Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change Relating to Amendments to MSRB Rule G-39, on Telemarketing, 14144-14148 [2013-04844]

Download as PDF 14144 Federal Register / Vol. 78, No. 42 / Monday, March 4, 2013 / Notices 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 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of BX. 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 No. No. SR– BX–2013–017, and should be submitted on or before March 25, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–04857 Filed 3–1–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68987; File No. SR–MSRB– 2013–02] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change Relating to Amendments to MSRB Rule G–39, on Telemarketing sroberts on DSK5SPTVN1PROD with NOTICES February 26, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 11, 2013, the Municipal Securities Rulemaking Board (‘‘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 substantially prepared by the MSRB. The Commission is publishing 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 16:15 Mar 01, 2013 Jkt 229001 this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The MSRB is filing with the Commission proposed amendments to MSRB Rule G–39, on telemarketing. The proposed rule change would adopt provisions that are substantially similar to the telemarketing rules of the Federal Trade Commission (‘‘FTC’’). The text of the proposed rule change is available on the MSRB’s Web site at www.msrb.org/Rules-andInterpretations/SEC-Filings/2013Filings.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 MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Summary of Proposed Rule Change. The MSRB proposes to amend Rule G– 39, on telemarketing, to add provisions that are substantially similar to FTC rules that prohibit deceptive and other abusive telemarketing acts or practices.3 Rule G–39 currently requires brokers, dealers, and municipal securities dealers (‘‘dealers’’) to, among other things, maintain do-not-call lists and limit the hours of telephone solicitations. In 1996, the SEC directed the MSRB to enact a telemarketing rule in accordance with the Prevention Act.4 The Prevention Act requires the 3 The FTC initially adopted its rules prohibiting deceptive and other abusive telemarketing acts or practices (the ‘‘Telemarketing Sales Rule,’’ codified at 16 CFR 310.1–9) in 1995 under the Telemarketing and Consumer Fraud and Abuse Prevention Act (‘‘Prevention Act’’) codified at 15 U.S.C. 6101–6108. See FTC, Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995). The Telemarketing Sales Rule has been amended since 1995, prompting the SEC’s request for the MSRB to review its telemarketing rule. See amendments cited infra note 7. 4 See Prevention Act supra note 3. PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 Commission to promulgate, or direct any national securities exchange or registered securities association to promulgate, rules substantially similar to the FTC rules to prohibit deceptive and other abusive telemarketing acts or practices, unless the Commission determines either that the rules are not necessary or appropriate for the protection of investors or the maintenance of fair and orderly markets, or that existing federal securities laws or Commission rules already provide for such protection.5 In 1997, the SEC determined that telemarketing rules promulgated and expected to be promulgated by selfregulatory organizations, together with the other rules of the self-regulatory organizations, the federal securities laws, and the SEC’s rules thereunder, satisfied the requirements of the Prevention Act because, at the time, the applicable provisions of those laws and rules were substantially similar to the Telemarketing Sales Rule.6 Since 1997, the FTC has amended its telemarketing rules in light of changing telemarketing practices and technology.7 In May 2011, Commission staff directed the MSRB to conduct a review of its telemarketing rule and propose rule amendments that provide protections that are at least as strong as those provided by the FTC’s telemarketing rules.8 Commission staff had concerns ‘‘that the [self-regulatory organization] rules overall have not kept pace with the FTC’s rules, and thus may no longer meet the standards of the Prevention Act.’’ 9 The proposed rule amendments, as directed by the Commission staff, would amend and adopt provisions in Rule G– 5 See 15 U.S.C. 6102. Telemarketing and Consumer Fraud and Abuse Prevention Act; Determination that No Additional Rulemaking Required, Securities Exchange Act Release No. 38480 (Apr. 7, 1997), 62 FR 18666 (Apr. 16, 1997). The Commission also determined that some provisions of the FTC’s telemarketing rules related to areas already extensively regulated by existing securities laws or activities not applicable to securities transactions. Id. at 62 FR 18667–69. 7 See, e.g., FTC, Telemarketing Sales Rule, 73 FR 51164 (Aug. 29, 2008) (amendments to the Telemarketing Sales Rule relating to prerecorded messages and call abandonments); and FTC, Telemarketing Sales Rule, 68 FR 4580 (Jan. 29, 2003) (amendments to the Telemarketing Sales Rule establishing requirements for, among other things, sellers and telemarketers to participate in the national do-not-call registry). 8 See Letter from Robert W. Cook, Director, Division of Trading and Markets, SEC, to Michael G. Bartolotta, then Chairman of the Board of Directors of the MSRB, dated May 10, 2011 (the ‘‘Cook Letter’’). SEC staff also asked the MSRB to coordinate with the Financial Industry Regulatory Authority (‘‘FINRA’’) regarding proposed telemarketing rule amendments. 9 Id. 6 See E:\FR\FM\04MRN1.SGM 04MRN1 Federal Register / Vol. 78, No. 42 / Monday, March 4, 2013 / Notices 39 that the MSRB believes would be substantially similar to the FTC’s current rules that prohibit deceptive and other abusive telemarketing acts or practices as described below.10 General Telemarketing Requirements Proposed Rule G–39(a)(iv) would remind dealers that engage in telemarketing that they are also subject to the requirements of relevant state and federal laws and rules, including the Prevention Act, the Telephone Consumer Protection Act,11 and the rules of the Federal Communications Commission relating to telemarketing practices and the rights of telephone consumers.12 Maintenance of Do-Not-Call Lists Proposed Rule G–39(d)(vi) would maintain the requirement in MSRB Rule G–39 that a broker, dealer, or municipal securities dealer making telemarketing calls must maintain a record of a caller’s request not to receive further calls. The amendment, however, would delete the requirement that a dealer honor a firmspecific do-not-call request for five years from the time the request is made. Commission staff directed the MSRB to delete this provision because the time for which the firm-specific opt-out must be honored under the FTC’s Telemarketing Sales Rule 13 is indefinite, rather than five years as currently provided in Rule G–39.14 Additionally, the proposed rule change would clarify that the record of do-notcall requests must be permanent. Outsourcing Telemarketing MSRB Rule G–39(f) would continue to state that, if a dealer uses another entity to perform telemarketing services on its behalf, the dealer remains responsible for ensuring compliance with all provisions contained in the rule. The proposed revisions would clarify that dealers must consider whether the entity or person that a dealer uses for outsourcing, is appropriately registered or licensed, where required. sroberts on DSK5SPTVN1PROD with NOTICES Caller Identification Information Proposed Rule G–39(g) would provide that dealers engaging in telemarketing must transmit caller identification information15 and are explicitly 10 The MSRB believes that proposed amended Rule G–39 also would be similar in most material respects to FINRA Rule 3230 (Telemarketing). The material differences between FINRA Rule 3230 and proposed Rule G–39 are described below. 11 See 47 U.S.C. 227. 12 See 47 CFR 64.1200. 13 See 16 CFR 310.4. 14 See the Cook Letter. 15 Caller identification information includes the telephone number and, when made available by the VerDate Mar<15>2010 16:15 Mar 01, 2013 Jkt 229001 prohibited from blocking caller identification information. The telephone number provided would have to permit any person to make a do-notcall request during regular business hours. These provisions are similar to the caller identification provision in the FTC rules.16 Unencrypted Consumer Account Numbers Proposed Rule G–39(h) would prohibit a dealer from disclosing or receiving, for consideration, unencrypted consumer account numbers for use in telemarketing. The MSRB believes that this proposed provision would be substantially similar to the FTC’s provision regarding unencrypted consumer account numbers.17 The FTC provided a discussion of the provision when it was adopted pursuant to the Prevention Act.18 Additionally, the proposed rule change would define ‘‘unencrypted’’ to include not only complete, visible account numbers, whether provided in lists or singly, but also encrypted information with a key to its decryption. The MSRB believes that the proposed definition is substantially similar to the approach taken by the FTC.19 Submission of Billing Information Proposed Rule G–39(i) would provide that, for any telemarketing transaction, a dealer must obtain the express informed consent of the person to be charged and to be charged using the identified account. If the telemarketing transaction involves preacquired account information 20 and a free-to-pay conversion 21 feature, the dealer would have to: (1) Obtain from the customer, at a minimum, the last four digits of the account number to be charged; (2) broker, dealer, or municipal securities dealer’s telephone carrier, the name of the broker, dealer, or municipal securities dealer. 16 See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g). 17 See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h). 18 See FTC, Telemarketing Sales Rule, 68 FR 4580, 4615–16 (Jan. 29, 2003). 19 See Id. at 4616. 20 The term ‘‘preacquired account information’’ would mean any information that enables a dealer to cause a charge to be placed against a customer’s or donor’s account without obtaining the account number directly from the customer or donor during the telemarketing transaction pursuant to which the account will be charged. See proposed Rule G– 39(n)(xix). 21 The term ‘‘free-to-pay conversion’’ would mean, in an offer or agreement to sell or provide any goods or services, a provision under which a customer receives a product or service for free for an initial period and will incur an obligation to pay for the product or service if he or she does not take affirmative action to cancel before the end of that period. See proposed Rule G–39(n)(xiii). PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 14145 obtain from the customer an express agreement to be charged and to be charged using the identified account number; and (3) make and maintain an audio recording of the entire telemarketing transaction. For any other telemarketing transaction involving preacquired account information, the dealer would have to: (1) Identify the account to be charged with sufficient specificity for the customer to understand what account will be charged; and (2) obtain from the customer an express agreement to be charged and to be charged using the identified account number. The MSRB believes that these proposed provisions would be substantially similar to the FTC’s provision regarding the submission of billing information.22 The FTC provided a discussion of the provision when it was adopted.23 Although the MSRB expressed the view that some of these provisions may not be directly applicable to securities transactions generally, and, more specifically, municipal securities transactions, SEC staff suggested that the MSRB substantially conform the proposed rule to FINRA’s telemarketing rule, which includes similar provisions.24 Abandoned Calls Proposed Rule G–39(j) would prohibit a dealer from abandoning 25 any outbound telephone call. The abandoned calls prohibition would be subject to a ‘‘safe harbor’’ under proposed subparagraph (j)(ii) that would require the dealer: (1) To employ technology that ensures abandonment of no more than three percent of all calls answered by a person, measured over the duration of a single calling campaign, if less than 30 days, or separately over each successive 30-day period or portion thereof that the campaign continues; (2) for each outbound telephone call placed, to allow the telephone to ring for at least 15 seconds or four rings before disconnecting an unanswered call; (3) whenever a dealer is not available to speak with the person answering the outbound telephone call within two seconds after the person’s completed greeting, to promptly play a recorded message stating the name and telephone 22 See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i). 23 See FTC, Telemarketing Sales Rule, 68 FR 4580, 4616–23 (Jan. 29, 2003). 24 See FINRA Rule 3230(i). See also the Cook Letter. 25 Under the proposed amended rule, an outbound call would be ‘‘abandoned’’ if a called person answers it and the call is not connected to a dealer within two seconds of the called person’s completed greeting. E:\FR\FM\04MRN1.SGM 04MRN1 14146 Federal Register / Vol. 78, No. 42 / Monday, March 4, 2013 / Notices number of the dealer on whose behalf the call was placed; and (4) to maintain records establishing compliance with the ‘‘safe harbor.’’ The MSRB believes that these proposed provisions would be substantially similar to the FTC’s provisions regarding abandoned calls.26 The FTC provided a discussion of the provisions when they were adopted pursuant to the Prevention Act.27 Prerecorded Messages Proposed Rule G–39(k) would prohibit a broker, dealer, or municipal securities dealer from initiating any outbound telephone call that delivers a prerecorded message without a person’s express written agreement 28 to receive such calls. The proposed rule change also would require that all prerecorded outbound telephone calls provide specified opt-out mechanisms so that a person can opt out of future calls. The prohibition would not apply to a prerecorded message permitted for compliance with the ‘‘safe harbor’’ for abandoned calls under proposed subparagraph (j)(ii). The MSRB believes that the proposed provisions would be substantially similar to the FTC’s provisions regarding prerecorded messages.29 The FTC provided a discussion of the provisions when they were adopted pursuant to the Prevention Act.30 sroberts on DSK5SPTVN1PROD with NOTICES Credit Card Laundering Except as expressly permitted by the applicable credit card system, proposed Rule G–39(l) would prohibit a dealer 26 See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 3230(j) (Throughout FINRA Rules 3230(j) and (k), referred to in note 29 infra, FINRA uses the term ‘‘telemarketing call’’ where the proposed MSRB rule would use the term ‘‘outbound telephone call.’’ The MSRB believes that its proposed terminology is substantially similar because proposed MSRB Rule G–39(n)(xvi) defines ‘‘outbound telephone call’’ as a telephone call initiated by a telemarketer to induce the purchase of goods or services or to solicit a charitable contribution from a donor). 27 See FTC, Telemarketing Sales Rule, 68 FR 4580, 4641 (Jan. 29, 2003). 28 The express written agreement would have to: (a) Have been obtained only after a clear and conspicuous disclosure that the purpose of the agreement is to authorize the dealer to place prerecorded calls to such person; (b) have been obtained without requiring, directly or indirectly, that the agreement be executed as a condition of opening an account or purchasing any good or service; (c) evidence the willingness of the called person to receive calls that deliver prerecorded messages by or on behalf of the dealer; and (d) include the person’s telephone number and signature (which may be obtained electronically under the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 7001, et seq. (‘‘ESign Act’’)). 29 See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k). 30 See FTC, Telemarketing Sales Rule, 73 FR 51164, 51165 (Aug. 29, 2008). VerDate Mar<15>2010 16:15 Mar 01, 2013 Jkt 229001 from: (1) Presenting to or depositing into, the credit card system 31 for payment, a credit card sales draft 32 generated by a telemarketing transaction that is not the result of a telemarketing credit card transaction between the cardholder 33 and the dealer; 34 (2) employing, soliciting, or otherwise causing a merchant,35 or an employee, representative or agent of the merchant, to present to or to deposit into the credit card system for payment, a credit card sales draft generated by a telemarketing transaction that is not the result of a telemarketing credit card transaction between the cardholder and the merchant; or (3) obtaining access to the credit card system through the use of a business relationship or an affiliation with a merchant, when such access is not authorized by the merchant agreement 36 or the applicable credit card system. The MSRB believes that these proposed provisions would be substantially similar to the FTC’s 31 The term ‘‘credit card system’’ would mean any method or procedure used to process credit card transactions involving credit cards issued or licensed by the operator of that system. The term ‘‘credit card’’ would mean any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit. The term ‘‘credit’’ would mean the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment. See proposed Rules G–39(n)(vii), (viii), and (x). 32 The term ‘‘credit card sales draft’’ would mean any record or evidence of a credit card transaction. See proposed Rule G–39(n)(ix). 33 The term ‘‘cardholder’’ would mean a person to whom a credit card is issued or who is authorized to use a credit card on behalf of or in addition to the person to whom the credit card is issued. See proposed Rule G–39(n)(vi). 34 The Commission staff asked the MSRB to remind its registrants that extending or arranging for the extension of credit to purchase securities raises a number of issues under the federal securities laws, including whether the person extending or arranging credit needs to register as a broker-dealer. 35 The term ‘‘merchant’’ would mean a person who is authorized under a written contract with an acquirer to honor or accept credit cards, or to transmit or process for payment credit card payments, for the purchase of goods or services or a charitable contribution. See proposed Rule G– 39(n)(xiv). The term ‘‘acquirer’’ would mean a business organization, financial institution, or an agent of a business organization or financial institution that has authority from an organization that operates or licenses a credit card system to authorize merchants to accept, transmit, or process payment by credit card through the credit card system for money, goods or services, or anything else of value. See proposed Rule G–39(n)(ii). A ‘‘charitable contribution would mean ‘‘charitable contribution’’ means any donation or gift of money or any other thing of value, for example a transfer to a pooled income fund. See proposed Rule G– 39(n)(iii). 36 The term ‘‘merchant agreement’’ would mean a written contract between a merchant and an acquirer to honor or accept credit cards, or to transmit or process for payment credit card payments, for the purchase of goods or services or a charitable contribution. See proposed Rule G– 39(n)(xv). PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 provisions regarding credit card laundering.37 The FTC provided a discussion of the provisions when they were adopted pursuant to the Prevention Act.38 Although the MSRB expressed the view that some of these provisions may not be directly applicable to securities transactions generally, and, more specifically, municipal securities transactions, SEC staff suggested that the MSRB substantially conform the proposed rule to FINRA’s telemarketing rule, which includes these provisions.39 Exemption Proposed Rule G–39(m) would exempt business-to-business calls from most of the provisions of the amended rule. Specifically, the exemption would provide that outbound telephone calls from a dealer to a business entity, government, or political subdivision, agency, or instrumentality of a government are exempt from the rule, other than sections (a)(ii) and (d)(i) (iii), (v) and (vi). The sections of the proposed rule that would still apply to business-to-business calls relate to the firm-specific do-not-call list and procedures related to (i) maintaining a do-not-call list, (ii) training personnel on the existence and use of the do-notcall list, (iii) the recording and honoring of do-not-call requests, (iv) application to affiliated persons or entities, and (v) maintenance of do-not-call lists. FINRA’s telemarketing rule, Rule 3230, does not include an express exemption for business-to-business calls.40 The FTC’s Telemarketing Sales Rule, however, includes an exemption from all of its provisions for telephone calls between a telemarketer and any business, with a caveat that most of the rule continues to apply to sellers and telemarketers of nondurable office or cleaning supplies.41 When initially adopting the exception for business-to-business calls, the FTC indicated that it believed Congress did not intend that every business use of the telephone be covered by the FTC’s Telemarketing Sales Rule.42 The only type of business-to-business calls that are subject to the Telemarketing Sales Rule are calls to induce the retail sale of nondurable office or cleaning 37 See 16 CFR 310.3(c); see also FINRA Rule 3230(l). 38 See FTC, Telemarketing Sales Rule, 60 FR 43842, 43852 (Aug. 23, 1995). 39 See FINRA Rule 3230(l). See also the Cook Letter. 40 See FINRA Rule 3230. 41 See 16 CFR 310.6(b)(7). 42 See FTC, Telemarketing Sales Rule, 60 FR 43842, 43861 (Aug. 23, 1995). E:\FR\FM\04MRN1.SGM 04MRN1 sroberts on DSK5SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 42 / Monday, March 4, 2013 / Notices supplies.43 Sellers of these products are treated differently because the FTC believes that the conduct prohibitions and affirmative disclosures mandated by the Telemarketing Sales Rule ‘‘are crucial to protect businesses— particularly small businesses and nonprofit organizations—from the harsh practices of some unscrupulous sellers of these products.44 Additionally, the FTC’s enforcement experience against deceptive telemarketers indicated that office and cleaning supplies had been ‘‘by far the most significant business-tobusiness problem area[.]’’§ 45 When adopting its Telemarketing Sales Rule in 1995, the FTC indicated that it would consider expanding the list of businessto-business telemarketing activities excluded from the exemption if additional business-to-business telemarketing activities became problems after the Telemarketing Sales Rule became effective.46 To date, however, the only type of business-tobusiness telemarketing activity that is excluded from the exemption is the retail sale of nondurable office or cleaning supplies. The MSRB believes that exempting business-to-business calls pertaining to municipal securities from Rule G–39 would be consistent with the FTC’s general approach to exempting business-to-business calls because, unlike sellers of nondurable office or cleaning supplies, dealers are subject to an entire regulatory regime, which includes the federal securities laws, the fair practice rules of the MSRB, and examinations and enforcement by FINRA, banking regulators and the SEC. Nevertheless, the provisions of proposed Rule G–39 pertaining to the firm-specific do-not-call list and related procedures would apply to business-tobusiness calls. Dealers are already required to maintain a firm-specific donot-call list for requests that are not related to business-to-business calls; therefore, the MSRB believes that requiring such a list with respect to business-to-business calls would not create an undue burden. Moreover, the MSRB believes that it would be reasonable to require dealers to honor the wishes of businesses that do not wish to be solicited by telephone by requiring dealers to maintain a list of such do-not-call requests. The MSRB believes that this approach also would be consistent with FINRA’s 43 See 16 CFR 310.6(b)(7). 44 See FTC, Telemarketing Sales Rule, 60 FR 43842, 43862 (Aug. 23, 1995). 45 Id. at 43861. 46 Id. VerDate Mar<15>2010 16:15 Mar 01, 2013 Jkt 229001 telemarketing rule and related guidance.47 Definitions Proposed Rule G–39(n) would include the following definitions, which the MSRB believes would be substantially similar to the corresponding definitions in the FTC’s Telemarketing Sales Rule: 48 ‘‘acquirer,’’ ‘‘billing information,’’ ‘‘caller identification service,’’ ‘‘cardholder,’’ ‘‘charitable contribution,’’ ‘‘credit,’’ ‘‘credit card,’’ ‘‘credit card sales draft,’’ ‘‘credit card system,’’ ‘‘customer,’’ ‘‘donor,’’ ‘‘free-topay conversion,’’ ‘‘merchant,’’ ‘‘merchant agreement,’’ ‘‘outbound telephone call,’’ ‘‘preacquired account information’’ and ‘‘telemarketer.’’ 49 Additionally, the proposed rule change would delete the reference to ‘‘telephone solicitation.’’ The FTC provided a discussion of each of these definitions when it adopted them pursuant to the Prevention Act.50 Proposed Rule G–39(n) also would include definitions of ‘‘person’’ and ‘‘telemarketing’’ that differ substantively from the FTC’s and FINRA’s definitions of these terms. While the definition of ‘‘person’’ in proposed MSRB Rule G– 39(n)(xvii) tracks the definition in the FTC and FINRA rules to include any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity, it further defines a ‘‘person’’ to include a government, or political subdivision, agency, or instrumentality of a government. These entities are included in the proposed definition because dealers often solicit these types of entities. While the MSRB believes that the proposed definition of ‘‘telemarketing’’ would be substantially similar to the definitions in the FTC and FINRA rules, its scope would be limited in MSRB Rule G–39(n)(xxi) to calls ‘‘pertaining to municipal securities or municipal financial products’’ since the MSRB only promulgates rules pertaining to the municipal securities 47 See FINRA Rule 3230; see also FINRA guidance dated November 1, 1995, Requirements of member firms in maintaining do-not-call lists under NASD Rule 3110 (‘‘[M]embers who are involved in telemarketing, and whom make cold calls to the public, [must] * * * establish and maintain a donot-call list notwithstanding whether [the member] contact[s] businesses or residences’’). 48 The MSRB believes that these definitions are also substantially similar to definitions in FINRA Rule 3230, with the exception of ‘‘telemarketer,’’ which is not defined in FINRA’s rule. 49 See proposed Rule G–39(n)(ii), (iii), (v), (vi), (vii), (viii), (ix), (x), (xi), (xiii), (xiv), (xv), (xvi), (xix), and (xx). 50 See FTC, Telemarketing Sales Rule, 60 FR 43842, 43843 (Aug. 23, 1995) and FTC, Telemarketing Sales Rule, 68 FR 4580, 4587 (Jan. 29, 2003). PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 14147 activities of dealers. The MSRB intends the limitation in the definition to correspond with the limits of the MSRB’s rulemaking authority. As described earlier, the MSRB has implemented rules to address sales practices by dealers that cover their municipal securities activities, including sales by telephone. Technical and Conforming Changes The proposed revisions to MSRB Rule G–39 would make a number of minor technical and conforming changes. First, the proposed revisions would amend Rule G–39 to delete the phrase ‘‘or person associated with a broker, dealer or municipal securities dealer’’ throughout the rule since associated persons are included in the definition of ‘‘broker, dealer or municipal securities dealer’’ in the MSRB rules.51 Second, the proposed revisions would renumber and make minor technical changes to the terms ‘‘account activity,’’ ‘‘broker, dealer or municipal securities dealer of record,’’ ‘‘established business relationship,’’ and ‘‘personal relationship.’’ Third, the proposed revisions would amend paragraphs (a), (b), (c), (c)(iv), and (e) by replacing the term ‘‘telephone solicitation’’ with the term ‘‘outbound telephone call.’’ Fourth, the proposed revisions would amend paragraphs (d)(iii), (d)(iv), and (d)(vi) by replacing the term ‘‘telemarketing’’ with the term ‘‘outbound telephone.’’ Fifth, the proposed revisions would update a reference to an ‘‘established business relationship’’ in subparagraph (a)(1)(A). Finally, the proposed rule change would amend paragraph (b)(ii) to clarify that a signed, written agreement may be obtained electronically under the E-Sign Act. The MSRB requests an effective date for the proposed rule change of 90 days following the date of SEC approval. 2. Statutory Basis The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act,52 which provides that the MSRB’s rules shall be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities and municipal financial products, 51 See MSRB Rule D–11 which states: ‘‘Unless the context otherwise requires or a rule of the Board otherwise specifically provides, the terms ‘broker,’ ‘dealer,’ * * * ‘municipal securities dealer,’ * * * shall refer to and include their respective associated persons.’’ 52 15 U.S.C. 78o–4(b)(2)(C). E:\FR\FM\04MRN1.SGM 04MRN1 14148 Federal Register / Vol. 78, No. 42 / Monday, March 4, 2013 / Notices to remove impediments to and perfect the mechanism of a free and open market in municipal securities and municipal financial products, and, in general, to protect investors, municipal entities, obligated persons, and the public interest. The MSRB believes that the proposed rule change is consistent with the Act because the proposed rule change would prevent fraudulent and manipulative acts and protect investors and the public interest by continuing to prohibit dealers from engaging in deceptive and other abusive telemarketing acts or practices. B. Self-Regulatory Organization’s Statement on Burden on Competition The MSRB does not believe that the proposed rule change would result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. As discussed above, the Prevention Act requires the Commission to promulgate, or direct any national securities exchange or registered securities association to promulgate, rules substantially similar to the FTC rules to prohibit deceptive and other abusive telemarketing acts or practices. 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 up to 90 days of such date (i) as the Commission may designate 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. sroberts on DSK5SPTVN1PROD with NOTICES 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: VerDate Mar<15>2010 16:15 Mar 01, 2013 Jkt 229001 Electronic Comments SMALL BUSINESS ADMINISTRATION • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–MSRB–2013–02 on the subject line. [Disaster Declaration #13500 and #13501] • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR–MSRB–2013–02. This file number should be included on the subject line if email 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the MSRB. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MSRB– 2013–02 and should be submitted on or before March 25, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.53 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–04844 Filed 3–1–13; 8:45 am] BILLING CODE 8011–01–P PO 00000 CFR 200.30–3(a)(12). Frm 00078 Fmt 4703 U.S. Small Business Administration. ACTION: Notice. AGENCY: This is a notice of an Administrative declaration of a disaster for the State of West Virginia dated 02/ 25/2013. Incident: Hurricane Sandy. Incident Period: 10/29/2012 through 11/10/2012. Effective Date: 02/25/2013. Physical Loan Application Deadline Date: 04/26/2013. Economic Injury (EIDL) Loan Application Deadline Date: 11/25/2013. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Administrator’s disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Nicholas. Contiguous Counties: West Virginia: Braxton, Clay, Fayette, Greenbrier, Kanawha, Webster. The Interest Rates are: SUMMARY: Paper Comments 53 17 West Virginia Disaster #WV–00030 Sfmt 4703 Percent For Physical Damage: Homeowners With Credit Available Elsewhere ...................... Homeowners Without Credit Available Elsewhere .............. Businesses With Credit Available Elsewhere ...................... Businesses Without Credit Available Elsewhere .............. Non-Profit Organizations With Credit Available Elsewhere ... Non-Profit Organizations Without Credit Available Elsewhere ..................................... For Economic Injury: Businesses & Small Agricultural Cooperatives Without Credit Available Elsewhere .............. Non-Profit Organizations Without Credit Available Elsewhere ..................................... E:\FR\FM\04MRN1.SGM 04MRN1 3.375 1.688 6.000 4.000 3.125 3.000 4.000 3.000

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 42 (Monday, March 4, 2013)]
[Notices]
[Pages 14144-14148]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04844]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68987; File No. SR-MSRB-2013-02]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change Relating to 
Amendments to MSRB Rule G-39, on Telemarketing

February 26, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 11, 2013, the Municipal Securities Rulemaking Board 
(``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 substantially 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 Commission proposed amendments to MSRB 
Rule G-39, on telemarketing. The proposed rule change would adopt 
provisions that are substantially similar to the telemarketing rules of 
the Federal Trade Commission (``FTC'').
    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2013-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 MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Summary of Proposed Rule Change. The MSRB proposes to amend Rule G-
39, on telemarketing, to add provisions that are substantially similar 
to FTC rules that prohibit deceptive and other abusive telemarketing 
acts or practices.\3\ Rule G-39 currently requires brokers, dealers, 
and municipal securities dealers (``dealers'') to, among other things, 
maintain do-not-call lists and limit the hours of telephone 
solicitations. In 1996, the SEC directed the MSRB to enact a 
telemarketing rule in accordance with the Prevention Act.\4\ The 
Prevention Act requires the Commission to promulgate, or direct any 
national securities exchange or registered securities association to 
promulgate, rules substantially similar to the FTC rules to prohibit 
deceptive and other abusive telemarketing acts or practices, unless the 
Commission determines either that the rules are not necessary or 
appropriate for the protection of investors or the maintenance of fair 
and orderly markets, or that existing federal securities laws or 
Commission rules already provide for such protection.\5\
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    \3\ The FTC initially adopted its rules prohibiting deceptive 
and other abusive telemarketing acts or practices (the 
``Telemarketing Sales Rule,'' codified at 16 CFR 310.1-9) in 1995 
under the Telemarketing and Consumer Fraud and Abuse Prevention Act 
(``Prevention Act'') codified at 15 U.S.C. 6101-6108. See FTC, 
Telemarketing Sales Rule, 60 FR 43842 (Aug. 23, 1995). The 
Telemarketing Sales Rule has been amended since 1995, prompting the 
SEC's request for the MSRB to review its telemarketing rule. See 
amendments cited infra note 7.
    \4\ See Prevention Act supra note 3.
    \5\ See 15 U.S.C. 6102.
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    In 1997, the SEC determined that telemarketing rules promulgated 
and expected to be promulgated by self-regulatory organizations, 
together with the other rules of the self-regulatory organizations, the 
federal securities laws, and the SEC's rules thereunder, satisfied the 
requirements of the Prevention Act because, at the time, the applicable 
provisions of those laws and rules were substantially similar to the 
Telemarketing Sales Rule.\6\ Since 1997, the FTC has amended its 
telemarketing rules in light of changing telemarketing practices and 
technology.\7\
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    \6\ See Telemarketing and Consumer Fraud and Abuse Prevention 
Act; Determination that No Additional Rulemaking Required, 
Securities Exchange Act Release No. 38480 (Apr. 7, 1997), 62 FR 
18666 (Apr. 16, 1997). The Commission also determined that some 
provisions of the FTC's telemarketing rules related to areas already 
extensively regulated by existing securities laws or activities not 
applicable to securities transactions. Id. at 62 FR 18667-69.
    \7\ See, e.g., FTC, Telemarketing Sales Rule, 73 FR 51164 (Aug. 
29, 2008) (amendments to the Telemarketing Sales Rule relating to 
prerecorded messages and call abandonments); and FTC, Telemarketing 
Sales Rule, 68 FR 4580 (Jan. 29, 2003) (amendments to the 
Telemarketing Sales Rule establishing requirements for, among other 
things, sellers and telemarketers to participate in the national do-
not-call registry).
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    In May 2011, Commission staff directed the MSRB to conduct a review 
of its telemarketing rule and propose rule amendments that provide 
protections that are at least as strong as those provided by the FTC's 
telemarketing rules.\8\ Commission staff had concerns ``that the [self-
regulatory organization] rules overall have not kept pace with the 
FTC's rules, and thus may no longer meet the standards of the 
Prevention Act.'' \9\
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    \8\ See Letter from Robert W. Cook, Director, Division of 
Trading and Markets, SEC, to Michael G. Bartolotta, then Chairman of 
the Board of Directors of the MSRB, dated May 10, 2011 (the ``Cook 
Letter''). SEC staff also asked the MSRB to coordinate with the 
Financial Industry Regulatory Authority (``FINRA'') regarding 
proposed telemarketing rule amendments.
    \9\ Id.
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    The proposed rule amendments, as directed by the Commission staff, 
would amend and adopt provisions in Rule G-

[[Page 14145]]

39 that the MSRB believes would be substantially similar to the FTC's 
current rules that prohibit deceptive and other abusive telemarketing 
acts or practices as described below.\10\
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    \10\ The MSRB believes that proposed amended Rule G-39 also 
would be similar in most material respects to FINRA Rule 3230 
(Telemarketing). The material differences between FINRA Rule 3230 
and proposed Rule G-39 are described below.
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General Telemarketing Requirements
    Proposed Rule G-39(a)(iv) would remind dealers that engage in 
telemarketing that they are also subject to the requirements of 
relevant state and federal laws and rules, including the Prevention 
Act, the Telephone Consumer Protection Act,\11\ and the rules of the 
Federal Communications Commission relating to telemarketing practices 
and the rights of telephone consumers.\12\
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    \11\ See 47 U.S.C. 227.
    \12\ See 47 CFR 64.1200.
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Maintenance of Do-Not-Call Lists
    Proposed Rule G-39(d)(vi) would maintain the requirement in MSRB 
Rule G-39 that a broker, dealer, or municipal securities dealer making 
telemarketing calls must maintain a record of a caller's request not to 
receive further calls. The amendment, however, would delete the 
requirement that a dealer honor a firm-specific do-not-call request for 
five years from the time the request is made. Commission staff directed 
the MSRB to delete this provision because the time for which the firm-
specific opt-out must be honored under the FTC's Telemarketing Sales 
Rule \13\ is indefinite, rather than five years as currently provided 
in Rule G-39.\14\ Additionally, the proposed rule change would clarify 
that the record of do-not-call requests must be permanent.
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    \13\ See 16 CFR 310.4.
    \14\ See the Cook Letter.
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Outsourcing Telemarketing
    MSRB Rule G-39(f) would continue to state that, if a dealer uses 
another entity to perform telemarketing services on its behalf, the 
dealer remains responsible for ensuring compliance with all provisions 
contained in the rule. The proposed revisions would clarify that 
dealers must consider whether the entity or person that a dealer uses 
for outsourcing, is appropriately registered or licensed, where 
required.
Caller Identification Information
    Proposed Rule G-39(g) would provide that dealers engaging in 
telemarketing must transmit caller identification information\15\ and 
are explicitly prohibited from blocking caller identification 
information. The telephone number provided would have to permit any 
person to make a do-not-call request during regular business hours. 
These provisions are similar to the caller identification provision in 
the FTC rules.\16\
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    \15\ Caller identification information includes the telephone 
number and, when made available by the broker, dealer, or municipal 
securities dealer's telephone carrier, the name of the broker, 
dealer, or municipal securities dealer.
    \16\ See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
---------------------------------------------------------------------------

Unencrypted Consumer Account Numbers
    Proposed Rule G-39(h) would prohibit a dealer from disclosing or 
receiving, for consideration, unencrypted consumer account numbers for 
use in telemarketing. The MSRB believes that this proposed provision 
would be substantially similar to the FTC's provision regarding 
unencrypted consumer account numbers.\17\ The FTC provided a discussion 
of the provision when it was adopted pursuant to the Prevention 
Act.\18\ Additionally, the proposed rule change would define 
``unencrypted'' to include not only complete, visible account numbers, 
whether provided in lists or singly, but also encrypted information 
with a key to its decryption. The MSRB believes that the proposed 
definition is substantially similar to the approach taken by the 
FTC.\19\
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    \17\ See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h).
    \18\ See FTC, Telemarketing Sales Rule, 68 FR 4580, 4615-16 
(Jan. 29, 2003).
    \19\ See Id. at 4616.
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Submission of Billing Information
    Proposed Rule G-39(i) would provide that, for any telemarketing 
transaction, a dealer must obtain the express informed consent of the 
person to be charged and to be charged using the identified account. If 
the telemarketing transaction involves preacquired account information 
\20\ and a free-to-pay conversion \21\ feature, the dealer would have 
to: (1) Obtain from the customer, at a minimum, the last four digits of 
the account number to be charged; (2) obtain from the customer an 
express agreement to be charged and to be charged using the identified 
account number; and (3) make and maintain an audio recording of the 
entire telemarketing transaction. For any other telemarketing 
transaction involving preacquired account information, the dealer would 
have to: (1) Identify the account to be charged with sufficient 
specificity for the customer to understand what account will be 
charged; and (2) obtain from the customer an express agreement to be 
charged and to be charged using the identified account number. The MSRB 
believes that these proposed provisions would be substantially similar 
to the FTC's provision regarding the submission of billing 
information.\22\ The FTC provided a discussion of the provision when it 
was adopted.\23\ Although the MSRB expressed the view that some of 
these provisions may not be directly applicable to securities 
transactions generally, and, more specifically, municipal securities 
transactions, SEC staff suggested that the MSRB substantially conform 
the proposed rule to FINRA's telemarketing rule, which includes similar 
provisions.\24\
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    \20\ The term ``preacquired account information'' would mean any 
information that enables a dealer to cause a charge to be placed 
against a customer's or donor's account without obtaining the 
account number directly from the customer or donor during the 
telemarketing transaction pursuant to which the account will be 
charged. See proposed Rule G-39(n)(xix).
    \21\ The term ``free-to-pay conversion'' would mean, in an offer 
or agreement to sell or provide any goods or services, a provision 
under which a customer receives a product or service for free for an 
initial period and will incur an obligation to pay for the product 
or service if he or she does not take affirmative action to cancel 
before the end of that period. See proposed Rule G-39(n)(xiii).
    \22\ See 16 CFR 310.4(a)(7); see also FINRA Rule 3230(i).
    \23\ See FTC, Telemarketing Sales Rule, 68 FR 4580, 4616-23 
(Jan. 29, 2003).
    \24\ See FINRA Rule 3230(i). See also the Cook Letter.
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Abandoned Calls
    Proposed Rule G-39(j) would prohibit a dealer from abandoning \25\ 
any outbound telephone call. The abandoned calls prohibition would be 
subject to a ``safe harbor'' under proposed subparagraph (j)(ii) that 
would require the dealer: (1) To employ technology that ensures 
abandonment of no more than three percent of all calls answered by a 
person, measured over the duration of a single calling campaign, if 
less than 30 days, or separately over each successive 30-day period or 
portion thereof that the campaign continues; (2) for each outbound 
telephone call placed, to allow the telephone to ring for at least 15 
seconds or four rings before disconnecting an unanswered call; (3) 
whenever a dealer is not available to speak with the person answering 
the outbound telephone call within two seconds after the person's 
completed greeting, to promptly play a recorded message stating the 
name and telephone

[[Page 14146]]

number of the dealer on whose behalf the call was placed; and (4) to 
maintain records establishing compliance with the ``safe harbor.'' The 
MSRB believes that these proposed provisions would be substantially 
similar to the FTC's provisions regarding abandoned calls.\26\ The FTC 
provided a discussion of the provisions when they were adopted pursuant 
to the Prevention Act.\27\
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    \25\ Under the proposed amended rule, an outbound call would be 
``abandoned'' if a called person answers it and the call is not 
connected to a dealer within two seconds of the called person's 
completed greeting.
    \26\ See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 
3230(j) (Throughout FINRA Rules 3230(j) and (k), referred to in note 
29 infra, FINRA uses the term ``telemarketing call'' where the 
proposed MSRB rule would use the term ``outbound telephone call.'' 
The MSRB believes that its proposed terminology is substantially 
similar because proposed MSRB Rule G-39(n)(xvi) defines ``outbound 
telephone call'' as a telephone call initiated by a telemarketer to 
induce the purchase of goods or services or to solicit a charitable 
contribution from a donor).
    \27\ See FTC, Telemarketing Sales Rule, 68 FR 4580, 4641 (Jan. 
29, 2003).
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Prerecorded Messages
    Proposed Rule G-39(k) would prohibit a broker, dealer, or municipal 
securities dealer from initiating any outbound telephone call that 
delivers a prerecorded message without a person's express written 
agreement \28\ to receive such calls. The proposed rule change also 
would require that all prerecorded outbound telephone calls provide 
specified opt-out mechanisms so that a person can opt out of future 
calls. The prohibition would not apply to a prerecorded message 
permitted for compliance with the ``safe harbor'' for abandoned calls 
under proposed subparagraph (j)(ii). The MSRB believes that the 
proposed provisions would be substantially similar to the FTC's 
provisions regarding prerecorded messages.\29\ The FTC provided a 
discussion of the provisions when they were adopted pursuant to the 
Prevention Act.\30\
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    \28\ The express written agreement would have to: (a) Have been 
obtained only after a clear and conspicuous disclosure that the 
purpose of the agreement is to authorize the dealer to place 
prerecorded calls to such person; (b) have been obtained without 
requiring, directly or indirectly, that the agreement be executed as 
a condition of opening an account or purchasing any good or service; 
(c) evidence the willingness of the called person to receive calls 
that deliver prerecorded messages by or on behalf of the dealer; and 
(d) include the person's telephone number and signature (which may 
be obtained electronically under the Electronic Signatures in Global 
and National Commerce Act, 15 U.S.C. 7001, et seq. (``E-Sign 
Act'')).
    \29\ See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k).
    \30\ See FTC, Telemarketing Sales Rule, 73 FR 51164, 51165 (Aug. 
29, 2008).
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Credit Card Laundering
    Except as expressly permitted by the applicable credit card system, 
proposed Rule G-39(l) would prohibit a dealer from: (1) Presenting to 
or depositing into, the credit card system \31\ for payment, a credit 
card sales draft \32\ generated by a telemarketing transaction that is 
not the result of a telemarketing credit card transaction between the 
cardholder \33\ and the dealer; \34\ (2) employing, soliciting, or 
otherwise causing a merchant,\35\ or an employee, representative or 
agent of the merchant, to present to or to deposit into the credit card 
system for payment, a credit card sales draft generated by a 
telemarketing transaction that is not the result of a telemarketing 
credit card transaction between the cardholder and the merchant; or (3) 
obtaining access to the credit card system through the use of a 
business relationship or an affiliation with a merchant, when such 
access is not authorized by the merchant agreement \36\ or the 
applicable credit card system. The MSRB believes that these proposed 
provisions would be substantially similar to the FTC's provisions 
regarding credit card laundering.\37\ The FTC provided a discussion of 
the provisions when they were adopted pursuant to the Prevention 
Act.\38\ Although the MSRB expressed the view that some of these 
provisions may not be directly applicable to securities transactions 
generally, and, more specifically, municipal securities transactions, 
SEC staff suggested that the MSRB substantially conform the proposed 
rule to FINRA's telemarketing rule, which includes these 
provisions.\39\
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    \31\ The term ``credit card system'' would mean any method or 
procedure used to process credit card transactions involving credit 
cards issued or licensed by the operator of that system. The term 
``credit card'' would mean any card, plate, coupon book, or other 
credit device existing for the purpose of obtaining money, property, 
labor, or services on credit. The term ``credit'' would mean the 
right granted by a creditor to a debtor to defer payment of debt or 
to incur debt and defer its payment. See proposed Rules G-
39(n)(vii), (viii), and (x).
    \32\ The term ``credit card sales draft'' would mean any record 
or evidence of a credit card transaction. See proposed Rule G-
39(n)(ix).
    \33\ The term ``cardholder'' would mean a person to whom a 
credit card is issued or who is authorized to use a credit card on 
behalf of or in addition to the person to whom the credit card is 
issued. See proposed Rule G-39(n)(vi).
    \34\ The Commission staff asked the MSRB to remind its 
registrants that extending or arranging for the extension of credit 
to purchase securities raises a number of issues under the federal 
securities laws, including whether the person extending or arranging 
credit needs to register as a broker-dealer.
    \35\ The term ``merchant'' would mean a person who is authorized 
under a written contract with an acquirer to honor or accept credit 
cards, or to transmit or process for payment credit card payments, 
for the purchase of goods or services or a charitable contribution. 
See proposed Rule G-39(n)(xiv). The term ``acquirer'' would mean a 
business organization, financial institution, or an agent of a 
business organization or financial institution that has authority 
from an organization that operates or licenses a credit card system 
to authorize merchants to accept, transmit, or process payment by 
credit card through the credit card system for money, goods or 
services, or anything else of value. See proposed Rule G-39(n)(ii). 
A ``charitable contribution would mean ``charitable contribution'' 
means any donation or gift of money or any other thing of value, for 
example a transfer to a pooled income fund. See proposed Rule G-
39(n)(iii).
    \36\ The term ``merchant agreement'' would mean a written 
contract between a merchant and an acquirer to honor or accept 
credit cards, or to transmit or process for payment credit card 
payments, for the purchase of goods or services or a charitable 
contribution. See proposed Rule G-39(n)(xv).
    \37\ See 16 CFR 310.3(c); see also FINRA Rule 3230(l).
    \38\ See FTC, Telemarketing Sales Rule, 60 FR 43842, 43852 (Aug. 
23, 1995).
    \39\ See FINRA Rule 3230(l). See also the Cook Letter.
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Exemption
    Proposed Rule G-39(m) would exempt business-to-business calls from 
most of the provisions of the amended rule. Specifically, the exemption 
would provide that outbound telephone calls from a dealer to a business 
entity, government, or political subdivision, agency, or 
instrumentality of a government are exempt from the rule, other than 
sections (a)(ii) and (d)(i) (iii), (v) and (vi). The sections of the 
proposed rule that would still apply to business-to-business calls 
relate to the firm-specific do-not-call list and procedures related to 
(i) maintaining a do-not-call list, (ii) training personnel on the 
existence and use of the do-not-call list, (iii) the recording and 
honoring of do-not-call requests, (iv) application to affiliated 
persons or entities, and (v) maintenance of do-not-call lists. FINRA's 
telemarketing rule, Rule 3230, does not include an express exemption 
for business-to-business calls.\40\ The FTC's Telemarketing Sales Rule, 
however, includes an exemption from all of its provisions for telephone 
calls between a telemarketer and any business, with a caveat that most 
of the rule continues to apply to sellers and telemarketers of 
nondurable office or cleaning supplies.\41\
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    \40\ See FINRA Rule 3230.
    \41\ See 16 CFR 310.6(b)(7).
---------------------------------------------------------------------------

    When initially adopting the exception for business-to-business 
calls, the FTC indicated that it believed Congress did not intend that 
every business use of the telephone be covered by the FTC's 
Telemarketing Sales Rule.\42\ The only type of business-to-business 
calls that are subject to the Telemarketing Sales Rule are calls to 
induce the retail sale of nondurable office or cleaning

[[Page 14147]]

supplies.\43\ Sellers of these products are treated differently because 
the FTC believes that the conduct prohibitions and affirmative 
disclosures mandated by the Telemarketing Sales Rule ``are crucial to 
protect businesses--particularly small businesses and nonprofit 
organizations--from the harsh practices of some unscrupulous sellers of 
these products.\44\ Additionally, the FTC's enforcement experience 
against deceptive telemarketers indicated that office and cleaning 
supplies had been ``by far the most significant business-to-business 
problem area[.]''Sec.  \45\ When adopting its Telemarketing Sales Rule 
in 1995, the FTC indicated that it would consider expanding the list of 
business-to-business telemarketing activities excluded from the 
exemption if additional business-to-business telemarketing activities 
became problems after the Telemarketing Sales Rule became 
effective.\46\ To date, however, the only type of business-to-business 
telemarketing activity that is excluded from the exemption is the 
retail sale of nondurable office or cleaning supplies.
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    \42\ See FTC, Telemarketing Sales Rule, 60 FR 43842, 43861 (Aug. 
23, 1995).
    \43\ See 16 CFR 310.6(b)(7).
    \44\ See FTC, Telemarketing Sales Rule, 60 FR 43842, 43862 (Aug. 
23, 1995).
    \45\ Id. at 43861.
    \46\ Id.
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    The MSRB believes that exempting business-to-business calls 
pertaining to municipal securities from Rule G-39 would be consistent 
with the FTC's general approach to exempting business-to-business calls 
because, unlike sellers of nondurable office or cleaning supplies, 
dealers are subject to an entire regulatory regime, which includes the 
federal securities laws, the fair practice rules of the MSRB, and 
examinations and enforcement by FINRA, banking regulators and the SEC. 
Nevertheless, the provisions of proposed Rule G-39 pertaining to the 
firm-specific do-not-call list and related procedures would apply to 
business-to-business calls. Dealers are already required to maintain a 
firm-specific do-not-call list for requests that are not related to 
business-to-business calls; therefore, the MSRB believes that requiring 
such a list with respect to business-to-business calls would not create 
an undue burden. Moreover, the MSRB believes that it would be 
reasonable to require dealers to honor the wishes of businesses that do 
not wish to be solicited by telephone by requiring dealers to maintain 
a list of such do-not-call requests. The MSRB believes that this 
approach also would be consistent with FINRA's telemarketing rule and 
related guidance.\47\
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    \47\ See FINRA Rule 3230; see also FINRA guidance dated November 
1, 1995, Requirements of member firms in maintaining do-not-call 
lists under NASD Rule 3110 (``[M]embers who are involved in 
telemarketing, and whom make cold calls to the public, [must] * * * 
establish and maintain a do-not-call list notwithstanding whether 
[the member] contact[s] businesses or residences'').
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Definitions
    Proposed Rule G-39(n) would include the following definitions, 
which the MSRB believes would be substantially similar to the 
corresponding definitions in the FTC's Telemarketing Sales Rule: \48\ 
``acquirer,'' ``billing information,'' ``caller identification 
service,'' ``cardholder,'' ``charitable contribution,'' ``credit,'' 
``credit card,'' ``credit card sales draft,'' ``credit card system,'' 
``customer,'' ``donor,'' ``free-to-pay conversion,'' ``merchant,'' 
``merchant agreement,'' ``outbound telephone call,'' ``preacquired 
account information'' and ``telemarketer.'' \49\ Additionally, the 
proposed rule change would delete the reference to ``telephone 
solicitation.'' The FTC provided a discussion of each of these 
definitions when it adopted them pursuant to the Prevention Act.\50\
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    \48\ The MSRB believes that these definitions are also 
substantially similar to definitions in FINRA Rule 3230, with the 
exception of ``telemarketer,'' which is not defined in FINRA's rule.
    \49\ See proposed Rule G-39(n)(ii), (iii), (v), (vi), (vii), 
(viii), (ix), (x), (xi), (xiii), (xiv), (xv), (xvi), (xix), and 
(xx).
    \50\ See FTC, Telemarketing Sales Rule, 60 FR 43842, 43843 (Aug. 
23, 1995) and FTC, Telemarketing Sales Rule, 68 FR 4580, 4587 (Jan. 
29, 2003).
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    Proposed Rule G-39(n) also would include definitions of ``person'' 
and ``telemarketing'' that differ substantively from the FTC's and 
FINRA's definitions of these terms. While the definition of ``person'' 
in proposed MSRB Rule G-39(n)(xvii) tracks the definition in the FTC 
and FINRA rules to include any individual, group, unincorporated 
association, limited or general partnership, corporation, or other 
business entity, it further defines a ``person'' to include a 
government, or political subdivision, agency, or instrumentality of a 
government. These entities are included in the proposed definition 
because dealers often solicit these types of entities. While the MSRB 
believes that the proposed definition of ``telemarketing'' would be 
substantially similar to the definitions in the FTC and FINRA rules, 
its scope would be limited in MSRB Rule G-39(n)(xxi) to calls 
``pertaining to municipal securities or municipal financial products'' 
since the MSRB only promulgates rules pertaining to the municipal 
securities activities of dealers. The MSRB intends the limitation in 
the definition to correspond with the limits of the MSRB's rulemaking 
authority. As described earlier, the MSRB has implemented rules to 
address sales practices by dealers that cover their municipal 
securities activities, including sales by telephone.
Technical and Conforming Changes
    The proposed revisions to MSRB Rule G-39 would make a number of 
minor technical and conforming changes. First, the proposed revisions 
would amend Rule G-39 to delete the phrase ``or person associated with 
a broker, dealer or municipal securities dealer'' throughout the rule 
since associated persons are included in the definition of ``broker, 
dealer or municipal securities dealer'' in the MSRB rules.\51\ Second, 
the proposed revisions would renumber and make minor technical changes 
to the terms ``account activity,'' ``broker, dealer or municipal 
securities dealer of record,'' ``established business relationship,'' 
and ``personal relationship.'' Third, the proposed revisions would 
amend paragraphs (a), (b), (c), (c)(iv), and (e) by replacing the term 
``telephone solicitation'' with the term ``outbound telephone call.'' 
Fourth, the proposed revisions would amend paragraphs (d)(iii), 
(d)(iv), and (d)(vi) by replacing the term ``telemarketing'' with the 
term ``outbound telephone.'' Fifth, the proposed revisions would update 
a reference to an ``established business relationship'' in subparagraph 
(a)(1)(A). Finally, the proposed rule change would amend paragraph 
(b)(ii) to clarify that a signed, written agreement may be obtained 
electronically under the E-Sign Act.
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    \51\ See MSRB Rule D-11 which states: ``Unless the context 
otherwise requires or a rule of the Board otherwise specifically 
provides, the terms `broker,' `dealer,' * * * `municipal securities 
dealer,' * * * shall refer to and include their respective 
associated persons.''
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    The MSRB requests an effective date for the proposed rule change of 
90 days following the date of SEC approval.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act,\52\ which provides that the MSRB's 
rules shall
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    \52\ 15 U.S.C. 78o-4(b)(2)(C).

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 and 
municipal financial products,

[[Page 14148]]

to remove impediments to and perfect the mechanism of a free and 
open market in municipal securities and municipal financial 
products, and, in general, to protect investors, municipal entities, 
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obligated persons, and the public interest.

    The MSRB believes that the proposed rule change is consistent with 
the Act because the proposed rule change would prevent fraudulent and 
manipulative acts and protect investors and the public interest by 
continuing to prohibit dealers from engaging in deceptive and other 
abusive telemarketing acts or practices.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As discussed 
above, the Prevention Act requires the Commission to promulgate, or 
direct any national securities exchange or registered securities 
association to promulgate, rules substantially similar to the FTC rules 
to prohibit deceptive and other abusive telemarketing acts or 
practices.

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 up to 90 days of such 
date (i) as the Commission may designate 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 email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2013-02 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.

All submissions should refer to File Number SR-MSRB-2013-02. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the MSRB. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MSRB-2013-02 and should be 
submitted on or before March 25, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\53\
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    \53\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-04844 Filed 3-1-13; 8:45 am]
BILLING CODE 8011-01-P

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