Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Approving a Proposed Rule Change To Amend MSRB Rule G-39, on Telemarketing, 32483-32487 [2013-12850]

Download as PDF TKELLEY on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices has been publicly announced that application will be made to such exchange for the listing thereon of such securities. 24. Contracts of ASA, other than those executed on an Established Exchange which do not involve affiliated persons, will provide that: (a) the contracts, irrespective of the place of their execution or performance, will be performed in accordance with the requirements of the Act, the Securities Act of 1933, and the Securities Exchange Act of 1934, each as amended, if the subject matter of the contracts is within the purview of these Acts; and (b) in effecting the purchase or sale of assets, the parties to the contracts will utilize the U.S. mails or means of interstate commerce. 25. ASA will keep at least 20% of its assets in the United States in the custody of a U.S. bank. ASA’s remaining assets will be kept in the custody of (a) an eligible foreign custodian, as defined in rule 17f–5 under the Act, in South Africa, Hong Kong, the United Kingdom, Canada, or Australia; or (b) an eligible securities depository, as defined in rule 17f–7 under the Act, in South Africa, Hong Kong, the United Kingdom, Canada, or Australia. 26. If removal of securities purchased on the Tokyo Stock Exchange and the SIX Swiss Exchange becomes either prohibited by law or regulation or financially impracticable, up to 5% of ASA’s assets may be held by an eligible foreign custodian or overseas branch of ASA’s custodian in each of Japan and Switzerland. 27. ASA will withdraw its assets from the care of a subcustodian as soon as practicable, and in any event within 180 days of the date when a majority of the Board makes the determination that a particular subcustodian may no longer be considered eligible under rule 17f–5 under the Act or that continuance of the subcustodian arrangement would not be consistent with the best interests of ASA and its shareholders. 28. ASA will cause its custodian to enter into an agreement (to be filed by ASA with the Commission when the custodian commences service to ASA), which will provide that the custodian agrees: (a) To comply with the Act and the rules of the Commission under the Act and the undertakings and agreements contained in the application as applicable to the custodian and as each may be amended from time to time, as applicable to the custodian; (b) to do nothing inconsistent with the undertakings and agreements contained in the application, the provisions of the Act, or the rules under the Act; and (c) that the undertakings described in (a) VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 and (b) above constitute representations and inducements to the Commission to issue the requested order.21 29. So long as ASA is registered under the Act, ASA’s custody contract with its custodian will provide that the custodian will: (a) Consummate all purchases and sales of securities by ASA through the delivery of securities and receipt of cash, or vice versa as the case may be, within the United States, except for (i) purchases and sales on the Established Exchanges, and (ii) purchases and sales, through ASA’s custodian or custodian’s agent, in South Africa of South African Treasury Bills from or to the South African Treasury, South African Reserve Bank securities, or CSD-eligible securities; and (b) distribute ASA’s assets, or the proceeds thereof, to ASA’s creditors and shareholders, upon service upon the custodian of an order of the Commission or court directing such distribution as provided in conditions 17, 20, and 30. 30. With respect to an alleged violation of the Act or the requested order by ASA’s custodian, eligible foreign custodian, or eligible securities depository, the Commission, on its own motion, will have the right to initiate a proceeding: (a) Before the Commission for the revocation of the order permitting registration of ASA; or (b) before a court of competent jurisdiction for the liquidation of ASA and a distribution of its assets to its shareholders and creditors. The court may enter the order in the event that it finds, after notice and opportunity for hearing, that ASA’s custodian has violated any provision of the Act or the requested order. 31. The Chief Compliance Officer, as defined in Rule 38a–l(a)(4) under the Act, shall prepare a report, as part of the annual report to the Board, that evaluates ASA’s compliance with the terms and conditions of the Application and the procedures established to achieve such compliance. The Chief Compliance Officer will also annually file a certification pursuant to item 77Q3 of Form N–SAR as such Form may be revised, amended or superseded from time to time, that certifies that ASA and the Board have established procedures reasonably designed to achieve compliance with Conditions 22, 25 and 21 ASA acknowledges that: (a) Every agreement and undertaking of ASA and its custodian contained in the application constitutes (i) inducements to the Commission for the issuance and continuance in effect of the requested order, and (ii) a contract among ASA, the Commission and ASA’s shareholders; and (b) the failure by ASA or the custodian to comply with any of the agreements or undertakings, unless permitted by the Commission, will constitute a violation of the requested order. PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 32483 26 regarding location of ASA’s assets. Additionally, ASA’s independent public accountants, in connection with their audit examination of ASA, will review the operations and procedures pertaining to the location of ASA’s assets and custody arrangements for compliance with the conditions of the Application, and their review will form the basis, in part, of the auditor’s report on internal accounting controls in Form N–SAR. By the Commission. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–12797 Filed 5–29–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69635; File No. SR–MSRB– 2013–02] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Approving a Proposed Rule Change To Amend MSRB Rule G– 39, on Telemarketing May 24, 2013. I. Introduction On February 11, 2013, the Municipal Securities Rulemaking Board (‘‘MSRB’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend MSRB Rule G–39, on telemarketing. Specifically, the proposed rule change would amend certain provisions of MSRB Rule G–39 and add new provisions to make the rule substantially similar to the telemarketing rules of the Federal Trade Commission (‘‘FTC’’). The proposed rule change was published for comment in the Federal Register on March 4, 2013.3 The Commission received no comments on the proposed rule change. 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. This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Exchange Act Release No. 68987 (Feb. 16, 2013), 78 FR 14144 (Mar. 4, 2013) (‘‘Notice’’). The comment period closed on March 25, 2013. 2 17 E:\FR\FM\30MYN1.SGM 30MYN1 32484 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices TKELLEY on DSK3SPTVN1PROD with NOTICES II. Description of the Proposal As stated in the Notice, the proposed rule change would amend MSRB Rule G–39, on telemarketing, to include provisions substantially similar to those contained in the FTC rules that prohibit deceptive and other abusive telemarketing acts or practices.4 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 (along with the other self-regulatory organizations) to enact a telemarketing rule in accordance with the Prevention Act.5 The Prevention Act requires the Commission to promulgate, or direct any national securities exchange or registered national securities association (collectively, ‘‘self-regulatory organizations’’ or ‘‘SROs’’) 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.6 In 1997, the SEC determined that telemarketing rules promulgated and expected to be promulgated by the SROs, together with the other rules of the SROs, 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.7 Since 1997, the FTC has amended its telemarketing rules in light of changing telemarketing practices and technology.8 4 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 8. 5 See Prevention Act supra note 4. 6 See 15 U.S.C. 6102. 7 See Telemarketing and Consumer Fraud and Abuse Prevention Act; Determination that No Additional Rulemaking Required, 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. 8 See, e.g., FTC, Telemarketing Sales Rule, 73 FR 51164 (Aug. 29, 2008) (amendments to the VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 In May 2011, Commission staff directed the MSRB (along with all other SROs) 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.9 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.’’ 10 The proposed rule amendments, as directed by the Commission staff, would amend and adopt provisions in Rule G– 39 that would be substantially similar to the FTC’s current rules that prohibit deceptive and other abusive telemarketing acts or practices as described below.11 honored under the FTC’s Telemarketing Sales Rule 14 is indefinite.15 Additionally, the proposed rule change would clarify that the record of do-notcall requests must be permanent. 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,12 and the rules of the Federal Communications Commission relating to telemarketing practices and the rights of telephone consumers.13 Proposed Rule G–39(g) would provide that dealers engaging in telemarketing must transmit caller identification information 16 and are explicitly 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.17 Maintenance of Do-Not-Call Lists Proposed Rule G–39(d)(vi) would maintain the requirement in Rule G–39 that a 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. This amendment makes this provision consistent with the FTC’s Telemarketing Sales Rule because the time for which the firm-specific opt-out must be Unencrypted Consumer Account Numbers 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). 9 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. 10 Id. 11 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. 12 See 47 U.S.C. 227. 13 See 47 CFR 64.1200. PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 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 of the rule. The proposed amendments 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(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.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 this approach is substantially similar to the approach taken by the FTC.19 14 See 16 CFR 310.4. the Cook Letter. 16 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. 17 See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g). 18 See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h). The FTC provided a discussion of the provision when it was adopted pursuant to the Prevention Act. See FTC, Telemarketing Sales Rule, 68 FR 4580, 4615–16 (Jan. 29, 2003). 19 See Id. at 4616. 15 See E:\FR\FM\30MYN1.SGM 30MYN1 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices 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 provisions regarding the submission of billing information.22 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, the proposed rule is substantially similar to FINRA’s telemarketing rule, which includes similar provisions.23 TKELLEY on DSK3SPTVN1PROD with NOTICES Abandoned Calls Proposed Rule G–39(j) would prohibit a dealer from abandoning 24 any 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). The FTC provided a discussion of the provision when it was adopted. See FTC, Telemarketing Sales Rule, 68 FR 4580, 4616–23 (Jan. 29, 2003). 23 See FINRA Rule 3230(i). See also the Cook Letter. 24 Under the proposed amended rule, an outbound call would be ‘‘abandoned’’ if a called person answers it and the call is not connected to VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 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 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.25 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 26 to receive such calls. The proposed rule change also would require that all prerecorded a dealer within two seconds of the called person’s completed greeting. 25 See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 3230(j) (Throughout FINRA Rule 3230(j) and (k), referred to in note 30 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.). The FTC provided a discussion of the provisions when they were adopted pursuant to the Prevention Act. See FTC, Telemarketing Sales Rule, 68 FR 4580, 4641 (Jan. 29, 2003). 26 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’’)). PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 32485 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.27 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 28 for payment, a credit card sales draft 29 generated by a telemarketing transaction that is not the result of a telemarketing credit card transaction between the cardholder 30 and the dealer; 31 (2) employing, soliciting, or otherwise causing a merchant,32 or an employee, 27 See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k). The FTC provided a discussion of the provisions when they were adopted pursuant to the Prevention Act. See FTC, Telemarketing Sales Rule, 73 FR 51164, 51165 (Aug. 29, 2008). 28 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 Rule G–39(n)(vii), G–39(n)(viii), and G–39(n)(x), respectively. 29 The term ‘‘credit card sales draft’’ would mean any record or evidence of a credit card transaction. See proposed Rule G–39(n)(ix). 30 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). 31 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. 32 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 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). E:\FR\FM\30MYN1.SGM 30MYN1 32486 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices 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 33 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.34 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, the proposed rule is substantially similar to FINRA’s telemarketing rule, which includes these provisions.35 TKELLEY on DSK3SPTVN1PROD with NOTICES 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.36 The FTC’s Telemarketing Sales Rule, however, includes an exemption from all of its provisions for telephone calls 33 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). 34 See 16 CFR 310.3(c); see also FINRA Rule 3230(l). The FTC provided a discussion of the provisions when they were adopted pursuant to the Prevention Act. See FTC, Telemarketing Sales Rule, 60 FR 43842, 43852 (Aug. 23, 1995). 35 See FINRA Rule 3230(l); see also the Cook Letter. 36 See FINRA Rule 3230. VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 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.37 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.38 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 supplies.39 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 should 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 37 See 16 CFR 310.6(b)(7). FTC, Telemarketing Sales Rule, 60 FR 43842, 43861 (Aug. 23, 1995). 39 See 16 CFR 310.6(b)(7). 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.’’ See FTC, Telemarketing Sales Rule, 60 FR 43842, 43862 (Aug. 23, 1995). 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.’’ Id. at 43861. 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. Id. 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. 38 See PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 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.40 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: 41 ‘‘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.’’ 42 Additionally, the proposed rule change would delete the reference to ‘‘telephone solicitation.’’ 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 but that reflect MSRB’s jurisdictional scope. 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 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 40 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-notcall list notwithstanding whether [the member] contact[s] businesses or residences.’’). 41 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. 42 See proposed Rule G–39(n)(ii), (iii), (v), (vi), (vii), (viii), (ix), (x), (xi), (xiii), (xiv), (xv), (xvi), (xix), and (xx). E:\FR\FM\30MYN1.SGM 30MYN1 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices 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 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.43 Second, the proposed revisions would renumber and make 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 requested an effective date for the proposed rule change of 90 days following the date of SEC approval. III. Summary of Comments Received As previously noted, the Commission received no comments on the proposed rule change. TKELLEY on DSK3SPTVN1PROD with NOTICES IV. Commission’s Findings The Commission has carefully reviewed the proposed rule change, and, based on its review of the record, finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the MSRB.44 In 43 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.’’ 44 In approving the proposed rule change, the Commission has considered the proposed rule’s VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 particular, the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act, 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, 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.45 More specifically, the Commission finds that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act because it should protect investors and the public interest by preventing dealers from engaging in fraudulent and manipulative acts and practices, particularly deceptive and other abusive telemarketing acts or practices. The Commission also finds that the proposed rule is consistent with the FTC’s and FINRA’s telemarketing rules, which include provisions similar to those described above. Accordingly, the proposed rule change should foster cooperation and coordination with FINRA members and other persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities and municipal financial products, and remove impediments to and perfect the mechanism of a free and open market in municipal securities and municipal financial products. For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder. As requested by the MSRB, the proposed rule change will become effective 90 days following the date of SEC approval. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,46 that the proposed rule change (SR–MSRB–2013– 02) be, and hereby is, approved. impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 45 15 U.S.C. 78o–4(b)(2)(C). 46 15 U.S.C. 78s(b)(2). PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 32487 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.47 Jill M. Peterson, Assistant Secretary. [FR Doc. 2013–12850 Filed 5–29–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69634; File No. SR– NYSEArca–2013–56] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Listing and Trading of Shares of the PowerShares China A-Share Portfolio Under NYSE Arca Equities Rule 8.600 May 23, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 21, 2013, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. 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 Exchange proposes to list and trade the shares of the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): PowerShares China A-Share Portfolio. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. 47 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\30MYN1.SGM 30MYN1

Agencies

[Federal Register Volume 78, Number 104 (Thursday, May 30, 2013)]
[Notices]
[Pages 32483-32487]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12850]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69635; File No. SR-MSRB-2013-02]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Approving a Proposed Rule Change To Amend MSRB Rule G-39, 
on Telemarketing

May 24, 2013.

I. Introduction

    On February 11, 2013, the Municipal Securities Rulemaking Board 
(``MSRB'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend MSRB Rule G-39, on 
telemarketing. Specifically, the proposed rule change would amend 
certain provisions of MSRB Rule G-39 and add new provisions to make the 
rule substantially similar to the telemarketing rules of the Federal 
Trade Commission (``FTC''). The proposed rule change was published for 
comment in the Federal Register on March 4, 2013.\3\ The Commission 
received no comments on the proposed rule change. 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. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Exchange Act Release No. 68987 (Feb. 16, 2013), 78 FR 
14144 (Mar. 4, 2013) (``Notice''). The comment period closed on 
March 25, 2013.

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[[Page 32484]]

II. Description of the Proposal

    As stated in the Notice, the proposed rule change would amend MSRB 
Rule G-39, on telemarketing, to include provisions substantially 
similar to those contained in the FTC rules that prohibit deceptive and 
other abusive telemarketing acts or practices.\4\ 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 (along with the other self-regulatory organizations) to enact 
a telemarketing rule in accordance with the Prevention Act.\5\ The 
Prevention Act requires the Commission to promulgate, or direct any 
national securities exchange or registered national securities 
association (collectively, ``self-regulatory organizations'' or 
``SROs'') 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.\6\
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    \4\ 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 8.
    \5\ See Prevention Act supra note 4.
    \6\ 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 the SROs, together with the other 
rules of the SROs, 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.\7\ Since 1997, 
the FTC has amended its telemarketing rules in light of changing 
telemarketing practices and technology.\8\
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    \7\ See Telemarketing and Consumer Fraud and Abuse Prevention 
Act; Determination that No Additional Rulemaking Required, 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.
    \8\ 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 (along with all 
other SROs) 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.\9\ 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.'' \10\
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    \9\ 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.
    \10\ Id.
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    The proposed rule amendments, as directed by the Commission staff, 
would amend and adopt provisions in Rule G-39 that would be 
substantially similar to the FTC's current rules that prohibit 
deceptive and other abusive telemarketing acts or practices as 
described below.\11\
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    \11\ 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,\12\ and the rules of the 
Federal Communications Commission relating to telemarketing practices 
and the rights of telephone consumers.\13\
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    \12\ See 47 U.S.C. 227.
    \13\ 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 Rule G-
39 that a 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. This 
amendment makes this provision consistent with the FTC's Telemarketing 
Sales Rule because the time for which the firm-specific opt-out must be 
honored under the FTC's Telemarketing Sales Rule \14\ is 
indefinite.\15\ Additionally, the proposed rule change would clarify 
that the record of do-not-call requests must be permanent.
---------------------------------------------------------------------------

    \14\ See 16 CFR 310.4.
    \15\ 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 
of the rule. The proposed amendments 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 \16\ 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.\17\
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    \16\ 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.
    \17\ See 16 CFR 310.4(a)(8); see also FINRA Rule 3230(g).
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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.\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 this approach is substantially similar to the approach taken by 
the FTC.\19\
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    \18\ See 16 CFR 310.4(a)(6); see also FINRA Rule 3230(h). The 
FTC provided a discussion of the provision when it was adopted 
pursuant to the Prevention Act. See FTC, Telemarketing Sales Rule, 
68 FR 4580, 4615-16 (Jan. 29, 2003).
    \19\ See Id. at 4616.

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[[Page 32485]]

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 provisions regarding the submission of billing 
information.\22\ 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, the proposed rule is substantially similar to FINRA's 
telemarketing rule, which includes similar provisions.\23\
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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). The 
FTC provided a discussion of the provision when it was adopted. See 
FTC, Telemarketing Sales Rule, 68 FR 4580, 4616-23 (Jan. 29, 2003).
    \23\ 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 \24\ 
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 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.\25\
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    \24\ 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.
    \25\ See 16 CFR 310.4(b)(1)(iv) and (b)(4); see also FINRA Rule 
3230(j) (Throughout FINRA Rule 3230(j) and (k), referred to in note 
30 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.). The FTC provided a discussion of the 
provisions when they were adopted pursuant to the Prevention Act. 
See FTC, Telemarketing Sales Rule, 68 FR 4580, 4641 (Jan. 29, 2003).
---------------------------------------------------------------------------

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 \26\ 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.\27\
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    \26\ 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'')).
    \27\ See 16 CFR 310.4(b)(1)(v); see also FINRA Rule 3230(k). The 
FTC provided a discussion of the provisions when they were adopted 
pursuant to the Prevention Act. 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 \28\ for payment, a credit 
card sales draft \29\ generated by a telemarketing transaction that is 
not the result of a telemarketing credit card transaction between the 
cardholder \30\ and the dealer; \31\ (2) employing, soliciting, or 
otherwise causing a merchant,\32\ or an employee,

[[Page 32486]]

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 \33\ 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.\34\ 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, the proposed rule is substantially similar to 
FINRA's telemarketing rule, which includes these provisions.\35\
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    \28\ 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 Rule G-39(n)(vii), 
G-39(n)(viii), and G-39(n)(x), respectively.
    \29\ The term ``credit card sales draft'' would mean any record 
or evidence of a credit card transaction. See proposed Rule G-
39(n)(ix).
    \30\ 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).
    \31\ 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.
    \32\ 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 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).
    \33\ 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).
    \34\ See 16 CFR 310.3(c); see also FINRA Rule 3230(l). The FTC 
provided a discussion of the provisions when they were adopted 
pursuant to the Prevention Act. See FTC, Telemarketing Sales Rule, 
60 FR 43842, 43852 (Aug. 23, 1995).
    \35\ 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.\36\ 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.\37\
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    \36\ See FINRA Rule 3230.
    \37\ 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.\38\ 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 supplies.\39\
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    \38\ See FTC, Telemarketing Sales Rule, 60 FR 43842, 43861 (Aug. 
23, 1995).
    \39\ See 16 CFR 310.6(b)(7). 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.'' 
See FTC, Telemarketing Sales Rule, 60 FR 43842, 43862 (Aug. 23, 
1995). 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.'' Id. at 43861. 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. Id. 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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    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 should 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.\40\
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    \40\ 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: \41\ 
``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.'' \42\ Additionally, the 
proposed rule change would delete the reference to ``telephone 
solicitation.''
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    \41\ 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.
    \42\ See proposed Rule G-39(n)(ii), (iii), (v), (vi), (vii), 
(viii), (ix), (x), (xi), (xiii), (xiv), (xv), (xvi), (xix), and 
(xx).
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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 but that reflect MSRB's 
jurisdictional scope. 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 
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

[[Page 32487]]

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 
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.\43\ Second, 
the proposed revisions would renumber and make 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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    \43\ 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 requested an effective date for the proposed rule change 
of 90 days following the date of SEC approval.

III. Summary of Comments Received

    As previously noted, the Commission received no comments on the 
proposed rule change.

IV. Commission's Findings

    The Commission has carefully reviewed the proposed rule change, 
and, based on its review of the record, finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to the MSRB.\44\ In particular, the 
proposed rule change is consistent with Section 15B(b)(2)(C) of the 
Act, 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, 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.\45\
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    \44\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \45\ 15 U.S.C. 78o-4(b)(2)(C).
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    More specifically, the Commission finds that the proposed rule 
change is consistent with Section 15B(b)(2)(C) of the Act because it 
should protect investors and the public interest by preventing dealers 
from engaging in fraudulent and manipulative acts and practices, 
particularly deceptive and other abusive telemarketing acts or 
practices. The Commission also finds that the proposed rule is 
consistent with the FTC's and FINRA's telemarketing rules, which 
include provisions similar to those described above. Accordingly, the 
proposed rule change should foster cooperation and coordination with 
FINRA members and other persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in municipal securities and municipal financial products, 
and remove impediments to and perfect the mechanism of a free and open 
market in municipal securities and municipal financial products.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder. As requested by the MSRB, the proposed rule change will 
become effective 90 days following the date of SEC approval.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\46\ that the proposed rule change (SR-MSRB-2013-02) be, and hereby 
is, approved.
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    \46\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\47\
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    \47\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2013-12850 Filed 5-29-13; 8:45 am]
BILLING CODE 8011-01-P