Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Amendment No. 1 and Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change Consisting of Proposed Amendments to MSRB Rules G-1, on Separately Identifiable Department or Division of a Bank; G-2, on Standards of Professional Qualification; G-3, on Professional Qualification Requirements; and D-13, on Municipal Advisory Activities, 11706-11712 [2015-04431]

Download as PDF 11706 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices V. Conclusion It is therefore ordered pursuant to section 19(b)(2) of the Act 196 that the proposed rule change (SR–FINRA– 2014–028) be and hereby is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.197 Jill M. Peterson, Assistant Secretary. [FR Doc. 2015–04419 Filed 3–3–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74384; File No. SR–MSRB– 2014–08] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Amendment No. 1 and Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change Consisting of Proposed Amendments to MSRB Rules G–1, on Separately Identifiable Department or Division of a Bank; G–2, on Standards of Professional Qualification; G–3, on Professional Qualification Requirements; and D–13, on Municipal Advisory Activities February 26, 2015. I. Introduction On November 18, 2014, the Municipal Securities Rulemaking Board (the ‘‘MSRB’’ or ‘‘Board’’) filed with the Securities and Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change consisting of proposed amendments to MSRB Rules G–1, on separately identifiable department or division of a bank; G–2, on standards of professional qualification; G–3, on professional qualification requirements; and D–13, on municipal advisory activities (the ‘‘proposed rule change’’). The proposed rule change was published for comment in the Federal Register on December 5, 2014.3 The Commission received five comment letters on the proposed rule change.4 On February 5, 2015, the mstockstill on DSK4VPTVN1PROD with NOTICES 196 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 73708 (December 1, 2014), 79 FR 72225 (December 5, 2014) (the ‘‘Proposing Release’’). 4 See Letters from Anonymous, dated December 25, 2014; Leslie M. Norwood, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association (‘‘SIFMA’’), 197 17 VerDate Sep<11>2014 18:11 Mar 03, 2015 Jkt 235001 MSRB submitted a response to the comments on the proposed rule change 5 and filed Amendment No. 1 (‘‘Amendment No. 1’’).6 The Commission received two comment letters on Amendment No. 1.7 On February 20, 2015, the MSRB submitted a response to the comments on Amendment No.1.8 On February 25, 2015, the MSRB submitted Amendment No. 2 (‘‘Amendment No. 2’’ and together with Amendment No. 1, the ‘‘Amendments’’).9 The Commission is publishing this notice to solicit comments on the Amendments from interested persons and is approving the proposed rule change, as modified by the Amendments, on an accelerated basis. II. Description of the Proposed Rule Change According to the MSRB, the purpose of the proposed rule change is to establish professional qualification requirements for municipal advisors and their associated persons and to make related changes to select MSRB rules.10 A full description of the proposed rule change is contained in the Proposing Release. dated December 26, 2014 (‘‘SIFMA Letter’’); Anonymous Attorney, on behalf of a registered investment advisor and municipal advisor (‘‘Anonymous Attorney’’), dated December 26, 2014 (‘‘Anonymous Letter’’); Tamara K. Salmon, Senior Associate Counsel, Investment Company Institute (‘‘ICI’’), dated December 29, 2014 (‘‘ICI Letter’’); and Terri Heaton, President, National Association of Municipal Advisors (‘‘NAMA’’), dated January 27, 2015 (‘‘NAMA Letter No. 1’’). 5 See Letter to Secretary, Commission, from Lawrence P. Sandor, Deputy General Counsel, MSRB, dated February 5, 2015 (‘‘MSRB Response Letter No. 1’’). 6 See Letter to Secretary, Commission, from Lawrence P. Sandor, Deputy General Counsel, MSRB, dated February 5, 2015. Amendment No. 1 partially amends the text of the proposed rule change to revise Rules G–1(a)(ii)(B), G–3(a)(i)(A)(2) and G–3(b)(i)(B) by deleting the following clause: ‘‘Except to the extent a person must be qualified as a municipal advisor representative to perform such services.’’ The MSRB believes that it would be premature to include such clause until certain foundational rules regarding municipal advisors are approved and effective. 7 See Letters from Dave A. Sanchez Attorney at Law (‘‘Sanchez’’), dated February 12, 2015 (‘‘Sanchez Letter’’); and Terri Heaton, President, NAMA, dated February 12, 2015 (‘‘NAMA Letter No. 2’’). 8 See Letter to Secretary, Commission, from Lawrence P. Sandor, Deputy General Counsel, MSRB, dated February 20, 2015 (‘‘MSRB Response Letter No. 2’’ and together with MSRB Response Letter No. 1, the ‘‘MSRB Response Letters’’). 9 See Letter to Secretary, Commission, from Michael Cowart, Assistant General Counsel, MSRB, dated February 25, 2015. Amendment No. 2 partially amends Amendment No. 1 to correct a technical error in a quotation of rule text. 10 See supra note 3 at 2. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 1. Proposed Amendments to Rule G–1 The proposed amendments to Rule G– 1 includes language to provide that, for purposes of its municipal advisory activities, the term ‘‘separately identifiable department or division of a bank’’ would have the same meaning as used in 17 CFR 240.15Ba1–1(d)(4).11 2. Proposed Amendments to Rule G–2 The proposed amendments to Rule G– 2 add a basic requirement that no municipal advisor shall engage in municipal advisory activities unless such municipal advisor and every natural person associated with such municipal advisor is qualified in accordance with the rules of the Board.12 3. Proposed Amendments to Rule G–3 Apprenticeship MSRB Rule G–3 currently requires a municipal securities representative to serve an apprenticeship period of 90 days before transacting business with any member of the public or receiving compensation for such activities.13 The MSRB believes that dealers and municipal advisors should determine the length and nature of the initial training for newly registered persons, consistent with industry feedback and the approach taken by Financial Industry Regulatory Authority (‘‘FINRA’’).14 Accordingly, the proposed amendments to Rule G–3 eliminate the apprenticeship requirement for municipal securities representatives and, similarly, do not propose an apprenticeship requirement for municipal advisor representatives.15 New Registration Classifications The proposed amendments to Rule G– 3 create two new registration classifications: (i) Municipal advisor representative; and (ii) municipal advisor principal.16 The proposed amendments to Rule G– 3 define a ‘‘municipal advisor representative’’ as a natural person associated with a municipal advisor who engages in municipal advisory activities on the municipal advisor’s behalf, other than a person performing only clerical, administrative, support or similar functions.17 The proposed amendments to Rule G–3 require each municipal advisor representative to take and pass the Municipal Advisor 11 See Exhibit 5 of the Amendments. 12 Id. 13 See supra note 3 at 9. 14 Id. 15 Id. 16 See supra note 11. 17 Id. E:\FR\FM\04MRN1.SGM 04MRN1 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices Representative Qualification Examination prior to being qualified as a municipal advisor representative.18 The proposed amendments to Rule G– 3 define a ‘‘municipal advisor principal’’ as a natural person associated with a municipal advisor who is qualified as a municipal advisor representative and is directly engaged in the management, direction or supervision of the municipal advisory activities of the municipal advisor and its associated persons.19 The proposed amendments to Rule G–3 require each municipal advisor to designate at least one municipal advisor principal.20 In addition, the proposed amendments to Rule G–3 require any person who ceases to be associated with a municipal advisor for two or more years (at any time after having qualified as a municipal advisor representative) to take and pass the Municipal Advisor Representative Qualification Examination prior to being qualified as a municipal advisor representative, unless a waiver is granted.21 MSRB Waiver The proposed amendments to Rule G– 3 and the Supplementary Material permit the MSRB to consider waiving the requirement that a municipal advisor representative or municipal advisor principal pass the Municipal Advisor Representative Qualification Examination in extraordinary cases: (1) Where the applicant participated in the development of the Municipal Advisor Representative Qualification Examination as a member of the MSRB’s Professional Qualifications Advisory Committee (‘‘PQAC’’); or (2) where the applicant previously qualified as a municipal advisor representative by passing the Municipal Advisor Representative Qualification Examination and such qualification lapsed pursuant to Rule G–3(d)(ii)(B).22 mstockstill on DSK4VPTVN1PROD with NOTICES 4. Proposed Amendments to Rule D–13 Currently, Rule D–13 defines municipal advisory activities as the activities described in Section 15B(e)(4)(A)(i) and (ii) of the Act.23 The proposed amendments to Rule D–13 incorporate Commission rules into the definition by providing that the term ‘‘municipal advisory activities’’ means, except as otherwise specifically provided by rule of the Board, the activities described in Section 15B(e)(4)(A)(i) and (ii) of the Act and the rules and regulations promulgated thereunder.24 5. Technical Amendments The proposed rule change would also make minor technical amendments to select MSRB rules, such as amending Rule G–3(a)(ii) to correctly re-letter G– 3(a)(ii)(D) as G–3(a)(ii)(C).25 6. Effective Date The MSRB requested that the proposed rule change become effective 60 days following the date of Commission approval.26 The MSRB stated that the effective date of the Municipal Advisor Representative Qualification Examination will be announced by the MSRB with at least 30 days notice.27 The MSRB further stated that prospective municipal advisor representatives will have one year from the effective date of the Municipal Advisor Representative Qualification Examination to pass such examination.28 III. Summary of Comments Received and the MSRB’s Response The Commission received five comment letters in response to the proposed rule change (four of which provide substantive comments) and two comment letters in response to Amendment No. 1.29 The Commission received MSRB Response Letter No. 1 in response to comments regarding the proposed rule change and MSRB Response Letter No. 2 in response to comments regarding Amendment No. 1.30 A full description of the comments, MSRB responses, and amendments are contained in the comment letters, the MSRB Response Letters, and the Amendments, respectively. 1. SIFMA Letter Professional Qualifications Examination SIFMA believes that persons currently qualified to perform municipal securities activities should also be qualified to perform municipal advisor activities.31 In other words, SIFMA believes that after the effective date of the proposed rule change, the Series 52 qualification examination should be sufficient for both municipal securities representatives and municipal advisor representatives.32 26 See 28 Id. 20 Id. supra note 3 at 10. 27 Id. 19 Id. 29 See at 6. supra notes 4 and 7. 30 See supra notes 5 and 8. 31 See SIFMA Letter at 2. 32 Id. 22 Id. 23 See supra note 3 at 5. VerDate Sep<11>2014 18:11 Mar 03, 2015 Jkt 235001 PO 00000 Frm 00079 Fmt 4703 MSRB Response Letter No. 1 at 3. at 3–4. 35 Id. at 4. 36 Id. 37 See SIFMA Letter at 3. 38 Id. at 4. 39 Id. at 3. 40 See MSRB Response Letter No. 1 at 4. 41 Id. 42 Id. 34 Id. supra note 11. 25 Id. 18 Id. 21 Id. Given the new regulatory regime for municipal advisors and the differences in the roles of municipal advisor and securities professionals, the MSRB does not believe the Series 52 examination (or the general securities representative examination that qualified municipal securities representatives before November 7, 2011) would sufficiently determine whether a municipal advisor professional meets a minimal level of competency to engage in municipal advisory activities.33 The MSRB stated that the focus of the Series 52 examination is not on municipal advisory activities.34 The MSRB further stated that the questions being developed for the Municipal Advisor Representative Qualification Examination target the job responsibilities of municipal advisor professionals.35 The MSRB noted that the roles and job responsibilities of municipal advisor representatives and municipal securities representatives are distinct, and the body of law that applies to each type of professional reflects the differences in such roles and responsibilities.36 SIFMA is concerned that development of a new qualification examination would take an additional two to three years.37 SIFMA states that because the Series 52 examination currently exists there would be no unnecessary delay in developing test material and administering the test, thereby avoiding an unnecessary delay in testing.38 SIFMA also contends it would be faster and more cost efficient for municipal advisor professionals to take the Series 52 examination.39 The MSRB does not agree with SIFMA’s assertion that developing a new qualification examination would take an additional two to three years.40 The MSRB stated that PQAC has been working expeditiously in developing the Municipal Advisor Representative Qualification Examination.41 The MSRB also reiterated its position that it does not believe the Series 52 examination would test the basic competency of municipal advisor professionals.42 The MSRB believes that while it is hard to dispute that using an existing exam would be faster and less costly, such an approach would fail to demonstrate basic competency of municipal advisor 33 See 24 See Sfmt 4703 11707 E:\FR\FM\04MRN1.SGM 04MRN1 11708 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices professionals to engage in municipal advisory activities.43 The MSRB stated that the costs, timing, and efficiency of the proposed rule change should only be appropriately compared to reasonable regulatory alternative—a criterion the Series 52 examination does not meet.44 SIFMA suggests that developing a separate test for municipal advisor professionals is an inefficient process and unfairly burdens the large percentage of municipal advisor professionals who are associated with municipal securities dealers.45 The MSRB does not believe that such individuals would be unfairly burdened by a new test.46 To the contrary, the MSRB believes that failing to develop a separate test for municipal advisor professionals could place individuals not associated with dealers at a competitive disadvantage and could result in an undue burden on small municipal advisors.47 The MSRB stated that the market for municipal advisory services is separate and distinct from the market for the services of municipal securities brokers and dealers and, as such, it is both appropriate and reasonable that all professionals providing municipal advisory services should be evaluated according to identical criteria, regardless of the status of their employer.48 Grandfathering Current Municipal Securities Representatives SIFMA suggests that if the MSRB decides to continue with the development of a new test for qualification as a municipal advisor representative, then associated persons currently qualified as municipal securities representatives should be grandfathered in as municipal advisor representatives, if they so choose.49 SIFMA believes that this methodology would be consistent with other major changes to qualifications examinations.50 The MSRB responded by reiterating its view that grandfathering would be inconsistent with the intent of Congress.51 The MSRB believes that requiring municipal advisor professionals to take and pass a basic qualification examination ensures that these individuals possess a minimum level of understanding of the role and responsibilities of municipal advisors and the applicable rules and regulations.52 The MSRB stated that investors, municipal entities, and the general public will be better served by a regulatory regime that requires all municipal advisor professionals to pass the same basic competency test.53 Economic Analysis SIFMA believes that the cost-benefit analysis contained in in the Proposing Release was inadequate.54 SIFMA suggests that the MSRB conduct a full cost-benefit analysis of the proposed rule change prior to its approval.55 The MSRB responded by stating that it considered the costs and benefits of the proposed rule change and even utilized the cost estimate per individual test taker provided by SIFMA in determining the likely initial cost to the industry and the likely ongoing expense.56 The MSRB also refined its estimate of the initial cost based on the number of Form MA-Is filed with the SEC by registered municipal advisors (as of January 20, 2015), which the MSRB stated is not materially different from the cost estimate used in its economic analysis.57 The MSRB believes its economic analysis was sound and that no further analysis is warranted.58 Continuing Education Requirement for Municipal Advisor Representatives SIFMA suggests that the MSRB develop continuing education requirements for municipal advisor representatives.59 SIFMA believes this concern was not addressed by the proposed rule change.60 The MSRB responded by stating that such suggestion is not relevant to the proposed rule change.61 The MSRB noted that the Act requires the MSRB to provide continuing education requirements for municipal advisors and it will likely consider rulemaking on this topic in the near future.62 PQAC Nomination Process SIFMA and its members believe that the process for nomination to the MSRB’s PQAC should be fully transparent and the members of PQAC should be listed on the MSRB’s Web site.63 Also, SIFMA further states that it is in the best interest of every industry member to ensure that the test questions that are developed are fair, even-handed and suitable for a basic competency examination.64 The MSRB stated that it understands the concern raised by SIFMA and believes that its examinations are developed in a fair, even-handed and suitable manner.65 The MSRB stated it contemplated publishing the names of PQAC members but is concerned that such transparency will undermine the test development process.66 The MSRB believes that it is not appropriate to publish the names of PQAC members given the importance of confidentiality and the integrity of the process.67 The MSRB further stated that it contracts with an external testing professional to ensure the overall integrity of the test development process, including the selection of PQAC members, is fair and in accordance with accepted standards for professional test development.68 Nevertheless, the MSRB stated that it will consider providing more information about the selection process and the criteria used by the MSRB to select PQAC members.69 2. ICI Letter ICI recommends that the MSRB reconsider its current approach to develop only one examination for representatives because such approach will result in use of an examination that does not sufficiently test competencies relevant to the advisory representative’s business and is inconsistent with the approach taken by other self-regulatory organizations.70 ICI suggests that the MSRB utilize at least two examinations—one for representatives of a municipal advisor whose advisory activities are limited to municipal fund securities, and one for representatives whose advice is limited to municipal securities other than municipal fund securities.71 The MSRB responded by stating that it believes that individuals who engage in municipal advisory activities regarding municipal fund securities should demonstrate knowledge of all of the rules and regulations governing municipal advisors.72 The MSRB stated that these rules and regulations 52 Id. mstockstill on DSK4VPTVN1PROD with NOTICES 53 Id. 43 Id. 4–5. 44 Id. at 5. 45 See SIFMA Letter at 5. 46 See MSRB Response Letter No. 1 at 5. 47 Id. 48 Id. 49 See SIFMA Letter at 5. 50 Id. 51 See MSRB Response Letter No. 1 at 5. VerDate Sep<11>2014 18:11 Mar 03, 2015 Jkt 235001 63 See 54 See 64 Id. SIFMA Letter at 6. 55 Id. at 2. 56 See MSRB Response Letter No. 1 at 6. 57 Id. 58 Id. 59 See SIFMA Letter at 6. 60 Id. 61 See MSRB Response Letter No. 1 at 6. 62 Id. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 SIFMA Letter at 6. at 6–7. 65 See MSRB Response Letter No. 1 at 6. 66 Id. 67 Id. at 7. 68 Id. 69 Id. 70 See ICI Letter at 2. 71 Id. 72 See MSRB Response Letter No. 1 at 7. E:\FR\FM\04MRN1.SGM 04MRN1 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices generally will apply to all municipal advisors, regardless of the product that is the subject of the advice provided.73 As such, the MSRB believes that all municipal advisors should have knowledge of the regulatory framework and the basic obligations of municipal advisors.74 ICI stated that it recognizes its recommendation of two examinations may impose additional burdens, however, ICI believes such approach is consistent with the manner in which self-regulatory organizations have long implemented examination requirements.75 ICI further stated that there is a long-standing self-regulatory organization practice of developing discrete examinations based on the nature of the business conducted.76 The MSRB responded by noting that self-regulatory organizations have developed a number of qualification examinations; however, most of these examinations are focused on the role of the investment professional, such as compliance officer (Series 14), investment adviser (Series 65), operations professional (Series 99), research analyst (Series 86 and 87), equity trader (Series 55), financial and operations principal (Series 27), general securities principal (Series 24), general securities sales supervisor (Series 9 and 10), and general securities representative (Series 7).77 The MSRB stated that for each of these examinations, a test taker may be required to demonstrate knowledge of a variety of products, consistent with the role of the individual; even where an examination is limited a candidate is expected to be familiar with a variety of products.78 Consequently, the MSRB believes its approach to the Municipal Advisor Representative Qualification Examination is consistent with its prior practice and the practice of other selfregulatory organizations.79 mstockstill on DSK4VPTVN1PROD with NOTICES 3. Anonymous Letter Anonymous Attorney believes that individuals who are Chartered Financial Analyst (‘‘CFA’’) charterholders should be exempt from the proposed Municipal Advisor Representative Qualification Examination requirement in the manner suggested by the CFA Institute (‘‘CFAI’’) in the CFAI’s response to MSRB Regulatory Notice 2014–08.80 CFAI proposed that the examination requirement be constructed in a modular fashion with one component focusing on the knowledge of business and the second component devoted to the rules and regulations of the municipal securities market.81 CFAI also requested that CFA charterholders be granted a waiver from the examination component focusing on the knowledge of business.82 Anonymous Attorney believes that separating the examination into two modules can be undertaken with minimal effort.83 Anonymous Attorney also stated that the examination requirement is burdensome and concluded that such examination could drive some CFA charterholders out of the municipal advisory business.84 The MSRB stated that it recognizes the requirements established by CFAI for CFA charterholders and understands that fixed income securities are covered on its examinations.85 However, the MSRB explained that the Municipal Advisor Representative Qualification Examination will focus on the role and responsibilities of municipal advisor professionals and the rules and regulations governing their conduct.86 The MSRB highlighted that the Municipal Advisor Representative Qualification Examination will not solely test a candidate’s knowledge of municipal securities.87 In addition, the MSRB stated that Anonymous Attorney has not provided any evidence that the CFA examinations (Levels I, II or III) test an individual’s knowledge of the role and responsibilities of a municipal advisor.88 The MSRB believes the assertion that CFA charterholders may be driven out of the market because of the new test is purely speculative.89 The MSRB further stated that Anonymous Attorney offers no information regarding the number of CFA charterholders that are engaged in municipal advisory activities or why they would be in any different position than individuals who passed other qualification examinations.90 Given that the costs and time associated with receiving and maintaining a CFA charter exceed any reasonable estimate of the costs to complete a new municipal advisor examination, the MSRB stated its expectation that the new exam would add only marginally to a CFA charterholder’s professional qualification expenses.91 For the foregoing reasons, the MSRB does not believe that a modular examination for municipal advisor professionals would be appropriate.92 4. NAMA Letter No. 1 NAMA supports the efforts of the MSRB to set professional qualification standards for municipal advisor professionals.93 NAMA believes the MSRB has taken the most cost-effective approach at this time.94 Additionally, NAMA supports the decision by the MSRB to have a uniform competency requirement for all persons deemed to be municipal advisor representatives regardless of whether such persons have passed other examinations (such as the Series 52 or Series 7 examinations).95 Consistent with the proposed rule change, NAMA does not believe that the MSRB should grandfather individuals who have passed such examinations.96 NAMA suggests, however, that the MSRB continue to evaluate the feasibility and wisdom of supplemental or targeted subject matter examinations.97 The MSRB does not believe that a supplemental or targeted subject area examination approach is appropriate.98 The MSRB believes it has a demonstrated commitment to seeking ways to improve regulatory efficiency generally and would be open to assessing alternative approaches to the assessment of professional qualifications once the municipal advisor regulatory framework is fully implemented.99 5. Sanchez Letter and NAMA Letter No. 2 Sanchez expressed concern that Amendment No. 1 will effectively create an exemption for municipal securities representatives who engage in financial advisory and consultant services for issuers in connection with the issuance of municipal securities (the ‘‘subject activity’’) from having to pass the Municipal Advisor Representative Qualification Examination to qualify as municipal advisor representatives.100 Similarly, NAMA expressed concern that Amendment No. 1 would provide municipal securities representatives 81 Id. 91 Id. 82 Id. 92 Id. 73 Id. 83 Id. 74 Id. 84 Id. 75 See ICI Letter at 3–4. 76 Id. 77 See MSRB Response Letter at 7–8. 78 Id. 79 Id. at 8. Anonymous Letter No. 1 at 1. 80 See VerDate Sep<11>2014 18:11 Mar 03, 2015 Jkt 235001 at 2. at 3. 85 See MSRB Response Letter No. 1 at 8. 86 Id. 87 Id. 88 Id. 89 Id. 90 Id. PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 11709 at 8–9. at 9. 93 See NAMA Letter No. 1 at 1. 94 Id. at 2. 95 Id. at 1. 96 Id. at 2. 97 Id. 98 See MSRB Response Letter No. 1 at 9. 99 Id. 100 See Sanchez Letter at 1. E:\FR\FM\04MRN1.SGM 04MRN1 mstockstill on DSK4VPTVN1PROD with NOTICES 11710 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices who engage in the subject activity an exemption from having to pass the Municipal Advisor Representative Qualification Examination because the subject activity would be considered municipal securities representative activity.101 NAMA also stated that Amendment No. 1 expands the definition of municipal advisory activity, as provided by the Act and Commission rules, because it appears to allow dealers and bank dealers to engage in municipal advisory activity without proper registration.102 The MSRB responded by clarifying that Amendment No. 1 would not have the effect of limiting, and was not intended to limit, the applicability of the municipal advisor regulatory regime, including MSRB rules governing the municipal advisory activities of municipal advisors, or to alter the definition of municipal advisory activities.103 The MSRB noted that the determination of whether an individual is engaged in municipal advisory activities is based on the scope of the individual’s activities, and not the individual’s status.104 The MSRB stated that due to such principle, a dealer and its associated persons could simultaneously be subject to MSRB rules applicable to dealers and MSRB rules applicable to municipal advisors.105 The MSRB stated that Amendment No. 1 would retain the current language in the MSRB professional qualification rules to prevent any confusion regarding the application of MSRB rules governing dealers to the financial advisory activities of municipal securities representatives while MSRB rules governing municipal advisors are developed and implemented and until the MSRB makes any future determinations regarding the application of such rules.106 The MSRB further stated that any individual engaged in or supervising municipal advisory activities must comply with the professional qualification requirements for municipal advisor representatives, which will include at a future date the taking and passing of the Municipal Advisor Representative Qualification Examination.107 The MSRB also represented that Amendment No. 1 has no bearing on the 101 See NAMA Letter No. 2 at 1. at 1–2. 103 See MSRB Response Letter No. 2 at 2. 104 Id. 105 Id. 106 Id. 107 Id. at 2–3. 102 Id. VerDate Sep<11>2014 18:11 Mar 03, 2015 Jkt 235001 definition of municipal advisory activities.108 IV. Discussion and Commission Findings The Commission has carefully considered the proposed rule change, as modified by the Amendments, as well as the comments received, and the responses by the MSRB to such comments. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the MSRB. In particular, the Commission finds that the proposed rule change is consistent with Section 15B(b)(2)(A) of the Act, which provides that the MSRB’s rules shall provide that no municipal securities broker or municipal securities dealer shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any municipal security, and no broker, dealer, municipal securities dealer, or municipal advisor shall provide advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, unless . . . such municipal securities broker or municipal securities dealer and every natural person associated with such municipal securities broker or municipal securities dealer meet such standards of training, experience, competence, and such other qualifications as the Board finds necessary or appropriate in the public interest or for the protection of investors and municipal entities or obligated persons.109 Section 15B(b)(2)(A) of the Act also provides that, in connection with the definition and application of such standards, the MSRB may appropriately classify municipal advisors and their associated persons, specify that all or any portion of such standards shall be applicable to any such class, and require persons in any such class to pass an examination regarding such standards of competence.110 The Commission believes that the proposed rule change is consistent with Section 15B(b)(2)(A) of the Act because the proposed rule change requires individuals who engage in or supervise municipal advisory activities to pass a professional qualification examination which is an established means for determining the basic competency of individuals in a particular class. The Commission believes that requiring prospective 108 Id. 109 15 at 3. U.S.C. 78o–4(b)(2)(A). 110 Id. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 municipal advisor representatives to pass a basic qualification examination will protect investors, municipal entities, and obligated persons by ensuring such representatives have a basic understanding of the role of a municipal advisor representative and the rules and regulations governing such individuals. Additionally, Section 15B(b)(2)(L)(iii) of the Act provides that the MSRB’s rules shall provide professional standards with respect to municipal advisors.111 The Commission believes that the proposed rule change is consistent with Section 15B(b)(2)(L)(iii) of the Act because it would establish professional standards for those individuals engaged in or supervising municipal advisory activities by requiring such individuals to demonstrate a basic competency regarding the role of municipal advisor representatives and the rules and regulations governing the conduct of such persons. Section 15B(b)(2)(L)(iv) of the Act requires that MSRB rules not impose a regulatory burden on small municipal advisors that is not necessary or appropriate in the public interest and for the protection of investors, municipal entities, and obligated persons, provided that there is robust protection of investors against fraud.112 The Commission believes that the proposed rule change is consistent with Section 15B(b)(2)(L)(iv) of the Act. While the proposed rule change would affect all municipal advisors, including small municipal advisors, it is a necessary and appropriate regulatory burden in order to establish the baseline competence of those individuals engaged in municipal advisory activities. Establishing a baseline competence is necessary for the protection of investors, municipal entities, and obligated persons. The Commission also believes such baseline competence is in the public interest because it promotes compliance with the rules and regulations governing the conduct of municipal advisors. In approving the proposed rule change, the Commission has considered the proposed rule change’s impact on efficiency, competition, and capital formation.113 The Commission believes that the proposed rule change includes accommodations that help promote efficiency. Specifically, the MSRB has provided a one-year grace period for passing the examination. As noted by the MSRB, the grace period provides 111 15 U.S.C. 78o–4(b)(2)(L)(iii). U.S.C. 78o–4(b)(2)(L)(iv). 113 15 U.S.C. 78c(f). 112 15 E:\FR\FM\04MRN1.SGM 04MRN1 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices municipal advisor representatives with sufficient time to study and take the examination without causing an undue disruption to the business of the municipal advisor. The Commission does not believe that the proposed rule change would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act since it would apply equally to all municipal advisor representatives who engage in municipal advisory activities. Furthermore, the Commission believes that the potential burdens created by the proposed rule change are to be likely outweighed by the benefits of establishing baseline professional qualification standards and promoting compliance with the rules and regulations governing the conduct of municipal advisors. The Commission has reviewed the record for the proposed rule change and notes that the record does not contain any information to indicate that the proposed rule change would have a negative effect on capital formation. As noted above, the Commission received five comment letters on the proposed rule change and two comment letters on Amendment No. 1. The Commission believes that the MSRB considered carefully and responded adequately to the comments and concerns regarding the proposed rule change and Amendment No. 1. For the reasons noted above, including those discussed in the Amendments and the MSRB Response Letters, the Commission believes that the proposed rule change, as amended by the Amendments, is consistent with the Act. mstockstill on DSK4VPTVN1PROD with NOTICES V. Solicitation of Comments on the Amendments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the Amendments to the proposed rule change are 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–2014–08 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. VerDate Sep<11>2014 18:11 Mar 03, 2015 Jkt 235001 All submissions should refer to File Number SR–MSRB–2014–08. 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– 2014–08 and should be submitted on or before March 25, 2015. VI. Accelerated Approval of the Proposed Rule Change as Modified by the Amendments The Commission finds good cause for approving the proposed rule change, as amended by the Amendments, prior to the 30th day after the date of publication of notice in the Federal Register. Amendment No. 1 partially amends the text of the proposed rule change to revise Rules G–1(a)(ii)(B), G– 3(a)(i)(A)(2), and G–3(b)(i)(B) by deleting the following clause: ‘‘Except to the extent a person must be qualified as a municipal advisor representative to perform such services.’’ 114 Amendment No. 2 partially amends Amendment No. 1 to correct a technical error in a quotation of rule text.115 The MSRB believes Amendment No. 1 will clarify and ensure that municipal securities representatives or principals who engage in the subject activity remain covered by applicable dealer regulations until such time as the MSRB may determine that such activities are appropriately covered by the developing municipal advisor regulatory framework.116 The MSRB believes Amendment No. 2 would make a mere technical correction.117 The MSRB does not believe Amendment No. 2 raises significant new issues or alters the substance of the proposed rule change.118 As previously noted, Sanchez and NAMA expressed concern that Amendment No. 1 will effectively provide an exemption for currently qualified municipal securities representative from having to take and pass the Municipal Advisor Representative Qualification Examination.119 NAMA also believes that the Amendment No. 1 expands the definition of municipal advisory activity because it appears to allow dealers and bank dealers to engage in municipal advisory activity without proper registration.120 The MSRB responded by clarifying that Amendment No. 1 would not have the effect of limiting, and was not intended to limit, the applicability of the municipal advisor regulatory regime, including MSRB rules governing the municipal advisory activities of municipal advisors, or to alter the definition of municipal advisory activities.121 According to the MSRB, Amendment No. 1 would retain the current language in the MSRB professional qualification rules to prevent any confusion regarding the application of MSRB rules governing dealers to the financial advisory activities of municipal securities representatives while MSRB rules governing municipal advisors are developed and implemented.122 The Commission believes that the revisions in Amendment No. 1 are being made to address the perception of a regulatory gap and are consistent with the purpose of the proposed rule change. The Commission believes that the revision in Amendment No. 2 is being made to correct a technical error. The Commission does not believe the revisions included in the Amendments raise significant new issues or alter the substance of the proposed rule change because the proposed rule change will retain the current rule language in Rules G–1(a)(ii)(B), G–3(a)(i)(A)(2), and G– 3(b)(i)(B). Accordingly, the Commission finds good cause for approving the proposed rule change, as modified by 116 See 117 See supra note 6. supra note 9. 118 Id. 119 See supra note 7. NAMA Letter No. 2 at 1–2. 121 See MSRB Response Letter No. 2 at 2. 122 Id. 120 See 114 See 115 See PO 00000 supra note 6. supra note 9. Frm 00083 Fmt 4703 Sfmt 4703 11711 E:\FR\FM\04MRN1.SGM 04MRN1 11712 Federal Register / Vol. 80, No. 42 / Wednesday, March 4, 2015 / Notices the Amendments, on an accelerated basis, pursuant to Section 19(b)(2) of the Act. VII. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,123 that the proposed rule change (SR–MSRB–2014– 08), as modified by the Amendments, be, and hereby is, approved. For the Commission, pursuant to delegated authority.124 Jill M. Peterson, Assistant Secretary. [FR Doc. 2015–04431 Filed 3–3–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74380; File No. SR–EDGA– 2015–12] Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.11, Routing to Away Trading Centers, To Delete References to the ROLF Routing Option, Which Routed Orders to LavaFlow ECN February 26, 2015. mstockstill on DSK4VPTVN1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 23, 2015, EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6)(iii) thereunder,4 which renders it effective upon filing with the Commission. 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 filed a proposal to amend Rule 11.11, Routing to Away Trading Centers, to delete references to the ROLF routing option, which routed orders to LavaFlow ECN. 123 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6)(iii). 124 17 VerDate Sep<11>2014 18:11 Mar 03, 2015 Jkt 235001 The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.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 Exchange 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 Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 11.11, Routing to Away Trading Centers, to delete references under subparagraphs (7) and (15) to the ROLF routing option, which routed to LavaFlow ECN. These changes are being proposed in response to LavaFlow ECN ceasing market operations on Friday, January 30, 2015. Under Rule 11.11(g)(7), an order utilizing the ROLF routing option first checked the System 5 for available shares and was then routed to the LavaFlow ECN. If shares remained unexecuted after being routed, they were cancelled, unless otherwise instructed by the User.6 In addition, under Rule 11.11(g)(15), a User was able to couple the Post to Away option and ROLF routing option. The grouping of the Post to Away and ROLF routing options instructed the System to route and post the order on LavaFlow ECN. As of February 2, 2015, the Exchange, via BATS Trading, the Exchange’s affiliated routing brokerdealer, was no longer able to route orders to LavaFlow ECN because it ceased operations. As a result, the Exchange no longer offers the ROLF routing option nor permit [sic] it to be coupled with a Post to Away routing 5 Exchange Rule 1.5(cc) defines ‘‘System’’ as ‘‘the electronic communications and trading facility designated by the Board through which securities orders of Users are consolidated for ranking, execution and, when applicable, routing away.’’ 6 The term ‘‘User’’ is defined as ‘‘any Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3.’’ See Exchange Rule 1.5(ee). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 option. Therefore, the Exchange proposes to delete the ROLF routing option under Rule 11.11(g)(7) as well as a reference to the ROLF routing option under Rule 11.11(g)(15). 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 7 in general, and furthers the objectives of Section 6(b)(5) of the Act 8 in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange does not believe that this proposal will permit unfair discrimination among customers, brokers, or dealers because the ROLF routing option will no longer be available to all Users. The proposed change is in response to LavaFlow ECN ceasing market operations on Friday, January 30, 2015. As of February 2, 2015, the Exchange, via BATS Trading, was no longer able to route orders to LavaFlow ECN and, therefore, proposes to delete references to the ROLF routing option under Rules 11.11(g)(7) and (15). The proposal is intended to make the Exchange’s rules clearer and less confusing for investors by eliminating a routing option that is no longer available; thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposal will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issues but rather avoid investor confusion by eliminating a routing option that is no longer made available by the Exchange. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. 7 15 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). E:\FR\FM\04MRN1.SGM 04MRN1

Agencies

[Federal Register Volume 80, Number 42 (Wednesday, March 4, 2015)]
[Notices]
[Pages 11706-11712]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-04431]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74384; File No. SR-MSRB-2014-08]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Amendment No. 1 and Amendment No. 2 and 
Order Granting Accelerated Approval of a Proposed Rule Change 
Consisting of Proposed Amendments to MSRB Rules G-1, on Separately 
Identifiable Department or Division of a Bank; G-2, on Standards of 
Professional Qualification; G-3, on Professional Qualification 
Requirements; and D-13, on Municipal Advisory Activities

February 26, 2015.

I. Introduction

    On November 18, 2014, the Municipal Securities Rulemaking Board 
(the ``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (the ``SEC'' or ``Commission''), pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change consisting of proposed 
amendments to MSRB Rules G-1, on separately identifiable department or 
division of a bank; G-2, on standards of professional qualification; G-
3, on professional qualification requirements; and D-13, on municipal 
advisory activities (the ``proposed rule change''). The proposed rule 
change was published for comment in the Federal Register on December 5, 
2014.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 73708 (December 1, 
2014), 79 FR 72225 (December 5, 2014) (the ``Proposing Release'').
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    The Commission received five comment letters on the proposed rule 
change.\4\ On February 5, 2015, the MSRB submitted a response to the 
comments on the proposed rule change \5\ and filed Amendment No. 1 
(``Amendment No. 1'').\6\
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    \4\ See Letters from Anonymous, dated December 25, 2014; Leslie 
M. Norwood, Managing Director and Associate General Counsel, 
Securities Industry and Financial Markets Association (``SIFMA''), 
dated December 26, 2014 (``SIFMA Letter''); Anonymous Attorney, on 
behalf of a registered investment advisor and municipal advisor 
(``Anonymous Attorney''), dated December 26, 2014 (``Anonymous 
Letter''); Tamara K. Salmon, Senior Associate Counsel, Investment 
Company Institute (``ICI''), dated December 29, 2014 (``ICI 
Letter''); and Terri Heaton, President, National Association of 
Municipal Advisors (``NAMA''), dated January 27, 2015 (``NAMA Letter 
No. 1'').
    \5\ See Letter to Secretary, Commission, from Lawrence P. 
Sandor, Deputy General Counsel, MSRB, dated February 5, 2015 (``MSRB 
Response Letter No. 1'').
    \6\ See Letter to Secretary, Commission, from Lawrence P. 
Sandor, Deputy General Counsel, MSRB, dated February 5, 2015. 
Amendment No. 1 partially amends the text of the proposed rule 
change to revise Rules G-1(a)(ii)(B), G-3(a)(i)(A)(2) and G-
3(b)(i)(B) by deleting the following clause: ``Except to the extent 
a person must be qualified as a municipal advisor representative to 
perform such services.'' The MSRB believes that it would be 
premature to include such clause until certain foundational rules 
regarding municipal advisors are approved and effective.
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    The Commission received two comment letters on Amendment No. 1.\7\ 
On February 20, 2015, the MSRB submitted a response to the comments on 
Amendment No.1.\8\ On February 25, 2015, the MSRB submitted Amendment 
No. 2 (``Amendment No. 2'' and together with Amendment No. 1, the 
``Amendments'').\9\ The Commission is publishing this notice to solicit 
comments on the Amendments from interested persons and is approving the 
proposed rule change, as modified by the Amendments, on an accelerated 
basis.
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    \7\ See Letters from Dave A. Sanchez Attorney at Law 
(``Sanchez''), dated February 12, 2015 (``Sanchez Letter''); and 
Terri Heaton, President, NAMA, dated February 12, 2015 (``NAMA 
Letter No. 2'').
    \8\ See Letter to Secretary, Commission, from Lawrence P. 
Sandor, Deputy General Counsel, MSRB, dated February 20, 2015 
(``MSRB Response Letter No. 2'' and together with MSRB Response 
Letter No. 1, the ``MSRB Response Letters'').
    \9\ See Letter to Secretary, Commission, from Michael Cowart, 
Assistant General Counsel, MSRB, dated February 25, 2015. Amendment 
No. 2 partially amends Amendment No. 1 to correct a technical error 
in a quotation of rule text.
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II. Description of the Proposed Rule Change

    According to the MSRB, the purpose of the proposed rule change is 
to establish professional qualification requirements for municipal 
advisors and their associated persons and to make related changes to 
select MSRB rules.\10\ A full description of the proposed rule change 
is contained in the Proposing Release.
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    \10\ See supra note 3 at 2.
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1. Proposed Amendments to Rule G-1

    The proposed amendments to Rule G-1 includes language to provide 
that, for purposes of its municipal advisory activities, the term 
``separately identifiable department or division of a bank'' would have 
the same meaning as used in 17 CFR 240.15Ba1-1(d)(4).\11\
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    \11\ See Exhibit 5 of the Amendments.
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2. Proposed Amendments to Rule G-2

    The proposed amendments to Rule G-2 add a basic requirement that no 
municipal advisor shall engage in municipal advisory activities unless 
such municipal advisor and every natural person associated with such 
municipal advisor is qualified in accordance with the rules of the 
Board.\12\
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    \12\ Id.
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3. Proposed Amendments to Rule G-3

Apprenticeship
    MSRB Rule G-3 currently requires a municipal securities 
representative to serve an apprenticeship period of 90 days before 
transacting business with any member of the public or receiving 
compensation for such activities.\13\ The MSRB believes that dealers 
and municipal advisors should determine the length and nature of the 
initial training for newly registered persons, consistent with industry 
feedback and the approach taken by Financial Industry Regulatory 
Authority (``FINRA'').\14\ Accordingly, the proposed amendments to Rule 
G-3 eliminate the apprenticeship requirement for municipal securities 
representatives and, similarly, do not propose an apprenticeship 
requirement for municipal advisor representatives.\15\
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    \13\ See supra note 3 at 9.
    \14\ Id.
    \15\ Id.
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New Registration Classifications
    The proposed amendments to Rule G-3 create two new registration 
classifications: (i) Municipal advisor representative; and (ii) 
municipal advisor principal.\16\
---------------------------------------------------------------------------

    \16\ See supra note 11.
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    The proposed amendments to Rule G-3 define a ``municipal advisor 
representative'' as a natural person associated with a municipal 
advisor who engages in municipal advisory activities on the municipal 
advisor's behalf, other than a person performing only clerical, 
administrative, support or similar functions.\17\ The proposed 
amendments to Rule G-3 require each municipal advisor representative to 
take and pass the Municipal Advisor

[[Page 11707]]

Representative Qualification Examination prior to being qualified as a 
municipal advisor representative.\18\
---------------------------------------------------------------------------

    \17\ Id.
    \18\ Id.
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    The proposed amendments to Rule G-3 define a ``municipal advisor 
principal'' as a natural person associated with a municipal advisor who 
is qualified as a municipal advisor representative and is directly 
engaged in the management, direction or supervision of the municipal 
advisory activities of the municipal advisor and its associated 
persons.\19\ The proposed amendments to Rule G-3 require each municipal 
advisor to designate at least one municipal advisor principal.\20\
---------------------------------------------------------------------------

    \19\ Id.
    \20\ Id.
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    In addition, the proposed amendments to Rule G-3 require any person 
who ceases to be associated with a municipal advisor for two or more 
years (at any time after having qualified as a municipal advisor 
representative) to take and pass the Municipal Advisor Representative 
Qualification Examination prior to being qualified as a municipal 
advisor representative, unless a waiver is granted.\21\
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    \21\ Id.
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MSRB Waiver
    The proposed amendments to Rule G-3 and the Supplementary Material 
permit the MSRB to consider waiving the requirement that a municipal 
advisor representative or municipal advisor principal pass the 
Municipal Advisor Representative Qualification Examination in 
extraordinary cases: (1) Where the applicant participated in the 
development of the Municipal Advisor Representative Qualification 
Examination as a member of the MSRB's Professional Qualifications 
Advisory Committee (``PQAC''); or (2) where the applicant previously 
qualified as a municipal advisor representative by passing the 
Municipal Advisor Representative Qualification Examination and such 
qualification lapsed pursuant to Rule G-3(d)(ii)(B).\22\
---------------------------------------------------------------------------

    \22\ Id.
---------------------------------------------------------------------------

4. Proposed Amendments to Rule D-13

    Currently, Rule D-13 defines municipal advisory activities as the 
activities described in Section 15B(e)(4)(A)(i) and (ii) of the 
Act.\23\ The proposed amendments to Rule D-13 incorporate Commission 
rules into the definition by providing that the term ``municipal 
advisory activities'' means, except as otherwise specifically provided 
by rule of the Board, the activities described in Section 
15B(e)(4)(A)(i) and (ii) of the Act and the rules and regulations 
promulgated thereunder.\24\
---------------------------------------------------------------------------

    \23\ See supra note 3 at 5.
    \24\ See supra note 11.
---------------------------------------------------------------------------

5. Technical Amendments

    The proposed rule change would also make minor technical amendments 
to select MSRB rules, such as amending Rule G-3(a)(ii) to correctly re-
letter G-3(a)(ii)(D) as G-3(a)(ii)(C).\25\
---------------------------------------------------------------------------

    \25\ Id.
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6. Effective Date

    The MSRB requested that the proposed rule change become effective 
60 days following the date of Commission approval.\26\ The MSRB stated 
that the effective date of the Municipal Advisor Representative 
Qualification Examination will be announced by the MSRB with at least 
30 days notice.\27\ The MSRB further stated that prospective municipal 
advisor representatives will have one year from the effective date of 
the Municipal Advisor Representative Qualification Examination to pass 
such examination.\28\
---------------------------------------------------------------------------

    \26\ See supra note 3 at 10.
    \27\ Id.
    \28\ Id. at 6.
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III. Summary of Comments Received and the MSRB's Response

    The Commission received five comment letters in response to the 
proposed rule change (four of which provide substantive comments) and 
two comment letters in response to Amendment No. 1.\29\ The Commission 
received MSRB Response Letter No. 1 in response to comments regarding 
the proposed rule change and MSRB Response Letter No. 2 in response to 
comments regarding Amendment No. 1.\30\ A full description of the 
comments, MSRB responses, and amendments are contained in the comment 
letters, the MSRB Response Letters, and the Amendments, respectively.
---------------------------------------------------------------------------

    \29\ See supra notes 4 and 7.
    \30\ See supra notes 5 and 8.
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1. SIFMA Letter

Professional Qualifications Examination
    SIFMA believes that persons currently qualified to perform 
municipal securities activities should also be qualified to perform 
municipal advisor activities.\31\ In other words, SIFMA believes that 
after the effective date of the proposed rule change, the Series 52 
qualification examination should be sufficient for both municipal 
securities representatives and municipal advisor representatives.\32\
---------------------------------------------------------------------------

    \31\ See SIFMA Letter at 2.
    \32\ Id.
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    Given the new regulatory regime for municipal advisors and the 
differences in the roles of municipal advisor and securities 
professionals, the MSRB does not believe the Series 52 examination (or 
the general securities representative examination that qualified 
municipal securities representatives before November 7, 2011) would 
sufficiently determine whether a municipal advisor professional meets a 
minimal level of competency to engage in municipal advisory 
activities.\33\ The MSRB stated that the focus of the Series 52 
examination is not on municipal advisory activities.\34\ The MSRB 
further stated that the questions being developed for the Municipal 
Advisor Representative Qualification Examination target the job 
responsibilities of municipal advisor professionals.\35\ The MSRB noted 
that the roles and job responsibilities of municipal advisor 
representatives and municipal securities representatives are distinct, 
and the body of law that applies to each type of professional reflects 
the differences in such roles and responsibilities.\36\
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    \33\ See MSRB Response Letter No. 1 at 3.
    \34\ Id. at 3-4.
    \35\ Id. at 4.
    \36\ Id.
---------------------------------------------------------------------------

    SIFMA is concerned that development of a new qualification 
examination would take an additional two to three years.\37\ SIFMA 
states that because the Series 52 examination currently exists there 
would be no unnecessary delay in developing test material and 
administering the test, thereby avoiding an unnecessary delay in 
testing.\38\ SIFMA also contends it would be faster and more cost 
efficient for municipal advisor professionals to take the Series 52 
examination.\39\
---------------------------------------------------------------------------

    \37\ See SIFMA Letter at 3.
    \38\ Id. at 4.
    \39\ Id. at 3.
---------------------------------------------------------------------------

    The MSRB does not agree with SIFMA's assertion that developing a 
new qualification examination would take an additional two to three 
years.\40\ The MSRB stated that PQAC has been working expeditiously in 
developing the Municipal Advisor Representative Qualification 
Examination.\41\ The MSRB also reiterated its position that it does not 
believe the Series 52 examination would test the basic competency of 
municipal advisor professionals.\42\ The MSRB believes that while it is 
hard to dispute that using an existing exam would be faster and less 
costly, such an approach would fail to demonstrate basic competency of 
municipal advisor

[[Page 11708]]

professionals to engage in municipal advisory activities.\43\ The MSRB 
stated that the costs, timing, and efficiency of the proposed rule 
change should only be appropriately compared to reasonable regulatory 
alternative--a criterion the Series 52 examination does not meet.\44\
---------------------------------------------------------------------------

    \40\ See MSRB Response Letter No. 1 at 4.
    \41\ Id.
    \42\ Id.
    \43\ Id. 4-5.
    \44\ Id. at 5.
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    SIFMA suggests that developing a separate test for municipal 
advisor professionals is an inefficient process and unfairly burdens 
the large percentage of municipal advisor professionals who are 
associated with municipal securities dealers.\45\
---------------------------------------------------------------------------

    \45\ See SIFMA Letter at 5.
---------------------------------------------------------------------------

    The MSRB does not believe that such individuals would be unfairly 
burdened by a new test.\46\ To the contrary, the MSRB believes that 
failing to develop a separate test for municipal advisor professionals 
could place individuals not associated with dealers at a competitive 
disadvantage and could result in an undue burden on small municipal 
advisors.\47\ The MSRB stated that the market for municipal advisory 
services is separate and distinct from the market for the services of 
municipal securities brokers and dealers and, as such, it is both 
appropriate and reasonable that all professionals providing municipal 
advisory services should be evaluated according to identical criteria, 
regardless of the status of their employer.\48\
---------------------------------------------------------------------------

    \46\ See MSRB Response Letter No. 1 at 5.
    \47\ Id.
    \48\ Id.
---------------------------------------------------------------------------

Grandfathering Current Municipal Securities Representatives
    SIFMA suggests that if the MSRB decides to continue with the 
development of a new test for qualification as a municipal advisor 
representative, then associated persons currently qualified as 
municipal securities representatives should be grandfathered in as 
municipal advisor representatives, if they so choose.\49\ SIFMA 
believes that this methodology would be consistent with other major 
changes to qualifications examinations.\50\
---------------------------------------------------------------------------

    \49\ See SIFMA Letter at 5.
    \50\ Id.
---------------------------------------------------------------------------

    The MSRB responded by reiterating its view that grandfathering 
would be inconsistent with the intent of Congress.\51\ The MSRB 
believes that requiring municipal advisor professionals to take and 
pass a basic qualification examination ensures that these individuals 
possess a minimum level of understanding of the role and 
responsibilities of municipal advisors and the applicable rules and 
regulations.\52\ The MSRB stated that investors, municipal entities, 
and the general public will be better served by a regulatory regime 
that requires all municipal advisor professionals to pass the same 
basic competency test.\53\
---------------------------------------------------------------------------

    \51\ See MSRB Response Letter No. 1 at 5.
    \52\ Id.
    \53\ Id.
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Economic Analysis
    SIFMA believes that the cost-benefit analysis contained in in the 
Proposing Release was inadequate.\54\ SIFMA suggests that the MSRB 
conduct a full cost-benefit analysis of the proposed rule change prior 
to its approval.\55\
---------------------------------------------------------------------------

    \54\ See SIFMA Letter at 6.
    \55\ Id. at 2.
---------------------------------------------------------------------------

    The MSRB responded by stating that it considered the costs and 
benefits of the proposed rule change and even utilized the cost 
estimate per individual test taker provided by SIFMA in determining the 
likely initial cost to the industry and the likely ongoing expense.\56\ 
The MSRB also refined its estimate of the initial cost based on the 
number of Form MA-Is filed with the SEC by registered municipal 
advisors (as of January 20, 2015), which the MSRB stated is not 
materially different from the cost estimate used in its economic 
analysis.\57\ The MSRB believes its economic analysis was sound and 
that no further analysis is warranted.\58\
---------------------------------------------------------------------------

    \56\ See MSRB Response Letter No. 1 at 6.
    \57\ Id.
    \58\ Id.
---------------------------------------------------------------------------

Continuing Education Requirement for Municipal Advisor Representatives
    SIFMA suggests that the MSRB develop continuing education 
requirements for municipal advisor representatives.\59\ SIFMA believes 
this concern was not addressed by the proposed rule change.\60\
---------------------------------------------------------------------------

    \59\ See SIFMA Letter at 6.
    \60\ Id.
---------------------------------------------------------------------------

    The MSRB responded by stating that such suggestion is not relevant 
to the proposed rule change.\61\ The MSRB noted that the Act requires 
the MSRB to provide continuing education requirements for municipal 
advisors and it will likely consider rulemaking on this topic in the 
near future.\62\
---------------------------------------------------------------------------

    \61\ See MSRB Response Letter No. 1 at 6.
    \62\ Id.
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PQAC Nomination Process
    SIFMA and its members believe that the process for nomination to 
the MSRB's PQAC should be fully transparent and the members of PQAC 
should be listed on the MSRB's Web site.\63\ Also, SIFMA further states 
that it is in the best interest of every industry member to ensure that 
the test questions that are developed are fair, even-handed and 
suitable for a basic competency examination.\64\
---------------------------------------------------------------------------

    \63\ See SIFMA Letter at 6.
    \64\ Id. at 6-7.
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    The MSRB stated that it understands the concern raised by SIFMA and 
believes that its examinations are developed in a fair, even-handed and 
suitable manner.\65\ The MSRB stated it contemplated publishing the 
names of PQAC members but is concerned that such transparency will 
undermine the test development process.\66\ The MSRB believes that it 
is not appropriate to publish the names of PQAC members given the 
importance of confidentiality and the integrity of the process.\67\ The 
MSRB further stated that it contracts with an external testing 
professional to ensure the overall integrity of the test development 
process, including the selection of PQAC members, is fair and in 
accordance with accepted standards for professional test 
development.\68\ Nevertheless, the MSRB stated that it will consider 
providing more information about the selection process and the criteria 
used by the MSRB to select PQAC members.\69\
---------------------------------------------------------------------------

    \65\ See MSRB Response Letter No. 1 at 6.
    \66\ Id.
    \67\ Id. at 7.
    \68\ Id.
    \69\ Id.
---------------------------------------------------------------------------

2. ICI Letter

    ICI recommends that the MSRB reconsider its current approach to 
develop only one examination for representatives because such approach 
will result in use of an examination that does not sufficiently test 
competencies relevant to the advisory representative's business and is 
inconsistent with the approach taken by other self-regulatory 
organizations.\70\ ICI suggests that the MSRB utilize at least two 
examinations--one for representatives of a municipal advisor whose 
advisory activities are limited to municipal fund securities, and one 
for representatives whose advice is limited to municipal securities 
other than municipal fund securities.\71\
---------------------------------------------------------------------------

    \70\ See ICI Letter at 2.
    \71\ Id.
---------------------------------------------------------------------------

    The MSRB responded by stating that it believes that individuals who 
engage in municipal advisory activities regarding municipal fund 
securities should demonstrate knowledge of all of the rules and 
regulations governing municipal advisors.\72\ The MSRB stated that 
these rules and regulations

[[Page 11709]]

generally will apply to all municipal advisors, regardless of the 
product that is the subject of the advice provided.\73\ As such, the 
MSRB believes that all municipal advisors should have knowledge of the 
regulatory framework and the basic obligations of municipal 
advisors.\74\
---------------------------------------------------------------------------

    \72\ See MSRB Response Letter No. 1 at 7.
    \73\ Id.
    \74\ Id.
---------------------------------------------------------------------------

    ICI stated that it recognizes its recommendation of two 
examinations may impose additional burdens, however, ICI believes such 
approach is consistent with the manner in which self-regulatory 
organizations have long implemented examination requirements.\75\ ICI 
further stated that there is a long-standing self-regulatory 
organization practice of developing discrete examinations based on the 
nature of the business conducted.\76\
---------------------------------------------------------------------------

    \75\ See ICI Letter at 3-4.
    \76\ Id.
---------------------------------------------------------------------------

    The MSRB responded by noting that self-regulatory organizations 
have developed a number of qualification examinations; however, most of 
these examinations are focused on the role of the investment 
professional, such as compliance officer (Series 14), investment 
adviser (Series 65), operations professional (Series 99), research 
analyst (Series 86 and 87), equity trader (Series 55), financial and 
operations principal (Series 27), general securities principal (Series 
24), general securities sales supervisor (Series 9 and 10), and general 
securities representative (Series 7).\77\ The MSRB stated that for each 
of these examinations, a test taker may be required to demonstrate 
knowledge of a variety of products, consistent with the role of the 
individual; even where an examination is limited a candidate is 
expected to be familiar with a variety of products.\78\ Consequently, 
the MSRB believes its approach to the Municipal Advisor Representative 
Qualification Examination is consistent with its prior practice and the 
practice of other self-regulatory organizations.\79\
---------------------------------------------------------------------------

    \77\ See MSRB Response Letter at 7-8.
    \78\ Id.
    \79\ Id. at 8.
---------------------------------------------------------------------------

3. Anonymous Letter

    Anonymous Attorney believes that individuals who are Chartered 
Financial Analyst (``CFA'') charterholders should be exempt from the 
proposed Municipal Advisor Representative Qualification Examination 
requirement in the manner suggested by the CFA Institute (``CFAI'') in 
the CFAI's response to MSRB Regulatory Notice 2014-08.\80\ CFAI 
proposed that the examination requirement be constructed in a modular 
fashion with one component focusing on the knowledge of business and 
the second component devoted to the rules and regulations of the 
municipal securities market.\81\ CFAI also requested that CFA 
charterholders be granted a waiver from the examination component 
focusing on the knowledge of business.\82\ Anonymous Attorney believes 
that separating the examination into two modules can be undertaken with 
minimal effort.\83\ Anonymous Attorney also stated that the examination 
requirement is burdensome and concluded that such examination could 
drive some CFA charterholders out of the municipal advisory 
business.\84\
---------------------------------------------------------------------------

    \80\ See Anonymous Letter No. 1 at 1.
    \81\ Id.
    \82\ Id.
    \83\ Id. at 2.
    \84\ Id. at 3.
---------------------------------------------------------------------------

    The MSRB stated that it recognizes the requirements established by 
CFAI for CFA charterholders and understands that fixed income 
securities are covered on its examinations.\85\ However, the MSRB 
explained that the Municipal Advisor Representative Qualification 
Examination will focus on the role and responsibilities of municipal 
advisor professionals and the rules and regulations governing their 
conduct.\86\ The MSRB highlighted that the Municipal Advisor 
Representative Qualification Examination will not solely test a 
candidate's knowledge of municipal securities.\87\ In addition, the 
MSRB stated that Anonymous Attorney has not provided any evidence that 
the CFA examinations (Levels I, II or III) test an individual's 
knowledge of the role and responsibilities of a municipal advisor.\88\ 
The MSRB believes the assertion that CFA charterholders may be driven 
out of the market because of the new test is purely speculative.\89\ 
The MSRB further stated that Anonymous Attorney offers no information 
regarding the number of CFA charterholders that are engaged in 
municipal advisory activities or why they would be in any different 
position than individuals who passed other qualification 
examinations.\90\ Given that the costs and time associated with 
receiving and maintaining a CFA charter exceed any reasonable estimate 
of the costs to complete a new municipal advisor examination, the MSRB 
stated its expectation that the new exam would add only marginally to a 
CFA charterholder's professional qualification expenses.\91\ For the 
foregoing reasons, the MSRB does not believe that a modular examination 
for municipal advisor professionals would be appropriate.\92\
---------------------------------------------------------------------------

    \85\ See MSRB Response Letter No. 1 at 8.
    \86\ Id.
    \87\ Id.
    \88\ Id.
    \89\ Id.
    \90\ Id.
    \91\ Id. at 8-9.
    \92\ Id. at 9.
---------------------------------------------------------------------------

4. NAMA Letter No. 1

    NAMA supports the efforts of the MSRB to set professional 
qualification standards for municipal advisor professionals.\93\ NAMA 
believes the MSRB has taken the most cost-effective approach at this 
time.\94\ Additionally, NAMA supports the decision by the MSRB to have 
a uniform competency requirement for all persons deemed to be municipal 
advisor representatives regardless of whether such persons have passed 
other examinations (such as the Series 52 or Series 7 
examinations).\95\ Consistent with the proposed rule change, NAMA does 
not believe that the MSRB should grandfather individuals who have 
passed such examinations.\96\ NAMA suggests, however, that the MSRB 
continue to evaluate the feasibility and wisdom of supplemental or 
targeted subject matter examinations.\97\
---------------------------------------------------------------------------

    \93\ See NAMA Letter No. 1 at 1.
    \94\ Id. at 2.
    \95\ Id. at 1.
    \96\ Id. at 2.
    \97\ Id.
---------------------------------------------------------------------------

    The MSRB does not believe that a supplemental or targeted subject 
area examination approach is appropriate.\98\ The MSRB believes it has 
a demonstrated commitment to seeking ways to improve regulatory 
efficiency generally and would be open to assessing alternative 
approaches to the assessment of professional qualifications once the 
municipal advisor regulatory framework is fully implemented.\99\
---------------------------------------------------------------------------

    \98\ See MSRB Response Letter No. 1 at 9.
    \99\ Id.
---------------------------------------------------------------------------

5. Sanchez Letter and NAMA Letter No. 2

    Sanchez expressed concern that Amendment No. 1 will effectively 
create an exemption for municipal securities representatives who engage 
in financial advisory and consultant services for issuers in connection 
with the issuance of municipal securities (the ``subject activity'') 
from having to pass the Municipal Advisor Representative Qualification 
Examination to qualify as municipal advisor representatives.\100\ 
Similarly, NAMA expressed concern that Amendment No. 1 would provide 
municipal securities representatives

[[Page 11710]]

who engage in the subject activity an exemption from having to pass the 
Municipal Advisor Representative Qualification Examination because the 
subject activity would be considered municipal securities 
representative activity.\101\ NAMA also stated that Amendment No. 1 
expands the definition of municipal advisory activity, as provided by 
the Act and Commission rules, because it appears to allow dealers and 
bank dealers to engage in municipal advisory activity without proper 
registration.\102\
---------------------------------------------------------------------------

    \100\ See Sanchez Letter at 1.
    \101\ See NAMA Letter No. 2 at 1.
    \102\ Id. at 1-2.
---------------------------------------------------------------------------

    The MSRB responded by clarifying that Amendment No. 1 would not 
have the effect of limiting, and was not intended to limit, the 
applicability of the municipal advisor regulatory regime, including 
MSRB rules governing the municipal advisory activities of municipal 
advisors, or to alter the definition of municipal advisory 
activities.\103\ The MSRB noted that the determination of whether an 
individual is engaged in municipal advisory activities is based on the 
scope of the individual's activities, and not the individual's 
status.\104\ The MSRB stated that due to such principle, a dealer and 
its associated persons could simultaneously be subject to MSRB rules 
applicable to dealers and MSRB rules applicable to municipal 
advisors.\105\
---------------------------------------------------------------------------

    \103\ See MSRB Response Letter No. 2 at 2.
    \104\ Id.
    \105\ Id.
---------------------------------------------------------------------------

    The MSRB stated that Amendment No. 1 would retain the current 
language in the MSRB professional qualification rules to prevent any 
confusion regarding the application of MSRB rules governing dealers to 
the financial advisory activities of municipal securities 
representatives while MSRB rules governing municipal advisors are 
developed and implemented and until the MSRB makes any future 
determinations regarding the application of such rules.\106\ The MSRB 
further stated that any individual engaged in or supervising municipal 
advisory activities must comply with the professional qualification 
requirements for municipal advisor representatives, which will include 
at a future date the taking and passing of the Municipal Advisor 
Representative Qualification Examination.\107\ The MSRB also 
represented that Amendment No. 1 has no bearing on the definition of 
municipal advisory activities.\108\
---------------------------------------------------------------------------

    \106\ Id.
    \107\ Id. at 2-3.
    \108\ Id. at 3.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    The Commission has carefully considered the proposed rule change, 
as modified by the Amendments, as well as the comments received, and 
the responses by the MSRB to such comments. The Commission finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to the MSRB.
    In particular, the Commission finds that the proposed rule change 
is consistent with Section 15B(b)(2)(A) of the Act, which provides that 
the MSRB's rules shall provide that no municipal securities broker or 
municipal securities dealer shall effect any transaction in, or induce 
or attempt to induce the purchase or sale of, any municipal security, 
and no broker, dealer, municipal securities dealer, or municipal 
advisor shall provide advice to or on behalf of a municipal entity or 
obligated person with respect to municipal financial products or the 
issuance of municipal securities, unless . . . such municipal 
securities broker or municipal securities dealer and every natural 
person associated with such municipal securities broker or municipal 
securities dealer meet such standards of training, experience, 
competence, and such other qualifications as the Board finds necessary 
or appropriate in the public interest or for the protection of 
investors and municipal entities or obligated persons.\109\ Section 
15B(b)(2)(A) of the Act also provides that, in connection with the 
definition and application of such standards, the MSRB may 
appropriately classify municipal advisors and their associated persons, 
specify that all or any portion of such standards shall be applicable 
to any such class, and require persons in any such class to pass an 
examination regarding such standards of competence.\110\ The Commission 
believes that the proposed rule change is consistent with Section 
15B(b)(2)(A) of the Act because the proposed rule change requires 
individuals who engage in or supervise municipal advisory activities to 
pass a professional qualification examination which is an established 
means for determining the basic competency of individuals in a 
particular class. The Commission believes that requiring prospective 
municipal advisor representatives to pass a basic qualification 
examination will protect investors, municipal entities, and obligated 
persons by ensuring such representatives have a basic understanding of 
the role of a municipal advisor representative and the rules and 
regulations governing such individuals.
---------------------------------------------------------------------------

    \109\ 15 U.S.C. 78o-4(b)(2)(A).
    \110\ Id.
---------------------------------------------------------------------------

    Additionally, Section 15B(b)(2)(L)(iii) of the Act provides that 
the MSRB's rules shall provide professional standards with respect to 
municipal advisors.\111\ The Commission believes that the proposed rule 
change is consistent with Section 15B(b)(2)(L)(iii) of the Act because 
it would establish professional standards for those individuals engaged 
in or supervising municipal advisory activities by requiring such 
individuals to demonstrate a basic competency regarding the role of 
municipal advisor representatives and the rules and regulations 
governing the conduct of such persons.
---------------------------------------------------------------------------

    \111\ 15 U.S.C. 78o-4(b)(2)(L)(iii).
---------------------------------------------------------------------------

    Section 15B(b)(2)(L)(iv) of the Act requires that MSRB rules not 
impose a regulatory burden on small municipal advisors that is not 
necessary or appropriate in the public interest and for the protection 
of investors, municipal entities, and obligated persons, provided that 
there is robust protection of investors against fraud.\112\ The 
Commission believes that the proposed rule change is consistent with 
Section 15B(b)(2)(L)(iv) of the Act. While the proposed rule change 
would affect all municipal advisors, including small municipal 
advisors, it is a necessary and appropriate regulatory burden in order 
to establish the baseline competence of those individuals engaged in 
municipal advisory activities. Establishing a baseline competence is 
necessary for the protection of investors, municipal entities, and 
obligated persons. The Commission also believes such baseline 
competence is in the public interest because it promotes compliance 
with the rules and regulations governing the conduct of municipal 
advisors.
---------------------------------------------------------------------------

    \112\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
---------------------------------------------------------------------------

    In approving the proposed rule change, the Commission has 
considered the proposed rule change's impact on efficiency, 
competition, and capital formation.\113\ The Commission believes that 
the proposed rule change includes accommodations that help promote 
efficiency. Specifically, the MSRB has provided a one-year grace period 
for passing the examination. As noted by the MSRB, the grace period 
provides

[[Page 11711]]

municipal advisor representatives with sufficient time to study and 
take the examination without causing an undue disruption to the 
business of the municipal advisor. The Commission does not believe that 
the proposed rule change would impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act 
since it would apply equally to all municipal advisor representatives 
who engage in municipal advisory activities. Furthermore, the 
Commission believes that the potential burdens created by the proposed 
rule change are to be likely outweighed by the benefits of establishing 
baseline professional qualification standards and promoting compliance 
with the rules and regulations governing the conduct of municipal 
advisors. The Commission has reviewed the record for the proposed rule 
change and notes that the record does not contain any information to 
indicate that the proposed rule change would have a negative effect on 
capital formation.
---------------------------------------------------------------------------

    \113\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    As noted above, the Commission received five comment letters on the 
proposed rule change and two comment letters on Amendment No. 1. The 
Commission believes that the MSRB considered carefully and responded 
adequately to the comments and concerns regarding the proposed rule 
change and Amendment No. 1. For the reasons noted above, including 
those discussed in the Amendments and the MSRB Response Letters, the 
Commission believes that the proposed rule change, as amended by the 
Amendments, is consistent with the Act.

V. Solicitation of Comments on the Amendments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the Amendments to 
the proposed rule change are 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-2014-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2014-08. 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-2014-08 and should be 
submitted on or before March 25, 2015.

VI. Accelerated Approval of the Proposed Rule Change as Modified by the 
Amendments

    The Commission finds good cause for approving the proposed rule 
change, as amended by the Amendments, prior to the 30th day after the 
date of publication of notice in the Federal Register. Amendment No. 1 
partially amends the text of the proposed rule change to revise Rules 
G-1(a)(ii)(B), G-3(a)(i)(A)(2), and G-3(b)(i)(B) by deleting the 
following clause: ``Except to the extent a person must be qualified as 
a municipal advisor representative to perform such services.'' \114\ 
Amendment No. 2 partially amends Amendment No. 1 to correct a technical 
error in a quotation of rule text.\115\
---------------------------------------------------------------------------

    \114\ See supra note 6.
    \115\ See supra note 9.
---------------------------------------------------------------------------

    The MSRB believes Amendment No. 1 will clarify and ensure that 
municipal securities representatives or principals who engage in the 
subject activity remain covered by applicable dealer regulations until 
such time as the MSRB may determine that such activities are 
appropriately covered by the developing municipal advisor regulatory 
framework.\116\ The MSRB believes Amendment No. 2 would make a mere 
technical correction.\117\ The MSRB does not believe Amendment No. 2 
raises significant new issues or alters the substance of the proposed 
rule change.\118\
---------------------------------------------------------------------------

    \116\ See supra note 6.
    \117\ See supra note 9.
    \118\ Id.
---------------------------------------------------------------------------

    As previously noted, Sanchez and NAMA expressed concern that 
Amendment No. 1 will effectively provide an exemption for currently 
qualified municipal securities representative from having to take and 
pass the Municipal Advisor Representative Qualification 
Examination.\119\ NAMA also believes that the Amendment No. 1 expands 
the definition of municipal advisory activity because it appears to 
allow dealers and bank dealers to engage in municipal advisory activity 
without proper registration.\120\ The MSRB responded by clarifying that 
Amendment No. 1 would not have the effect of limiting, and was not 
intended to limit, the applicability of the municipal advisor 
regulatory regime, including MSRB rules governing the municipal 
advisory activities of municipal advisors, or to alter the definition 
of municipal advisory activities.\121\ According to the MSRB, Amendment 
No. 1 would retain the current language in the MSRB professional 
qualification rules to prevent any confusion regarding the application 
of MSRB rules governing dealers to the financial advisory activities of 
municipal securities representatives while MSRB rules governing 
municipal advisors are developed and implemented.\122\
---------------------------------------------------------------------------

    \119\ See supra note 7.
    \120\ See NAMA Letter No. 2 at 1-2.
    \121\ See MSRB Response Letter No. 2 at 2.
    \122\ Id.
---------------------------------------------------------------------------

    The Commission believes that the revisions in Amendment No. 1 are 
being made to address the perception of a regulatory gap and are 
consistent with the purpose of the proposed rule change. The Commission 
believes that the revision in Amendment No. 2 is being made to correct 
a technical error. The Commission does not believe the revisions 
included in the Amendments raise significant new issues or alter the 
substance of the proposed rule change because the proposed rule change 
will retain the current rule language in Rules G-1(a)(ii)(B), G-
3(a)(i)(A)(2), and G-3(b)(i)(B). Accordingly, the Commission finds good 
cause for approving the proposed rule change, as modified by

[[Page 11712]]

the Amendments, on an accelerated basis, pursuant to Section 19(b)(2) 
of the Act.

VII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\123\ that the proposed rule change (SR-MSRB-2014-08), as modified 
by the Amendments, be, and hereby is, approved.
---------------------------------------------------------------------------

    \123\ 15 U.S.C. 78s(b)(2).

    For the Commission, pursuant to delegated authority.\124\
---------------------------------------------------------------------------

    \124\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-04431 Filed 3-3-15; 8:45 am]
BILLING CODE 8011-01-P
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