Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Proposed New Rule A-11, on Municipal Advisor Assessments, and New Form A-11-Interim, 48197-48200 [2011-19992]
Download as PDF
Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
open market and a national market
system, and, in general to protect
investors and the public interest, by
further clarifying the Exchange’s Rules
with respect to its members and member
organizations transacting options. The
Exchange believes that equally applying
the rule to both options members and
member organizations and PSX
Participants further protects the public
interest.
The Exchange believes that this
proposed rule would, in part, clarify the
obligations of an option member or
member organization with respect to the
provisions in section (a)(1) through (6)
of the proposed Rule. As specified
herein, the Exchange believes that
option members today are subject to
these requirements and the proposal
merely serves to clarify these obligations
in a single Rule. These requirements in
section (a) of the proposed rule seek to
ensure that the option members and
member organizations are required to
maintain certain standards to protect the
integrity of the Exchange’s systems, as is
the case today for PSX Participants.
The Exchange believes that an options
member and member organization’s
continuing obligation to report any
noncompliance with registration
requirements is inferred in the Rules
today as described herein. The
application of proposed Rule 911 to
option members would adopt a clear
Rule for option members regarding their
obligation to report noncompliance with
any registration requirement, as is the
case today for PSX Participants. The
Exchange believes this provision is
instrumental in assisting the Exchange
with its regulatory responsibilities.
Finally, the Exchange proposes to add
a new provision, that it may impose
temporary restrictions upon the
automated entry or updating of orders or
quotes/orders as the Exchange may
determine to be necessary to protect the
integrity of the Exchange’s systems, for
option members. This provision is
applicable today to PSX Participants.
The Exchange believes that this ability
to impose a temporary restriction upon
members and member organizations
transacting options would assist the
Exchange in maintaining the integrity of
the market and protecting investors and
the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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Jkt 223001
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 18 and Rule 19b–4(f)(6) 19
thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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–Phlx–2011–100 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
18 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
19 17
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
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48197
All submissions should refer to File
Number SR–Phlx–2011–100. 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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. 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–Phlx–
2011–100 and should be submitted on
or before August 29, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–19991 Filed 8–5–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65015; File No. SR–
MSRB–2011–08]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of Proposed
New Rule A–11, on Municipal Advisor
Assessments, and New Form A–11–
Interim
August 2, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
20 17
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CFR 200.30–3(a)(12).
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Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Notices
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 26,
2011, the Municipal Securities
Rulemaking Board (‘‘Board’’ or
‘‘MSRB’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the MSRB. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The MSRB is filing with the SEC a
proposed rule change consisting of (i)
Proposed new Rule A–11, on municipal
advisor assessments, and (ii) new Form
A–11–Interim (the ‘‘proposed rule
change’’). The MSRB requests that the
proposed rule change be made effective
October 1, 2011.
The text of the proposed rule change
is available on the MSRB’s Web site at
https://www.msrb.org/Rules-andInterpretations/SEC-Filings/2011Filings.aspx, at the MSRB’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
MSRB included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The Board has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The proposed rule change consists of
new Rule A–11, on municipal advisor
assessments, and new Form A–11–
Interim. The purpose of the proposed
rule change is to levy a reasonable
interim assessment to defray a portion
of the costs and expenses of operating
and administering the MSRB, including
in particular the increased costs and
expenses attributable to the regulation
of municipal advisors that the MSRB
began to incur upon being vested with
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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rulemaking authority in this area under
the Dodd-Frank Wall Street Reform and
Consumer Protection Act.3 The MSRB
expects the interim assessment to
remain in effect in the form proposed in
the proposed rule change for a limited
period of time during which the MSRB
would examine the nature of the
municipal advisory activities
undertaken by municipal advisors as
well as the manner and level of
compensation received by municipal
advisors for such municipal advisory
activities (the ‘‘MSRB municipal advisor
study’’).4 Based on the MSRB’s findings,
the MSRB would then consider whether
to replace the interim assessment with
a permanent form of assessment on
municipal advisors that would, together
with other MSRB assessments payable
by municipal advisors, brokers, dealers
and municipal securities dealers,
provide for reasonable assessments that
are fairly and equitably apportioned
among all market participants subject to
MSRB regulation and that do not
impose an undue burden on small
municipal advisors.
The interim assessment under
proposed Rule A–11 would consist of an
annual assessment equal to $300 for
each assessable professional reported or
required to be reported by a municipal
advisor to the MSRB on Form A–11–
Interim for each fiscal year. Completed
Form A–11–Interim and payment of the
interim assessment would be due by
November 30 of each year. Form A–11–
Interim would be completed and
submitted, and the interim assessment
would be paid, in the manner set forth
in the Instructions for Interim Municipal
Advisor Assessment and Form A–11–
Interim.
For purposes of the interim
assessment, an assessable professional
of a municipal advisor would, pursuant
to proposed Rule A–11(b)(i), consist of
any natural person who is an associated
person of the municipal advisor who
has received compensation or other
payments from the municipal advisor
(excluding reimbursement for out-ofpocket expenses) includable in such
person’s gross income for federal
income tax purposes in the amount of
$10,000 or more during the fiscal year
of the MSRB for which the municipal
advisor is submitting Form A–11–
3 Public
Law 111–203.
with the filing of this proposed rule
change, the MSRB published for comment a draft
amendment to proposed Rule A–11 and draft Form
A–11–Survey pursuant to which the MSRB would
collect the necessary information from municipal
advisors to undertake such examination. See MSRB
Notice 2011–34 (July 26, 2011). The MSRB would
file the draft Rule A–11 amendment and draft Form
A–11–Survey with the Commission prior to
undertaking such collection of information.
4 Concurrent
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Interim and who provides services in
connection with the municipal advisor’s
municipal advisory activities as defined
in Rule D–13. Such services include, but
are not limited to:
(A) Engaging in municipal advisory
business 5 with a municipal entity or
obligated person;
(B) soliciting 6 municipal advisory
business with a municipal entity or
obligated person on its own behalf or
soliciting third-party business; 7
(C) providing research or analytical
services to other personnel of the
municipal advisor engaged in the
services described in paragraph (A) or
(B) above or to clients of the municipal
advisor, where such research or analytic
services are related to the services
described in paragraph (A) or (B) above;
(D) acting as supervisor of any person
described in paragraph (A), (B) or (C)
above with respect to such person’s
services as described in paragraph (A),
(B) or (C) above;
(E) acting as supervisor of any person
described in paragraph (D) above up
through and including the Chief
Executive Officer or similarly situated
official; or
(F) serving as a member of the
municipal advisor’s executive or
management committee or similarly
situated officials, if any.
Notwithstanding the foregoing, a
municipal advisor would not be
required to include on Form A–11–
Interim as an assessable professional
any associated person (i) Who otherwise
qualifies as an assessable professional if
such associated person is included on
Form A–11–Interim for such fiscal year
as an assessable professional of another
municipal advisor that controls, is
5 Proposed Rule A–11(b)(ii) would define
municipal advisory business as the provision of
advice to or on behalf of a municipal entity or an
obligated person with respect to municipal
financial products or the issuance of municipal
securities.
6 Under proposed Rule A–11(b)(iii), an associated
person of a municipal advisor would be viewed as
soliciting municipal advisory business if the
associated person undertakes any direct or indirect
communication with a municipal entity or
obligated person for the purpose of obtaining or
retaining: (A) Municipal advisory business for such
municipal advisor with a municipal entity or
obligated person; or (B) third-party business.
7 Proposed Rule A–11(b)(iv) would define thirdparty business as an engagement by a municipal
entity of another person that does not control, is not
controlled by, or is not under common control with
the person soliciting such engagement, where such
other person is: (A) A broker, dealer, municipal
securities dealer, or municipal advisor engaging or
seeking an engagement with such municipal entity
in connection with municipal financial products or
the issuance of municipal securities; or (B) an
investment adviser (as defined in section 202 of the
Investment Advisers Act of 1940) providing or
seeking to provide investment advisory services to
or on behalf of such municipal entity.
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controlled by, or is under common
control with such municipal advisor, or
(ii) whose functions are solely clerical
or ministerial.
Proposed Form A–11–Interim would
require that municipal advisors provide
information about the number of
assessable professionals who, during the
fiscal year for which the assessment is
calculated, were principal/supervisory
personnel or other advisory personnel.
Principal/supervisory personnel would
consist of any assessable professional
who is either described in paragraph
(D), (E) or (F) of the definition of
assessable professional or who is a
partner or other equity owner of the
municipal advisor firm having a
cumulative ownership interest
representing at least 2.5% of the firm.
All other assessable professionals would
be reported as other advisory personnel.
The interim assessment would be
calculated based on the sum of
principal/supervisory personnel and
other advisory personnel.8 Because of
the gross income threshold in the
definition of assessable professional,
municipal advisors that generate
revenues of less than $10,000 in
connection with their municipal
advisory activities during the fiscal year
typically would not have any assessable
professionals to report for such fiscal
year and therefore would not be
required to pay the interim assessment.9
The MSRB requests that the proposed
rule change be made effective October 1,
2011, which is the first day of the
MSRB’s fiscal year. Municipal advisors
would be required to submit completed
Form A–11–Interim and to make
payment of the interim assessment by
November 30, 2011, based on
information for the period from October
1, 2010 through September 30, 2011. If
in any subsequent fiscal year the MSRB
has not yet replaced the interim
assessment with a permanent form of
assessment as described above,
municipal advisors would be required
to submit completed Form A–11–
Interim and to make payment of the
interim assessment by November 30 of
such fiscal year based on information
for the prior fiscal year.
8 Proposed Form A–11–Interim also would
require that municipal advisors provide information
about the number of personnel at the firm that are
engaged solely in non-municipal advisory activities.
This information would be used to better
understand the extent to which municipal advisory
activities represent only a portion of firms’ overall
activities but would not be used to calculate the
interim assessment.
9 All municipal advisors would be required to
submit completed Form A–11–Interim, even if such
municipal advisors have no assessable professionals
to report.
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2. Statutory Basis
The MSRB believes that the proposed
rule change is consistent with Section
15B(b)(2)(J) of the Securities Exchange
Act of 1934, as amended (the ‘‘Exchange
Act’’), which provides that the MSRB’s
rules shall:
provide that each municipal securities
broker, municipal securities dealer, and
municipal advisor shall pay to the Board
such reasonable fees and charges as may be
necessary or appropriate to defray the costs
and expenses of operating and administering
the Board.
In addition, Section 15B(b)(2)(L)(iv) of
the Exchange Act requires that rules
adopted by the MSRB:
not impose a regulatory burden on small
municipal advisors that is not necessary or
appropriate in the public interest and for the
protection of investors, municipal entities,
and obligated persons, provided that there is
robust protection of investors against fraud.
The proposed rule change would
establish an interim assessment on
municipal advisors that would help to
defray a portion of the costs and
expenses of operating and administering
the MSRB’s regulatory and related
activities in connection with municipal
advisors until such time as a permanent
assessment is established based on the
planned MSRB municipal advisor study
described above. Although the amounts
raised through the interim assessment
would not be sufficient to pay all ongoing costs of regulation of municipal
advisors and also would be insufficient
to cover costs already incurred in
connection with the regulation of
municipal advisors since the MSRB
commenced such regulatory activities
on October 1, 2010, the MSRB believes
that it is reasonable and appropriate to
impose the interim assessment pending
establishment of the final form of
municipal advisor assessment.
In approving a 2010 MSRB proposal
to increase the MSRB’s transaction fee
and to establish a new technology fee
payable by brokers, dealers and
municipal securities dealers,10 the
Commission recognized ‘‘the concerns
raised by some commenters that the
increase in transaction fees and the new
technology fee will be used to subsidize
municipal advisor regulation’’ and
noted that the MSRB had taken certain
initial steps to assess municipal advisor
fees 11 and expected to assess other fees
10 See Exchange Act Release No. 63621 (File No.
SR–MSRB–2010–10) (December 29, 2010) (the
‘‘2010 Dealer Fee Order’’).
11 See Exchange Act Release No. 63313 (File No.
SR–MSRB–2010–14) (November 12, 2010) (the
‘‘2010 Municipal Advisor Fee Order’’). Municipal
advisors pay an initial fee of $100 under MSRB
Rule A–12 and an annual fee of $500 under MSRB
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48199
on municipal advisors as appropriate.
Currently, under MSRB Rule A–13,
brokers, dealers and municipal
securities dealers pay an underwriting
fee of $.03 per $1000 par value of
municipal securities purchased in a
primary offering (with certain
exceptions), a transaction fee of $.01 per
$1000 par value of sale transactions of
municipal securities (with certain
exceptions), and a technology fee of $1
for each sale transaction of municipal
securities, in addition to an initial fee of
$100 under MSRB Rule A–12 and an
annual fee of $500 under MSRB Rule A–
14. For the MSRB fiscal year ended
September 30, 2010, the underwriting
fee generated $13,984,780 and the
transaction fee generated $6,940,551.12
The technology fee became effective on
January 1, 2011 and therefore the MSRB
did not generate any revenue from this
fee for the MSRB fiscal year ended
September 30, 2010.13 In addition, for
the MSRB fiscal year ended September
30, 2010, the initial fee generated $8,500
and the annual fee generated
$1,010,321.
Municipal advisors do not pay the
underwriting, transaction or technology
fee described above. The payment of the
initial fee became obligatory for
municipal advisors on January 1, 2011
and, as of July 22, 2011, approximately
495 municipal advisors not previously
registered with the MSRB have paid the
initial fee in connection with registering
with the MSRB as municipal advisors,
generating approximately $49,500 from
these new municipal advisor
registrants.14 The payment of the annual
fee also became obligatory for municipal
advisors on January 1, 2011 and, as of
July 22, 2011, these newly registered
municipal advisors have paid the
annual fee in connection with their first
year as registered municipal advisors in
an aggregate amount of approximately
$247,500. The MSRB expects that,
together with the initial fee and annual
fee, the proposed interim assessment
payable by municipal advisors would
Rule A–14, both amounts being equal to the annual
and initial fees paid by brokers, dealers and
municipal securities dealers under those rules.
12 The amount of the transaction fee was
increased from $.005 per $1000 par value of sale
transactions to .01 per $1000 par value of sale
transactions beginning January 1, 2011. The MSRB
previously estimated that this increase in the
transaction fee would generate an estimated $7
million of additional revenue annually. See 2010
Dealer Fee Order.
13 The MSRB previously estimated that the new
technology fee would generate an estimated $10
million of revenue annually. See 2010 Dealer Fee
Order.
14 The amount generated from the initial fee is
expected to be significantly lower in future years
since such fee is payable by each municipal advisor
only once upon initial registration with the MSRB.
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Federal Register / Vol. 76, No. 152 / Monday, August 8, 2011 / Notices
generate well under 10 percent of the
MSRB’s total annual revenue in the
fiscal year beginning October 1, 2011.15
Thus, the MSRB believes that the
burden on municipal advisors of the
proposed interim assessment would be
reasonable and appropriate and would
be relatively small compared to the
burden of fees and assessments paid by
brokers, dealers and municipal
securities dealers.
The amount of the interim assessment
payable by each municipal advisor firm
would be dependent on the number of
assessable professionals of the firm and
therefore would result in lower
assessments for smaller municipal
advisor firms and would bear a
reasonable relationship with the level of
municipal advisory activities
undertaken by each municipal advisor
firm. In addition, as noted above,
because of the gross income threshold in
the definition of assessable professional,
municipal advisors that generate
revenues of less than $10,000 in
connection with their municipal
advisory activities during the fiscal year
typically would not have any assessable
professionals to report for such fiscal
year and therefore would not be
required to pay the interim assessment.
Accordingly, the interim assessment
would minimize the regulatory burden
on small municipal advisors.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The MSRB does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Exchange Act since it
would apply equally to all municipal
advisors based on the number of
assessable professionals of each firm.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
15 Approximately 185 brokers, dealers and
municipal securities dealers previously registered
with the MSRB as such have also registered with
the MSRB as municipal advisors as of July 22, 2011
and such firms also would be subject to the
proposed interim assessment.
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18:57 Aug 05, 2011
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you wish to make available publicly. All
submissions should refer to File
Number SR–MSRB–2011–08 and should
be submitted on or before August 29,
2011.
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Elizabeth M. Murphy,
Secretary.
IV. Solicitation of Comments
[FR Doc. 2011–19992 Filed 8–5–11; 8:45 am]
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:
BILLING CODE 8011–01–P
SOCIAL SECURITY ADMINISTRATION
Agency Information Collection
Activities: Proposed Request and
Comment Request
Electronic Comments
The Social Security Administration
(SSA) publishes a list of information
collection packages requiring clearance
by the Office of Management and
Budget (OMB) in compliance with
• Send an e-mail to rulePublic Law 104–13, the Paperwork
comments@sec.gov. Please include File
Reduction Act of 1995, effective October
Number SR–MSRB–2011–08 on the
1, 1995. This notice includes revisions
subject line.
of OMB-approved information
Paper Comments
collections.
SSA is soliciting comments on the
• Send paper comments in triplicate
accuracy of the agency’s burden
to Elizabeth M. Murphy, Secretary,
estimate; the need for the information;
Securities and Exchange Commission,
its practical utility; ways to enhance its
100 F Street, NE., Washington, DC
quality, utility, and clarity; and ways to
20549–1090.
minimize burden on respondents,
All submissions should refer to File
including the use of automated
Number SR–MSRB–2011–08. This file
collection techniques or other forms of
number should be included on the
subject line if e-mail is used. To help the information technology. Mail, e-mail, or
fax your comments and
Commission process and review your
recommendations on the information
comments more efficiently, please use
only one method. The Commission will collection(s) to the OMB Desk Officer
post all comments on the Commission’s and SSA Reports Clearance Officer at
the following addresses or fax numbers.
Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all (OMB), Office of Management and
Budget, Attn: Desk Officer for SSA,
subsequent amendments, all written
Fax: 202–395–6974, E-mail address:
statements with respect to the proposed
OIRA_Submission@omb.eop.gov.
rule change that are filed with the
(SSA), Social Security Administration,
Commission, and all written
DCBFM, Attn: Reports Clearance
communications relating to the
Officer, 1333 Annex Building, 6401
proposed rule change between the
Security Blvd., Baltimore, MD 21235,
Commission and any person, other than
Fax: 410–965–6400, E-mail address:
those that may be withheld from the
OPLM.RCO@ssa.gov.
public in accordance with the
provisions of 5 U.S.C. 552, will be
I. The information collection below is
available for Web site viewing and
pending at SSA. SSA will submit it to
printing in the Commission’s Public
OMB within 60 days from the date of
Reference Room, 100 F Street, NE.,
this notice. To be sure we consider your
Washington, DC 20549, on official
comments, we must receive them no
business days between the hours of 10
later than October 7, 2011. Individuals
a.m. and 3 p.m. Copies of such filing
can obtain copies of the collection
also will be available for inspection and instrument by calling the SSA Reports
copying at the MSRB’s offices. All
Clearance Officer at 410–965–8783 or by
comments received will be posted
writing to the above e-mail address.
without change; the Commission does
SSI Notice of Interim Assistance
not edit personal identifying
Reimbursement (IAR)—0960–0546.
information from submissions. You
16 17 CFR 200.30–3(a)(12).
should submit only information that
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
PO 00000
Frm 00084
Fmt 4703
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E:\FR\FM\08AUN1.SGM
08AUN1
Agencies
[Federal Register Volume 76, Number 152 (Monday, August 8, 2011)]
[Notices]
[Pages 48197-48200]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19992]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65015; File No. SR-MSRB-2011-08]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Proposed New Rule A-11, on Municipal Advisor
Assessments, and New Form A-11-Interim
August 2, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 48198]]
``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 26, 2011, the Municipal Securities Rulemaking Board (``Board''
or ``MSRB'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the MSRB. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB is filing with the SEC a proposed rule change consisting
of (i) Proposed new Rule A-11, on municipal advisor assessments, and
(ii) new Form A-11-Interim (the ``proposed rule change''). The MSRB
requests that the proposed rule change be made effective October 1,
2011.
The text of the proposed rule change is available on the MSRB's Web
site at https://www.msrb.org/Rules-and-Interpretations/SEC-Filings/2011-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the MSRB included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Board has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The proposed rule change consists of new Rule A-11, on municipal
advisor assessments, and new Form A-11-Interim. The purpose of the
proposed rule change is to levy a reasonable interim assessment to
defray a portion of the costs and expenses of operating and
administering the MSRB, including in particular the increased costs and
expenses attributable to the regulation of municipal advisors that the
MSRB began to incur upon being vested with rulemaking authority in this
area under the Dodd-Frank Wall Street Reform and Consumer Protection
Act.\3\ The MSRB expects the interim assessment to remain in effect in
the form proposed in the proposed rule change for a limited period of
time during which the MSRB would examine the nature of the municipal
advisory activities undertaken by municipal advisors as well as the
manner and level of compensation received by municipal advisors for
such municipal advisory activities (the ``MSRB municipal advisor
study'').\4\ Based on the MSRB's findings, the MSRB would then consider
whether to replace the interim assessment with a permanent form of
assessment on municipal advisors that would, together with other MSRB
assessments payable by municipal advisors, brokers, dealers and
municipal securities dealers, provide for reasonable assessments that
are fairly and equitably apportioned among all market participants
subject to MSRB regulation and that do not impose an undue burden on
small municipal advisors.
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\3\ Public Law 111-203.
\4\ Concurrent with the filing of this proposed rule change, the
MSRB published for comment a draft amendment to proposed Rule A-11
and draft Form A-11-Survey pursuant to which the MSRB would collect
the necessary information from municipal advisors to undertake such
examination. See MSRB Notice 2011-34 (July 26, 2011). The MSRB would
file the draft Rule A-11 amendment and draft Form A-11-Survey with
the Commission prior to undertaking such collection of information.
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The interim assessment under proposed Rule A-11 would consist of an
annual assessment equal to $300 for each assessable professional
reported or required to be reported by a municipal advisor to the MSRB
on Form A-11-Interim for each fiscal year. Completed Form A-11-Interim
and payment of the interim assessment would be due by November 30 of
each year. Form A-11-Interim would be completed and submitted, and the
interim assessment would be paid, in the manner set forth in the
Instructions for Interim Municipal Advisor Assessment and Form A-11-
Interim.
For purposes of the interim assessment, an assessable professional
of a municipal advisor would, pursuant to proposed Rule A-11(b)(i),
consist of any natural person who is an associated person of the
municipal advisor who has received compensation or other payments from
the municipal advisor (excluding reimbursement for out-of-pocket
expenses) includable in such person's gross income for federal income
tax purposes in the amount of $10,000 or more during the fiscal year of
the MSRB for which the municipal advisor is submitting Form A-11-
Interim and who provides services in connection with the municipal
advisor's municipal advisory activities as defined in Rule D-13. Such
services include, but are not limited to:
(A) Engaging in municipal advisory business \5\ with a municipal
entity or obligated person;
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\5\ Proposed Rule A-11(b)(ii) would define municipal advisory
business as the provision of advice to or on behalf of a municipal
entity or an obligated person with respect to municipal financial
products or the issuance of municipal securities.
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(B) soliciting \6\ municipal advisory business with a municipal
entity or obligated person on its own behalf or soliciting third-party
business; \7\
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\6\ Under proposed Rule A-11(b)(iii), an associated person of a
municipal advisor would be viewed as soliciting municipal advisory
business if the associated person undertakes any direct or indirect
communication with a municipal entity or obligated person for the
purpose of obtaining or retaining: (A) Municipal advisory business
for such municipal advisor with a municipal entity or obligated
person; or (B) third-party business.
\7\ Proposed Rule A-11(b)(iv) would define third-party business
as an engagement by a municipal entity of another person that does
not control, is not controlled by, or is not under common control
with the person soliciting such engagement, where such other person
is: (A) A broker, dealer, municipal securities dealer, or municipal
advisor engaging or seeking an engagement with such municipal entity
in connection with municipal financial products or the issuance of
municipal securities; or (B) an investment adviser (as defined in
section 202 of the Investment Advisers Act of 1940) providing or
seeking to provide investment advisory services to or on behalf of
such municipal entity.
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(C) providing research or analytical services to other personnel of
the municipal advisor engaged in the services described in paragraph
(A) or (B) above or to clients of the municipal advisor, where such
research or analytic services are related to the services described in
paragraph (A) or (B) above;
(D) acting as supervisor of any person described in paragraph (A),
(B) or (C) above with respect to such person's services as described in
paragraph (A), (B) or (C) above;
(E) acting as supervisor of any person described in paragraph (D)
above up through and including the Chief Executive Officer or similarly
situated official; or
(F) serving as a member of the municipal advisor's executive or
management committee or similarly situated officials, if any.
Notwithstanding the foregoing, a municipal advisor would not be
required to include on Form A-11-Interim as an assessable professional
any associated person (i) Who otherwise qualifies as an assessable
professional if such associated person is included on Form A-11-Interim
for such fiscal year as an assessable professional of another municipal
advisor that controls, is
[[Page 48199]]
controlled by, or is under common control with such municipal advisor,
or (ii) whose functions are solely clerical or ministerial.
Proposed Form A-11-Interim would require that municipal advisors
provide information about the number of assessable professionals who,
during the fiscal year for which the assessment is calculated, were
principal/supervisory personnel or other advisory personnel. Principal/
supervisory personnel would consist of any assessable professional who
is either described in paragraph (D), (E) or (F) of the definition of
assessable professional or who is a partner or other equity owner of
the municipal advisor firm having a cumulative ownership interest
representing at least 2.5% of the firm. All other assessable
professionals would be reported as other advisory personnel. The
interim assessment would be calculated based on the sum of principal/
supervisory personnel and other advisory personnel.\8\ Because of the
gross income threshold in the definition of assessable professional,
municipal advisors that generate revenues of less than $10,000 in
connection with their municipal advisory activities during the fiscal
year typically would not have any assessable professionals to report
for such fiscal year and therefore would not be required to pay the
interim assessment.\9\
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\8\ Proposed Form A-11-Interim also would require that municipal
advisors provide information about the number of personnel at the
firm that are engaged solely in non-municipal advisory activities.
This information would be used to better understand the extent to
which municipal advisory activities represent only a portion of
firms' overall activities but would not be used to calculate the
interim assessment.
\9\ All municipal advisors would be required to submit completed
Form A-11-Interim, even if such municipal advisors have no
assessable professionals to report.
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The MSRB requests that the proposed rule change be made effective
October 1, 2011, which is the first day of the MSRB's fiscal year.
Municipal advisors would be required to submit completed Form A-11-
Interim and to make payment of the interim assessment by November 30,
2011, based on information for the period from October 1, 2010 through
September 30, 2011. If in any subsequent fiscal year the MSRB has not
yet replaced the interim assessment with a permanent form of assessment
as described above, municipal advisors would be required to submit
completed Form A-11-Interim and to make payment of the interim
assessment by November 30 of such fiscal year based on information for
the prior fiscal year.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(J) of the Securities Exchange Act of 1934, as amended
(the ``Exchange Act''), which provides that the MSRB's rules shall:
provide that each municipal securities broker, municipal securities
dealer, and municipal advisor shall pay to the Board such reasonable
fees and charges as may be necessary or appropriate to defray the
costs and expenses of operating and administering the Board.
In addition, Section 15B(b)(2)(L)(iv) of the Exchange Act requires
that rules adopted by the MSRB:
not impose a regulatory burden on small municipal advisors that is
not necessary or appropriate in the public interest and for the
protection of investors, municipal entities, and obligated persons,
provided that there is robust protection of investors against fraud.
The proposed rule change would establish an interim assessment on
municipal advisors that would help to defray a portion of the costs and
expenses of operating and administering the MSRB's regulatory and
related activities in connection with municipal advisors until such
time as a permanent assessment is established based on the planned MSRB
municipal advisor study described above. Although the amounts raised
through the interim assessment would not be sufficient to pay all on-
going costs of regulation of municipal advisors and also would be
insufficient to cover costs already incurred in connection with the
regulation of municipal advisors since the MSRB commenced such
regulatory activities on October 1, 2010, the MSRB believes that it is
reasonable and appropriate to impose the interim assessment pending
establishment of the final form of municipal advisor assessment.
In approving a 2010 MSRB proposal to increase the MSRB's
transaction fee and to establish a new technology fee payable by
brokers, dealers and municipal securities dealers,\10\ the Commission
recognized ``the concerns raised by some commenters that the increase
in transaction fees and the new technology fee will be used to
subsidize municipal advisor regulation'' and noted that the MSRB had
taken certain initial steps to assess municipal advisor fees \11\ and
expected to assess other fees on municipal advisors as appropriate.
Currently, under MSRB Rule A-13, brokers, dealers and municipal
securities dealers pay an underwriting fee of $.03 per $1000 par value
of municipal securities purchased in a primary offering (with certain
exceptions), a transaction fee of $.01 per $1000 par value of sale
transactions of municipal securities (with certain exceptions), and a
technology fee of $1 for each sale transaction of municipal securities,
in addition to an initial fee of $100 under MSRB Rule A-12 and an
annual fee of $500 under MSRB Rule A-14. For the MSRB fiscal year ended
September 30, 2010, the underwriting fee generated $13,984,780 and the
transaction fee generated $6,940,551.\12\ The technology fee became
effective on January 1, 2011 and therefore the MSRB did not generate
any revenue from this fee for the MSRB fiscal year ended September 30,
2010.\13\ In addition, for the MSRB fiscal year ended September 30,
2010, the initial fee generated $8,500 and the annual fee generated
$1,010,321.
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\10\ See Exchange Act Release No. 63621 (File No. SR-MSRB-2010-
10) (December 29, 2010) (the ``2010 Dealer Fee Order'').
\11\ See Exchange Act Release No. 63313 (File No. SR-MSRB-2010-
14) (November 12, 2010) (the ``2010 Municipal Advisor Fee Order'').
Municipal advisors pay an initial fee of $100 under MSRB Rule A-12
and an annual fee of $500 under MSRB Rule A-14, both amounts being
equal to the annual and initial fees paid by brokers, dealers and
municipal securities dealers under those rules.
\12\ The amount of the transaction fee was increased from $.005
per $1000 par value of sale transactions to .01 per $1000 par value
of sale transactions beginning January 1, 2011. The MSRB previously
estimated that this increase in the transaction fee would generate
an estimated $7 million of additional revenue annually. See 2010
Dealer Fee Order.
\13\ The MSRB previously estimated that the new technology fee
would generate an estimated $10 million of revenue annually. See
2010 Dealer Fee Order.
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Municipal advisors do not pay the underwriting, transaction or
technology fee described above. The payment of the initial fee became
obligatory for municipal advisors on January 1, 2011 and, as of July
22, 2011, approximately 495 municipal advisors not previously
registered with the MSRB have paid the initial fee in connection with
registering with the MSRB as municipal advisors, generating
approximately $49,500 from these new municipal advisor registrants.\14\
The payment of the annual fee also became obligatory for municipal
advisors on January 1, 2011 and, as of July 22, 2011, these newly
registered municipal advisors have paid the annual fee in connection
with their first year as registered municipal advisors in an aggregate
amount of approximately $247,500. The MSRB expects that, together with
the initial fee and annual fee, the proposed interim assessment payable
by municipal advisors would
[[Page 48200]]
generate well under 10 percent of the MSRB's total annual revenue in
the fiscal year beginning October 1, 2011.\15\ Thus, the MSRB believes
that the burden on municipal advisors of the proposed interim
assessment would be reasonable and appropriate and would be relatively
small compared to the burden of fees and assessments paid by brokers,
dealers and municipal securities dealers.
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\14\ The amount generated from the initial fee is expected to be
significantly lower in future years since such fee is payable by
each municipal advisor only once upon initial registration with the
MSRB.
\15\ Approximately 185 brokers, dealers and municipal securities
dealers previously registered with the MSRB as such have also
registered with the MSRB as municipal advisors as of July 22, 2011
and such firms also would be subject to the proposed interim
assessment.
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The amount of the interim assessment payable by each municipal
advisor firm would be dependent on the number of assessable
professionals of the firm and therefore would result in lower
assessments for smaller municipal advisor firms and would bear a
reasonable relationship with the level of municipal advisory activities
undertaken by each municipal advisor firm. In addition, as noted above,
because of the gross income threshold in the definition of assessable
professional, municipal advisors that generate revenues of less than
$10,000 in connection with their municipal advisory activities during
the fiscal year typically would not have any assessable professionals
to report for such fiscal year and therefore would not be required to
pay the interim assessment. Accordingly, the interim assessment would
minimize the regulatory burden on small municipal advisors.
B. Self-Regulatory Organization's Statement on Burden on Competition
The MSRB does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Exchange Act since it would apply equally to all
municipal advisors based on the number of assessable professionals of
each firm.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
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-2011-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MSRB-2011-08. 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 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 Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street, NE., Washington,
DC 20549, on official business days between the hours of 10 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the MSRB's offices. 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-2011-08 and should be submitted on or before August
29, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19992 Filed 8-5-11; 8:45 am]
BILLING CODE 8011-01-P