of the term ‘‘related’’ without further definition. The MSRB stated in its Response Letter that the descriptive information in the Commission’s Notice and the MSRB Notice summarized the universe of municipal fund securities issued by such issuer as, in general terms, ‘‘the same or related municipal fund securities.’’ The MSRB also stated that the general descriptive language does not limit or modify the plain language of the proposed rule itself, 8 MSRB Notice 2006–32 (November 21, 2006) (‘‘MSRB Notice’’). PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 31123 which the MSRB believes is clear. The Commission finds that the language of the rule itself is clear. Disclosure of Loads and Annual Operating Expense Ratio CSPN also asked for clarification that the cost information required to be disclosed by the proposed amendments to section (e)(i)(A)(3) of Rule G–21 and new subsection (i)(A)(4)(a)(iii) to be added to Section (e) of Rule G–21 is solely the cost information that is actually applicable to the municipal fund securities, rather than other information that may be generally applicable to any underlying investment. CSPN further stated: ‘‘For example, the actual cost of investing in a tuition savings program that only assesses a single, unitary, fixed fee for investment in any program investment option could be extremely unclear to a potential investor if the advertisement must list the expense ratio for the mutual fund in which the option invests. In such a scenario, a potential investor could draw the erroneous conclusion that he or she would be required to pay both the fixed fee and the underlying fund expense. * * * If an investment portfolio within a tuition savings program invests in multiple mutual funds similar to a fund of funds, it should not be necessary to identify in a performance advertisement about such investment portfolio each separate expense charge applicable to each separate mutual fund included in the investment portfolio. Rather, it should suffice to set forth a single blended expense charge that is calculated by combining the appropriately weighted expense charges of all of the underlying mutual funds in the portfolio. * * * Moreover, a tuition savings program’s costs may reflect discounts from those generally applicable to one or more of the underlying investments or may be uniform across all investment alternatives offered, in which case reference to specific underlying fund expense charges could divert the investor’s attention away from a positive fee scenario and obfuscate the actual expense charges directly applicable to the investor.’’ The MSRB responded that ‘‘In understanding how this provision is intended to be implemented, two basic principles apply: (i) As the MSRB seeks to maximize the degree to which the public will be assured of receiving information that is comparable across both the municipal fund securities and investment company securities markets, the MSRB believes that the specific fee and expense information required to be disclosed under proposed Rule G– E:\FR\FM\05JNN1.SGM 05JNN1 31124 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices jlentini on PROD1PC65 with NOTICES 21(e)(i)(A)(3) generally should match such information required to be disclosed under NASD Rule 2210(d)(3) and Securities Act Rule 482; and (ii) as the MSRB seeks to maximize the understandability of information received by the public about potential investments and the actual costs that an investment may entail, the MSRB believes that the specific fee and expense information required to be disclosed under proposed Rule G– 21(e)(i)(A)(3) generally should be the fees and expenses that an investor would actually incur rather than a collection of the components used to determine such actual fees and expenses. Each advertisement or correspondence 9 that includes performance data must be examined in light of these basic principles as applied in the context of the specific facts and circumstances. Thus, for example, if an advertisement includes performance data for a single investment option offered under a 529 college savings plan that consists of a portfolio of securities of several underlying registered investment companies, the requirements of this provision generally could be met with the inclusion of a single fee and expense figure if such figure accurately reflects the total fees and expenses that an investor would actually incur in connection with an investment in such option, taking into consideration any program level fees and expenses as well as any fees and expenses that may be attributable to the underlying securities in the portfolio or that are otherwise payable in connection with such investment. If such advertisement includes separate performance data for more than one investment option offered under a 529 college savings plan, the requirements of this provision generally could be met with the inclusion of a single fee and expense figure for each investment option for which performance data is shown if each such figure accurately reflects the total fees and expenses that an investor would actually incur in connection with an investment in each such option, taking into consideration any program level fees and expenses as well as any fees and expenses that may be attributable to the underlying securities in the option or that are otherwise payable in connection with such investment.’’ The Commission believes the MSRB has provided sufficient 9 Proposed Rule G–21(e)(vii) provides that all correspondence with the public that includes performance data relating to municipal fund securities must comply with the requirements of the rule regarding such performance data as if such correspondence were a product advertisement. VerDate Aug<31>2005 17:28 Jun 04, 2007 Jkt 211001 clarification of the cost information required to be disclosed under the proposed rule change. The Commission would expect the MSRB to provide additional guidance on specific situations if needed. Rule G–21(e)(ii)(C).’’ The Commission believes the MSRB has provided sufficient clarification regarding how frequently updates must be made to the total annual operating expense ratios in performance advertisements. Currentness of Total Annual Operating Expense Ratios CSPN also requested clarification on how frequently updates must be made to the total annual operating expense ratios that will be reported in advertisements containing performance data for municipal fund securities. CSPN said that they presume that any advertisements containing performance data, including performance tables on a program’s Web site, need only disclose the total annual operating expense ratios as reported in the most recent official statement for the program. The MSRB responded that ‘‘Proposed Rule G–21(e)(ii)(C) provides that the total annual operating expense ratio that appears in advertisements and correspondence that include performance data shall be calculated as of the most recent practicable date considering the type of municipal fund securities and the media through which data will be conveyed. NASD Rule 2210(d)(3) provides that the total annual operating expenses to be disclosed in investment company performance advertisements should be as stated in the fee table of the investment company’s prospectus current as of the date of submission of an advertisement for publication or as of the date of distribution of other communications with the public. Recognizing that the MSRB cannot mandate that such information be included in the issuer’s official statement for municipal fund securities, proposed Rule G–21(e)(ii)(A) provides that, to the extent that information necessary to calculate performance data or to determine loads, fees and expenses is not available from a registration statement or prospectus, the dealer is to use information derived from the issuer’s official statement, otherwise made available by the issuer or its agents or derived from such other sources which the dealer reasonably believes are reliable. The inclusion in an advertisement or correspondence of the total annual operating expense ratio obtained from the official statement, where the official statement is subject to periodic updating by the issuer and such ratio is from the most recent official statement as of the date of submission of the advertisement for publication or as of the date of distribution to the public, generally would be viewed as meeting the currentness standard under proposed Blind Advertisements CSPN asked for clarification of language in the proposed interpretive notice regarding proposed Rule G– 21(e)(i)(B)(2)(b) concerning certain blind advertisements. CSPN stated that there is no need for a requirement that a ‘‘distinct barrier between the providing of information and the seeking of orders’’ be maintained. CSPN further stated that it is doubtful that such a requirement would meaningfully protect potential investors who have evidenced an interest in initiating an order, and that the requirement may discourage persons from actually establishing accounts. The MSRB responded that ‘‘Proposed Rule G–21(e)(i)(B)(2) provides, in part, that an advertisement is not required to include certain disclosures under Rule G–21(e)(i)(A) and (B) if it does not identify a dealer or its affiliates and if it includes only one or more of the following: The issuer’s name, contact information to obtain the official statement or other information, the issuer’s logo or an issuer mark or slogan that does not constitute a call to invest in municipal fund securities. Clause (b) of this provision provides that, if contact information is provided for a dealer acting as the issuer’s agent in making the official statement or other information available, then no orders for municipal fund securities may be accepted through such source unless initiated by the customer. The proposed interpretive notice states, ‘If a potential customer initiates an order through the source identified in the advertisement, a distinct barrier between the providing of information and the seeking of orders must be maintained to qualify as a blind advertisement.’ The proposed interpretive notice also provides certain illustrative examples of this requirement. The MSRB notes that the blind advertisement provision in proposed Rule G–21(e)(i)(B)(2) is somewhat unique within the structure of the federal securities laws and was created in part as a result of the public–private partnerships that most 529 college savings plans represent and that are not typically seen in other sectors of the securities markets. This provision was intended to permit dealers to partner with the state plans in providing to the public basic information regarding the states’ public purpose goals without PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 E:\FR\FM\05JNN1.SGM 05JNN1 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices jlentini on PROD1PC65 with NOTICES promoting the sales activities of the dealers. As such, the MSRB views the requirement of a distinct barrier as an appropriately measured step to help ensure that the result of such blind advertisements is more information to the public rather than merely more opportunities for dealers to make sales. The MSRB also noted that to that end, any delays in the ability of an investor to invest as a result of the proposed barrier between the provision of information and sales activity could be viewed, if anything, as providing the potential customer with a greater opportunity to review the information he or she has received and to make an investment decision in a less hurried environment. Dealers seeking more direct promotion of potential investment opportunities may do so using materials that are subject to other provisions of Rule G–21.’’ The Commission believes that the proposed barrier between the provision of information and sales activity is a measured step that is not inconsistent with the Act. Required Annual Reports The proposed interpretive notice provides guidance to the effect that, in circumstances where a dealer may be required by state law or rules and regulations to prepare or distribute an annual financial report or other similar information regarding a municipal fund securities program, such report or information will not be treated as an advertisement so long as the dealer provides such report or information solely in the manner required by such state law or rules and regulations. CSPN stated that while this guidance is generally helpful, it is too narrow to the extent that it recognizes only actual state laws or formal administrative rulemaking as the means by which a dealer may be required to prepare or distribute information. CSPN stated that ‘‘This limitation is unnecessary to protect the investing public as a whole to the extent that such requirements typically address the distribution of information to existing customers. It is also both arbitrary and unnecessarily intrusive upon state discretion in administering their tuition savings programs in that it provides relief only in connection with programs operated under statutes that include disclosure requirements or administered by public entities that are authorized to adopt administrative rules or regulations and that choose to address their customer’s need for such information by exercising this authority. Some programs, however, are administered by public entities, such as trusts, that lack this authority or VerDate Aug<31>2005 17:28 Jun 04, 2007 Jkt 211001 that choose to require dealers to prepare and provide such information as a contractual matter.’’ The MSRB stated that ‘‘This interpretive guidance is intended to be consistent with similar guidance provided by NASD with respect to its Rule 2210 as applied to certain performance information and hypothetical illustrations required by state laws to be provided by dealers in connection with retirement investments and variable annuity contracts. The MSRB recognizes that there is considerable variability from state to state in the methods they may use to adopt binding requirements of general applicability. Therefore, the MSRB would not view the expression ‘rules and regulations adopted by the state or an instrumentality thereof governing a particular 529 plan or other municipal fund security program’ as limiting the types of requirements to which the interpretation is applicable solely to those promulgated pursuant to a specific formal administrative rulemaking process. Instead, the MSRB generally views the interpretation as applicable where the state or instrumentality thereof establishes a mandate of general applicability to, and binding upon, any equally situated person or entity. However, a negotiated contractual provision would not satisfy this requirement as this would permit dealers to avoid the appropriate application of Rule G–21 to promotional materials through narrowly tailored contractual arrangements.’’ The Commission believes that this guidance is not inconsistent with the Act because it provides relief to dealers providing certain information required by state law and is intended to be consistent with similar guidance provided by NASD. Effective Dates With one exception, CSPN requested that the proposed rule change be made effective immediately upon publication of the Commission’s approval order, rather than the MSRB’s previously requested April 1, 2007 effective date. CSPN requested that the revisions to proposed Rule G–21(e)(i)(A)(3) and proposed new Rule G– 21(e)(i)(A)(4)(a)(iii), relating to disclosures of maximum sales loads and total annual operating expense ratio, instead be made effective sixty days after the publication of such approval order, and that dealers not be required to implement such provisions until 15 days after the end of the calendar quarter following such effectiveness. The MSRB agrees with CSPN that the proposed rule change should be made PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 31125 effective immediately upon approval, provided that dealers should not be required to implement the new provisions of Rule G–21(e)(i)(A)(3) and (4)(a)(iii) relating to disclosure of maximum sales load and total annual operating expense ratio (as well as the related provisions of Rule G–21(e)(ii)(A), G–21 (e)(vii) and G–27(d)(ii)) for any advertisement submitted or caused to be submitted for publication, or any advertisement or correspondence otherwise distributed to the public, prior to July 15, 2007. Nonetheless, the MSRB urges dealers to implement these provisions as soon as practicable. In response to these comments and in recognition of potential production, publication and related technical issues that may exist in some cases in implementing the proposed rule change, the Commission finds that the implementation period proposed by the MSRB will provide dealers adequate time to make any necessary changes. 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 10 and, in particular, the requirements of Section 15B(b)(2)(C) of the Act 11 and the rules and regulations thereunder. 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.12 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 more comparable to registered mutual funds. The proposal will be effective upon publication in the Federal Register, except that dealers will not be required to implement the new provisions of 10 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). 11 15 U.S.C. 78o–4(b)(2)(C). 12 Id. E:\FR\FM\05JNN1.SGM 05JNN1 31126 Federal Register / Vol. 72, No. 107 / Tuesday, June 5, 2007 / Notices Rule G–21(e)(i)(A)(3) and (4)(a)(iii) relating to disclosure of maximum sales load and total annual operating expense ratio (as well as the related provisions of Rule G–21(e)(ii)(A), G–21(e)(vii) and G–27(d)(ii)) for any advertisement submitted or caused to be submitted for publication, or any advertisement or correspondence otherwise distributed to the public, prior to July 15, 2007. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,13 that the proposed rule change (SR–MSRB–2006– 09), as modified by Amendment No. 1, be, and it hereby is, approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14 J. Lynn Taylor, Assistant Secretary. [FR Doc. E7–10767 Filed 6–4–07; 8:45 am] BILLING CODE 8010–01–P Tuesday, June 19, 2007 DEPARTMENT OF TRANSPORTATION Federal Transit Administration Intent To Prepare an Environmental Impact Statement for the Southwest-toNortheast Rail Corridor Project in Fort Worth, TX Federal Transit Administration (FTA), Department of Transportation (DOT). ACTION: Notice of Intent to prepare an Environmental Impact Statement (EIS). jlentini on PROD1PC65 with NOTICES AGENCY: SUMMARY: The FTA and the Fort Worth Transportation Authority (The T) issue this notice to advise interested agencies and the public of their intent to prepare an EIS in accordance with the regulations implementing the National Environmental Policy Act (NEPA) for transit improvements in Fort Worth, and Tarrant County, Texas. Transit improvements from southwest Fort Worth, through downtown Fort Worth, to the northern entrance into the DallasFort Worth International Airport (DFW Airport), are proposed along what is known as the Southwest-to-Northeast Rail Corridor. The proposed alignment will largely follow the Fort Worth & Western Railroad (FWWR), Union Pacific Railroad Company (UPRR), Burlington Northern Santa Fe Railroad (BNSF), and Dallas Area Rapid Transitowned Cotton Belt rail lines that traverse Tarrant County. Transportation improvements are needed to meet current and future travel demand and to upgrade the transportation facilities in the corridor. 13 15 14 17 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). VerDate Aug<31>2005 17:28 Jun 04, 2007 The EIS will evaluate the future NoBuild Alternative, a Transportation Systems Management (TSM) alternative, the preliminary Locally Preferred Alternative (LPA) from the recently completed planning Alternatives Analysis (AA), and any additional reasonable alternatives that emerge from the scoping process. DATES: Comment Due Date: Written or electronic comments on the scope of the EIS, including the purpose and need for transportation action in the corridor, and alternatives and impacts to be considered, should be sent to the project public involvement team (see ADDRESSES below) by July 31, 2007. Scoping Meetings: Public scoping meetings will be held from June 19 to June 21, 2007, at the following times and locations: Jkt 211001 6 p.m.–7:30 p.m., Texas Department of Transportation—Regional Training Center, 2501 SW Loop 820, (I–20 and McCart Avenue), Fort Worth, Texas 76133. Wednesday, June 20, 2007 12 p.m. (noon)—1:30 p.m., Intermodal Transportation Center, 1001 Jones Street, Fort Worth, Texas 76102. Thursday, June 21, 2007 7 p.m.–8:30 p.m., Grapevine Community Activities Center, 1175 Municipal Way, Grapevine, Texas 76051. The meeting locations are accessible by persons with disabilities. The public involvement team must be contacted in advance regarding special needs such as signing or translation services. The time and place of the public scoping meetings will also be provided through display advertisements in local newspapers; newsletters that will be mailed to persons on the project database who have expressed an interest in the project; E-mail notifications; media releases that will be distributed to all print and electronic media serving the corridor; and posting of information on the project Web site. The scoping information packet is available on the internet at www.SW2NERail.com. The packet is also available in hardcopy form by contacting the project public involvement team as indicated below. ADDRESSES: Written or electronic comments on the scope of the EIS should be sent to:Southwest-toNortheast Rail Corridor, 1600 E. Lancaster Avenue, Fort Worth, TX 76102; the Southwest-to-Northeast Rail Corridor Fax: 214–495–0479; or E-mail: info@SW2NERail.com. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 Additional scoping information may be requested and other requests made by contacting the Public Involvement Team at: Southwest-to-Northeast Rail Corridor Public Involvement Team, 1600 E. Lancaster Avenue, Fort Worth, TX 76102; the Southwest-to-Northeast Rail Corridor Telephone Hotline: 817–215– 8785; or E-mail: info@SW2NERail.com. FOR FURTHER INFORMATION CONTACT: Lynn Hayes, Community Planner, Federal Transit Administration, Region VI; (817) 978–0550 SUPPLEMENTARY INFORMATION: I. Proposed Action Following a study of the transportation needs in the corridor and an analysis of alternative solutions, The T Executive Committee recommended transportation improvements along portions of the FWWR, UPRR, BNSF, and DART-owned Cotton Belt railroad lines from southwest Fort Worth beginning at approximately Altamesa Boulevard/Dirks Road, through Downtown Fort Worth, and continuing through Haltom City, North Richland Hills, Watauga, Hurst, Colleyville, and Grapevine, before terminating inside the northern entrance of DFW Airport. The planning Alternatives Analysis (AA) document that supported The T’s decision on a preliminary Locally Preferred Alternative (LPA) is available for public review on the internet at www.SW2NERail.com or by contacting the public involvement team at the ADDRESSES above. The AA, which led to the project’s purpose and need statement and the alternatives recommended for further review, will also be available for review at the public scoping meetings. The FTA and The T will prepare an EIS to evaluate the preliminary LPA (i.e., regional or commuter rail on the Southwest-to-Northeast alignment), the future No-Build alternative, and a TSM alternative. Interested individuals, organizations, businesses, Native American tribes, and federal, state and local government agencies are invited to participate in determining the scope of the EIS, including the purpose and need for transportation action in the corridor, alternative alignments, alternative station locations, impacts to be evaluated, and environmental or community resources to be protected. Specific suggestions on additional alternatives to be examined and issues to be addressed are welcome and will be considered in the development in the final study scope. Scoping comments may be made orally or in writing no later than July 31, 2007. See ADDRESSES above. Additional information on the E:\FR\FM\05JNN1.SGM 05JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 72, Number 107 (Tuesday, June 5, 2007)]
[Notices]
[Pages 31122-31126]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-10767]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55830, File No. SR-MSRB-2006-09]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Approving Proposed Rule Change and Amendment No. 1 Thereto 
Relating to MSRB Rule G-21, on Advertising, and MSRB Rule G-27, on 
Supervision

May 30, 2007.
    On November 21, 2006, the Municipal Securities Rulemaking Board 
(``MSRB''), filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change consisting of (i) Amendments to Rule G-21, on 
advertising, and Rule G-27, on supervision, and (ii) an interpretation 
(the ``proposed interpretive notice'') on general advertising 
disclosures, blind advertisements and annual reports relating to 
municipal fund securities. The MSRB amended the proposed rule change on 
February 12, 2007 (``Amendment No. 1''). The proposed rule change and 
Amendment No. 1 thereto were published for comment in the Federal 
Register on February 23, 2007.\3\ The Commission received one comment 
letter regarding the proposal.\4\ On May 14, 2007, the MSRB filed a 
response to the comment letter.\5\ This order approves the proposed 
rule change as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55302 (February 15, 
2007), 72 FR 8222 (February 23, 2007) (``Commission's Notice'').
    \4\ See letter from Jacqueline T. Williams, Chair, College 
Savings Plans Network, dated March 16, 2007.
    \5\ See letter from Ernesto A. Lanza, Senior Associate General 
Counsel, MSRB, to Nancy M. Morris, Secretary, Commission, dated May 
14, 2007 (``MSRB's Response Letter'').
---------------------------------------------------------------------------

    The proposed rule change consists of (i) Amendments to Rule G-21, 
on advertising, and Rule G-27, on supervision, and (ii) an 
interpretation (the ``proposed interpretive notice'') on general 
advertising disclosures, blind advertisements and annual reports 
relating to municipal fund securities. In 2005, the MSRB adopted new 
section (e) of Rule G-21 that established specific standards for 
advertisements by brokers, dealers and municipal securities dealers of 
municipal fund securities, including interests in 529 college savings 
plans.\6\ This section of the rule was modeled in part on Rule 482 
adopted by the SEC under the Securities Act of 1933, as amended, and 
also codified previous MSRB interpretive guidance on advertisements of 
municipal fund securities. On May 12, 2006, the MSRB published 
interpretive guidance on certain elements of amended Rule G-21 as they 
apply to advertisements of 529 plans.\7\
---------------------------------------------------------------------------

    \6\ Municipal fund securities are defined in Rule D-12. 529 
college savings plans are established by states under Section 
529(b)(A)(ii) of the Internal Revenue Code as ``qualified tuition 
programs'' through which individuals make investments for the 
purpose of accumulating savings for qualifying higher education 
costs of beneficiaries. Section 529 of the Internal Revenue Code 
also permits the establishment of so-called prepaid tuition plans by 
states and higher education institutions. All references to 529 
plans are intended to encompass only 529 college savings plans 
established under Section 529(b)(A)(ii).
    \7\ See Rule G-21 Interpretive Letter--529 College Savings Plan 
Advertisements, MSRB Interpretation of May 12, 2006, published in 
MSRB Notice 2006-13 (May 15, 2006) (the ``May 2006 
Interpretation''). The proposed rule change supersedes this May 2006 
Interpretation.

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[[Page 31123]]

    The proposed rule change further harmonizes the MSRB's advertising 
rule with the rules of the SEC and NASD relating to investment company 
advertising. The proposed rule change also provides certain 
clarifications of and exceptions to existing standards that the MSRB 
believes more closely tailor the provisions of the rule to the specific 
characteristics of the municipal fund securities market without 
reducing the investor protections afforded by the rule. Although most 
of the amendments effected by the proposed rule change relate 
specifically to advertisements of municipal fund securities, certain 
provisions apply to advertisements of all types of municipal 
securities, including bonds and notes. The MSRB proposed an effective 
date for the proposed rule change of April 1, 2007 to coincide with the 
effective date of NASD Rule 2210(d)(3). A full description of the 
proposal is contained in the Commission's Notice.
    The College Savings Plans Network (``CSPN'') stated in its comment 
letter that, in general, they believe that the proposed rule change may 
be feasibly implemented. However, CSPN stated that they believe several 
provisions and interpretive statements in the proposed rule change 
remain unclear, would be unduly costly to implement or would overly 
restrict their ability to make college savings information available to 
specific populations, such as existing account owners or potential 
account owners who have responded to a blind advertisement. CSPN also 
requested a delay in the effective date of the proposed rule change.

Transaction Confirmations and Periodic Statements

    CSPN asked for clarification of the definition of ``form letter'' 
that would be added as new subsection (ii) to Section (a) of Rule G-21 
to establish that transaction confirmations and periodic statements 
sent to account owners (along with any messages printed thereon, 
enclosed therewith or attached thereto) constitute ``form letters'' for 
purposes of Rule G-21. The MSRB stated in its Response Letter that 
``Provisions relating to transaction confirmations and periodic 
statements in lieu of such confirmations are set forth in MSRB Rule G-
15(a). Information provided to customers in connection with 
transactions in municipal fund securities in satisfaction of the 
requirements of Rule G-15(a), or as reasonably contemplated thereunder 
to be included in a confirmation or periodic statement, is treated for 
purposes of MSRB rules in the same manner as confirmations sent to 
customers in connection with transactions in any other type of 
municipal security, such as municipal bonds or notes. A determination 
of the status of information provided to customers beyond such items of 
information required under or reasonably contemplated by Rule G-15(a) 
(whether such information is physically attached to or otherwise 
included within a traditional confirmation or periodic statement, or is 
included in a separate writing or data file), such as whether such 
additional information would be treated as a form letter under proposed 
Rule G-21(a)(ii), generally should be based on a consideration of the 
specific nature of such additional information and any other relevant 
facts and circumstances.'' The Commission agrees that whether any 
additional information not reasonably contemplated to be included in a 
confirmation or periodic statement by Rule G-15(a) should be treated as 
a form letter under proposed Rule G-21(a)(ii) should be based on the 
specific nature of such additional information and any other relevant 
facts and circumstances.

Form Letters Regarding Related Municipal Fund Securities

    CSPN also asked for clarification regarding the intended operation 
of proposed Rule G-21(e)(i)(B)(3) concerning certain form letters to 
existing customers. Proposed Rule G-21(e)(i)(B)(3) provides, in part, 
that a form letter relating to municipal fund securities that is 
distributed by a dealer solely to its existing customers to whom the 
dealer has previously provided an official statement for any municipal 
fund securities issued by the same issuer as the issuer of the 
municipal funds securities that are the subject of the form letter is 
not required to include certain disclosures under Rule G-21(e)(i)(A). 
CSPN stated that the MSRB's discussion of this provision in the 
Commission's Notice and in the MSRB's Notice \8\ may be interpreted in 
an unduly restrictive manner because of the use of the term ``related'' 
without further definition. The MSRB stated in its Response Letter that 
the descriptive information in the Commission's Notice and the MSRB 
Notice summarized the universe of municipal fund securities issued by 
such issuer as, in general terms, ``the same or related municipal fund 
securities.'' The MSRB also stated that the general descriptive 
language does not limit or modify the plain language of the proposed 
rule itself, which the MSRB believes is clear. The Commission finds 
that the language of the rule itself is clear.
---------------------------------------------------------------------------

    \8\ MSRB Notice 2006-32 (November 21, 2006) (``MSRB Notice'').
---------------------------------------------------------------------------

Disclosure of Loads and Annual Operating Expense Ratio

    CSPN also asked for clarification that the cost information 
required to be disclosed by the proposed amendments to section 
(e)(i)(A)(3) of Rule G-21 and new subsection (i)(A)(4)(a)(iii) to be 
added to Section (e) of Rule G-21 is solely the cost information that 
is actually applicable to the municipal fund securities, rather than 
other information that may be generally applicable to any underlying 
investment. CSPN further stated: ``For example, the actual cost of 
investing in a tuition savings program that only assesses a single, 
unitary, fixed fee for investment in any program investment option 
could be extremely unclear to a potential investor if the advertisement 
must list the expense ratio for the mutual fund in which the option 
invests. In such a scenario, a potential investor could draw the 
erroneous conclusion that he or she would be required to pay both the 
fixed fee and the underlying fund expense. * * * If an investment 
portfolio within a tuition savings program invests in multiple mutual 
funds similar to a fund of funds, it should not be necessary to 
identify in a performance advertisement about such investment portfolio 
each separate expense charge applicable to each separate mutual fund 
included in the investment portfolio. Rather, it should suffice to set 
forth a single blended expense charge that is calculated by combining 
the appropriately weighted expense charges of all of the underlying 
mutual funds in the portfolio. * * * Moreover, a tuition savings 
program's costs may reflect discounts from those generally applicable 
to one or more of the underlying investments or may be uniform across 
all investment alternatives offered, in which case reference to 
specific underlying fund expense charges could divert the investor's 
attention away from a positive fee scenario and obfuscate the actual 
expense charges directly applicable to the investor.''
    The MSRB responded that ``In understanding how this provision is 
intended to be implemented, two basic principles apply: (i) As the MSRB 
seeks to maximize the degree to which the public will be assured of 
receiving information that is comparable across both the municipal fund 
securities and investment company securities markets, the MSRB believes 
that the specific fee and expense information required to be disclosed 
under proposed Rule G-

[[Page 31124]]

21(e)(i)(A)(3) generally should match such information required to be 
disclosed under NASD Rule 2210(d)(3) and Securities Act Rule 482; and 
(ii) as the MSRB seeks to maximize the understandability of information 
received by the public about potential investments and the actual costs 
that an investment may entail, the MSRB believes that the specific fee 
and expense information required to be disclosed under proposed Rule G-
21(e)(i)(A)(3) generally should be the fees and expenses that an 
investor would actually incur rather than a collection of the 
components used to determine such actual fees and expenses. Each 
advertisement or correspondence \9\ that includes performance data must 
be examined in light of these basic principles as applied in the 
context of the specific facts and circumstances.
---------------------------------------------------------------------------

    \9\ Proposed Rule G-21(e)(vii) provides that all correspondence 
with the public that includes performance data relating to municipal 
fund securities must comply with the requirements of the rule 
regarding such performance data as if such correspondence were a 
product advertisement.
---------------------------------------------------------------------------

    Thus, for example, if an advertisement includes performance data 
for a single investment option offered under a 529 college savings plan 
that consists of a portfolio of securities of several underlying 
registered investment companies, the requirements of this provision 
generally could be met with the inclusion of a single fee and expense 
figure if such figure accurately reflects the total fees and expenses 
that an investor would actually incur in connection with an investment 
in such option, taking into consideration any program level fees and 
expenses as well as any fees and expenses that may be attributable to 
the underlying securities in the portfolio or that are otherwise 
payable in connection with such investment. If such advertisement 
includes separate performance data for more than one investment option 
offered under a 529 college savings plan, the requirements of this 
provision generally could be met with the inclusion of a single fee and 
expense figure for each investment option for which performance data is 
shown if each such figure accurately reflects the total fees and 
expenses that an investor would actually incur in connection with an 
investment in each such option, taking into consideration any program 
level fees and expenses as well as any fees and expenses that may be 
attributable to the underlying securities in the option or that are 
otherwise payable in connection with such investment.'' The Commission 
believes the MSRB has provided sufficient clarification of the cost 
information required to be disclosed under the proposed rule change. 
The Commission would expect the MSRB to provide additional guidance on 
specific situations if needed.

Currentness of Total Annual Operating Expense Ratios

    CSPN also requested clarification on how frequently updates must be 
made to the total annual operating expense ratios that will be reported 
in advertisements containing performance data for municipal fund 
securities. CSPN said that they presume that any advertisements 
containing performance data, including performance tables on a 
program's Web site, need only disclose the total annual operating 
expense ratios as reported in the most recent official statement for 
the program.
    The MSRB responded that ``Proposed Rule G-21(e)(ii)(C) provides 
that the total annual operating expense ratio that appears in 
advertisements and correspondence that include performance data shall 
be calculated as of the most recent practicable date considering the 
type of municipal fund securities and the media through which data will 
be conveyed. NASD Rule 2210(d)(3) provides that the total annual 
operating expenses to be disclosed in investment company performance 
advertisements should be as stated in the fee table of the investment 
company's prospectus current as of the date of submission of an 
advertisement for publication or as of the date of distribution of 
other communications with the public. Recognizing that the MSRB cannot 
mandate that such information be included in the issuer's official 
statement for municipal fund securities, proposed Rule G-21(e)(ii)(A) 
provides that, to the extent that information necessary to calculate 
performance data or to determine loads, fees and expenses is not 
available from a registration statement or prospectus, the dealer is to 
use information derived from the issuer's official statement, otherwise 
made available by the issuer or its agents or derived from such other 
sources which the dealer reasonably believes are reliable. The 
inclusion in an advertisement or correspondence of the total annual 
operating expense ratio obtained from the official statement, where the 
official statement is subject to periodic updating by the issuer and 
such ratio is from the most recent official statement as of the date of 
submission of the advertisement for publication or as of the date of 
distribution to the public, generally would be viewed as meeting the 
currentness standard under proposed Rule G-21(e)(ii)(C).'' The 
Commission believes the MSRB has provided sufficient clarification 
regarding how frequently updates must be made to the total annual 
operating expense ratios in performance advertisements.

Blind Advertisements

    CSPN asked for clarification of language in the proposed 
interpretive notice regarding proposed Rule G-21(e)(i)(B)(2)(b) 
concerning certain blind advertisements. CSPN stated that there is no 
need for a requirement that a ``distinct barrier between the providing 
of information and the seeking of orders'' be maintained. CSPN further 
stated that it is doubtful that such a requirement would meaningfully 
protect potential investors who have evidenced an interest in 
initiating an order, and that the requirement may discourage persons 
from actually establishing accounts.
    The MSRB responded that ``Proposed Rule G-21(e)(i)(B)(2) provides, 
in part, that an advertisement is not required to include certain 
disclosures under Rule G-21(e)(i)(A) and (B) if it does not identify a 
dealer or its affiliates and if it includes only one or more of the 
following: The issuer's name, contact information to obtain the 
official statement or other information, the issuer's logo or an issuer 
mark or slogan that does not constitute a call to invest in municipal 
fund securities. Clause (b) of this provision provides that, if contact 
information is provided for a dealer acting as the issuer's agent in 
making the official statement or other information available, then no 
orders for municipal fund securities may be accepted through such 
source unless initiated by the customer. The proposed interpretive 
notice states, `If a potential customer initiates an order through the 
source identified in the advertisement, a distinct barrier between the 
providing of information and the seeking of orders must be maintained 
to qualify as a blind advertisement.' The proposed interpretive notice 
also provides certain illustrative examples of this requirement.
    The MSRB notes that the blind advertisement provision in proposed 
Rule G-21(e)(i)(B)(2) is somewhat unique within the structure of the 
federal securities laws and was created in part as a result of the 
public-private partnerships that most 529 college savings plans 
represent and that are not typically seen in other sectors of the 
securities markets. This provision was intended to permit dealers to 
partner with the state plans in providing to the public basic 
information regarding the states' public purpose goals without

[[Page 31125]]

promoting the sales activities of the dealers. As such, the MSRB views 
the requirement of a distinct barrier as an appropriately measured step 
to help ensure that the result of such blind advertisements is more 
information to the public rather than merely more opportunities for 
dealers to make sales. The MSRB also noted that to that end, any delays 
in the ability of an investor to invest as a result of the proposed 
barrier between the provision of information and sales activity could 
be viewed, if anything, as providing the potential customer with a 
greater opportunity to review the information he or she has received 
and to make an investment decision in a less hurried environment. 
Dealers seeking more direct promotion of potential investment 
opportunities may do so using materials that are subject to other 
provisions of Rule G-21.'' The Commission believes that the proposed 
barrier between the provision of information and sales activity is a 
measured step that is not inconsistent with the Act.

Required Annual Reports

    The proposed interpretive notice provides guidance to the effect 
that, in circumstances where a dealer may be required by state law or 
rules and regulations to prepare or distribute an annual financial 
report or other similar information regarding a municipal fund 
securities program, such report or information will not be treated as 
an advertisement so long as the dealer provides such report or 
information solely in the manner required by such state law or rules 
and regulations. CSPN stated that while this guidance is generally 
helpful, it is too narrow to the extent that it recognizes only actual 
state laws or formal administrative rulemaking as the means by which a 
dealer may be required to prepare or distribute information. CSPN 
stated that ``This limitation is unnecessary to protect the investing 
public as a whole to the extent that such requirements typically 
address the distribution of information to existing customers. It is 
also both arbitrary and unnecessarily intrusive upon state discretion 
in administering their tuition savings programs in that it provides 
relief only in connection with programs operated under statutes that 
include disclosure requirements or administered by public entities that 
are authorized to adopt administrative rules or regulations and that 
choose to address their customer's need for such information by 
exercising this authority. Some programs, however, are administered by 
public entities, such as trusts, that lack this authority or that 
choose to require dealers to prepare and provide such information as a 
contractual matter.''
    The MSRB stated that ``This interpretive guidance is intended to be 
consistent with similar guidance provided by NASD with respect to its 
Rule 2210 as applied to certain performance information and 
hypothetical illustrations required by state laws to be provided by 
dealers in connection with retirement investments and variable annuity 
contracts. The MSRB recognizes that there is considerable variability 
from state to state in the methods they may use to adopt binding 
requirements of general applicability. Therefore, the MSRB would not 
view the expression `rules and regulations adopted by the state or an 
instrumentality thereof governing a particular 529 plan or other 
municipal fund security program' as limiting the types of requirements 
to which the interpretation is applicable solely to those promulgated 
pursuant to a specific formal administrative rulemaking process. 
Instead, the MSRB generally views the interpretation as applicable 
where the state or instrumentality thereof establishes a mandate of 
general applicability to, and binding upon, any equally situated person 
or entity. However, a negotiated contractual provision would not 
satisfy this requirement as this would permit dealers to avoid the 
appropriate application of Rule G-21 to promotional materials through 
narrowly tailored contractual arrangements.'' The Commission believes 
that this guidance is not inconsistent with the Act because it provides 
relief to dealers providing certain information required by state law 
and is intended to be consistent with similar guidance provided by 
NASD.

Effective Dates

    With one exception, CSPN requested that the proposed rule change be 
made effective immediately upon publication of the Commission's 
approval order, rather than the MSRB's previously requested April 1, 
2007 effective date. CSPN requested that the revisions to proposed Rule 
G-21(e)(i)(A)(3) and proposed new Rule G-21(e)(i)(A)(4)(a)(iii), 
relating to disclosures of maximum sales loads and total annual 
operating expense ratio, instead be made effective sixty days after the 
publication of such approval order, and that dealers not be required to 
implement such provisions until 15 days after the end of the calendar 
quarter following such effectiveness.
    The MSRB agrees with CSPN that the proposed rule change should be 
made effective immediately upon approval, provided that dealers should 
not be required to implement the new provisions of Rule G-
21(e)(i)(A)(3) and (4)(a)(iii) relating to disclosure of maximum sales 
load and total annual operating expense ratio (as well as the related 
provisions of Rule G-21(e)(ii)(A), G-21 (e)(vii) and G-27(d)(ii)) for 
any advertisement submitted or caused to be submitted for publication, 
or any advertisement or correspondence otherwise distributed to the 
public, prior to July 15, 2007. Nonetheless, the MSRB urges dealers to 
implement these provisions as soon as practicable. In response to these 
comments and in recognition of potential production, publication and 
related technical issues that may exist in some cases in implementing 
the proposed rule change, the Commission finds that the implementation 
period proposed by the MSRB will provide dealers adequate time to make 
any necessary changes.
    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 \10\ and, in particular, the 
requirements of Section 15B(b)(2)(C) of the Act \11\ and the rules and 
regulations thereunder. 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.\12\ 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 more comparable to registered mutual funds. The 
proposal will be effective upon publication in the Federal Register, 
except that dealers will not be required to implement the new 
provisions of

[[Page 31126]]

Rule G-21(e)(i)(A)(3) and (4)(a)(iii) relating to disclosure of maximum 
sales load and total annual operating expense ratio (as well as the 
related provisions of Rule G-21(e)(ii)(A), G-21(e)(vii) and G-
27(d)(ii)) for any advertisement submitted or caused to be submitted 
for publication, or any advertisement or correspondence otherwise 
distributed to the public, prior to July 15, 2007.
---------------------------------------------------------------------------

    \10\ 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).
    \11\ 15 U.S.C. 78o-4(b)(2)(C).
    \12\ Id.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-MSRB-2006-09), as modified 
by Amendment No. 1, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E7-10767 Filed 6-4-07; 8:45 am]
BILLING CODE 8010-01-P

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