Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Consisting of Amendments to MSRB Rule A-12, on Registration, and MSRB Rule A-13, on Underwriting and Transaction Assessments for Brokers, Dealers and Municipal Securities Dealers, 52352-52357 [2015-21296]

Download as PDF Lhorne on DSK5TPTVN1PROD with NOTICES 52352 Federal Register / Vol. 80, No. 167 / Friday, August 28, 2015 / Notices is available in ADAMS) is provided the first time that a document is referenced. • NRC’s PDR: You may examine and purchase copies of public documents at the NRC’s PDR, Room O1–F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852. FOR FURTHER INFORMATION CONTACT: Stephen S. Koenick, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington DC 20555–0001; telephone: 301–415–6631, email: Stephen.Koenick@nrc.gov. SUPPLEMENTARY INFORMATION: On March 25, 2014 [sic], the petitioner requested that the NRC take action with regard to VY and KPS (ADAMS Accession No. ML15090A487). On July 7, 2015, the petitioner provided supplemental information via email (ADAMS Accession No. ML15198A091). The petitioner requested a number of actions including: • Conduct exigent and immediate full-scale ultrasonic inspections on the VY and the KPS reactor pressure vessels (RPVs), with similar or better technology, as conducted on the RPVs at Doel 3 and Tihange 2, which revealed thousands of cracks; • Take large borehole samples out of both the Vermont Yankee and Kewaunee RPVs and transport them to a respected metallurgic laboratory for comprehensive offsite testing; • Issue an immediate NRC report and hold a public meeting on any identified vulnerabilities; and • Ultrasonically test all RPVs in U.S. plants within 6 months, if distressed and unsafe results are discovered at VY or KPS. As the basis for this request, the petitioner states that the requested actions should be taken to determine whether foreign operating experience— specifically several thousand cracks that have been discovered during testing on the Doel 3 and Tihange 2 RPVs—could have implications on U.S. operating reactors. The request is being treated pursuant to section 2.206, ‘‘Requests for action under this subpart,’’ of Title 10 of the Code of Federal Regulations (10 CFR) of the Commission’s regulations. The request has been referred to the Director of the Office of Nuclear Reactor Regulation. The petitioner met with the Petition Review Board on May 19, 2015, to discuss the petition; the transcript of that meeting is an additional supplement to the petition (ADAMS Accession No. ML15181A127). The results of that discussion and the July 7, 2015, supplemental email were considered in the board’s determination VerDate Sep<11>2014 14:19 Aug 27, 2015 Jkt 235001 regarding the petitioner’s request for immediate action and in establishing the schedule for the review of the petition. The NRC has denied the petitioner’s request to conduct immediate ultrasonic inspections at VY and KPS because of the following reasons. Both the identified facilities have ceased operations and would not be subject to an enforcement-related action (i.e., to modify, suspend, or revoke the license). In addition, the NRC issued Information Notice (IN) 2013–19, ‘‘Quasi-Laminar Indications in Reactor Pressure Vessel Forgings,’’ on September 22, 2013 (ADAMS Accession No. ML13242A263). The purpose of this IN was to inform industry of the quasi-laminar indications that were identified in 2012, at two European commercial nuclear power plants. These indications were identified during the ultrasonic inspections that were performed on the RPV forgings. As provided by 10 CFR 2.206, appropriate action will be taken on the remaining requests within a reasonable time. Dated at Rockville, Maryland, this 20th day of August 2015. For the Nuclear Regulatory Commission. Michele G. Evans, Acting Director, Office of Nuclear Reactor Regulation. [FR Doc. 2015–21431 Filed 8–27–15; 8:45 am] BILLING CODE 7590–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75751; File No. SR–MSRB– 2015–08] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Consisting of Amendments to MSRB Rule A–12, on Registration, and MSRB Rule A–13, on Underwriting and Transaction Assessments for Brokers, Dealers and Municipal Securities Dealers August 24, 2015. 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 August 10, 2015, the Municipal Securities Rulemaking Board (the ‘‘MSRB’’ or ‘‘Board’’) filed with the Securities and Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’) the proposed rule 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00108 Fmt 4703 change as described in Items I, II, and III below, which Items have been prepared by the MSRB. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The MSRB filed with the Commission a proposed rule change consisting of amendments to MSRB Rule A–12, on registration, and MSRB Rule A–13, on underwriting and transaction assessments for brokers, dealers and municipal securities dealers (‘‘proposed rule change’’). The MSRB designated the proposed rule change as ‘‘establishing or changing a due, fee or other charge’’ under section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) 4 thereunder, which renders the proposal effective upon filing with the Commission. The implementation date of the proposed amendment to Rule A–12 is October 1, 2015 and the implementation date for the proposed amendment to Rule A–13 is January 1, 2016. The text of the proposed rule change is available on the MSRB’s Web site at www.msrb.org/Rules-andInterpretations/SEC-Filings/2015Filings.aspx, at the MSRB’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the MSRB included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The MSRB has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to adjust certain existing MSRB fees applicable to dealers and municipal advisors that engage in municipal securities and municipal advisory activities (collectively ‘‘regulated entities’’) to continue to assess reasonable fees necessary to 3 15 4 17 Sfmt 4703 E:\FR\FM\28AUN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 28AUN1 Federal Register / Vol. 80, No. 167 / Friday, August 28, 2015 / Notices defray the costs and expenses of operating and administering the MSRB. The proposed rule change would amend Rule A–13 to decrease the existing underwriting fee from $.03 per $1,000 of par value to $.0275 per $1,000 of par value. Additionally, the proposed rule change would amend Rule A–12 to (i) increase the initial registration fee from $100 to $1,000 and (ii) increase the annual registration fee from $500 to $1,000. Further, the proposed rule change would amend Rule A–13(c)(iii) to clarify that securities issued pursuant to a commercial paper program are not subject to the transaction fee. Lhorne on DSK5TPTVN1PROD with NOTICES Holistic Review of MSRB Fees The MSRB assesses regulated entities various fees designed to defray the cost of its operations, including rulemaking, market transparency and educational initiatives that fulfill its Congressional mandate to, among other things, protect investors and municipal entities by promoting the fairness and efficiency of the $3.7 trillion municipal securities market. The MSRB provides investors, state and local governments and other market participants with free access to disclosure and transparency information in the municipal securities market through its Electronic Municipal Market Access (EMMA®) 5 Web site, the official repository for information on virtually all municipal bonds. Additionally, the MSRB serves as an objective resource on the municipal market, conducts extensive education and outreach to market participants, and provides market leadership on key issues impacting the municipal securities market. Section 15B(b)(2)(J) of the Act 6 provides, in pertinent part, that each dealer and municipal advisor shall pay to the Board such reasonable fees and charges as may be necessary or appropriate to defray the costs and expenses of operating and administering the Board and that the MSRB shall have rules specifying the amount of such fees. The current MSRB fees are: 1. Municipal advisor professional fee (Rule A–11) $300 annual fee to be paid for each Form MA–I filed with the SEC by the municipal advisor; 2. Initial registration fee (Rule A–12) $100 one-time registration fee to be paid by each dealer to register with the MSRB prior to engaging in municipal securities activities and each municipal advisor to register with the MSRB prior to engaging in municipal advisory activities; 5 EMMA 6 15 is a registered trademark of the MSRB. U.S.C. 78o–4(b)(2)(J). VerDate Sep<11>2014 14:19 Aug 27, 2015 Jkt 235001 3. Annual registration fee (Rule A–12) $500 annual fee to be paid by each dealer and municipal advisor registered with the MSRB; 4. Underwriting fee (Rule A–13) .003% ($.03 per $1,000) of the par value to be paid by a dealer, except in limited circumstances, for all municipal securities purchased from an issuer by or through such dealer, whether acting as principal or agent, as part of a primary offering; 5. Transaction fee (Rule A–13) .001% ($.01 per $1,000) of the total par value to be paid by a dealer, except in limited circumstances, for inter-dealer sales and customer sales reported to the MSRB pursuant to MSRB Rule G–14(b); 6. Technology fee (Rule A–13) $1.00 paid by a dealer per transaction for each inter-dealer sale and for each sale to customers reported to the MSRB pursuant to MSRB Rule G–14(b); and 7. Examination fee (Rule A–16) $150 test development fee assessed per candidate for each MSRB examination. In addition, the MSRB charges data subscription and service fees for subscribers, including dealers and municipal advisors, seeking direct electronic delivery of municipal trade data and disclosure documents associated with municipal bond issues.7 Over the course of the current fiscal year, the Board has undertaken a holistic review of the fees assessed on regulated entities. The last such review occurred in 2010 and culminated with amendments to Rule A–13, specifically a transaction fee increase from $.005 to $.01 per $1,000 of the total par value of inter-dealer and customer sales reported to the MSRB and the establishment of a $1.00 technology fee per transaction for each inter-dealer and customer sale reported to the MSRB.8 These two changes were necessitated by increasing costs, including those associated with implementing the mandates of the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘DoddFrank’’) 9 and the need for additional revenue to replace aging and outdated information technology software and hardware and ensure the operational integrity of the MSRB’s information systems. The funds generated from the technology fee have been segregated for accounting purposes and dedicated solely to funding capital expenses for 7 This information is available without direct electronic delivery on the MSRB’s EMMA Web site at no charge. 8 These fees became effective on January 1, 2011. See Exchange Act Release No. 63621 (Dec. 29, 2010), 76 FR 604 (Jan. 5, 2011) (File No. SR–MSRB– 2010–10). 9 Public Law 111–203, 124 Stat. 1376 (2010). PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 52353 technology investments in capitalized hardware and software. Since 2011, the MSRB has successfully reached and now exceeds the operating reserve target of twelve months of operating expenses and has accumulated the reserve target of three times the annual information technology depreciation expenses. The annual technology fee revenues exceed the annual information technology capital draws and have provided the funding to establish the targeted technology renewal fund. In fact, once the reserve target was met, excess revenues created a surplus over the reserve target, resulting in the Board approving a technology fee rebate of $3.6 million in July 2014. The Board recognized that, with the current revenue and information technology capital spend rate for capitalized hardware and software, the surplus in the segregated technology fund would continue to grow. Meanwhile, the Board noted that operating reserves are projected to fall to 12 months of operating expenses in fiscal year 2017 and continue to decline thereafter because operating expenses continue to modestly rise annually while the current primary revenue sources to fund these operating expenses are projected to be effectively flat. This decline in reserves could accelerate if bond and trade volumes fall below projected levels causing funds from market activity fees to decrease. The inverse relationship between the projected growing surplus in the technology renewal fund and the potential erosion of operating reserves in the next few years was the catalyst for the Board to conduct a holistic fee review. The Board evaluated the assessment of MSRB fees on regulated entities with the goal of better aligning revenue sources with operating expenses and all capital needs. The Board strives to diversify funding sources among regulated entities and other entities that fund MSRB services in a manner that ensures long-term sustainability, while continuing to strike an equitable balance among regulated entities and a fair allocation of the expenses of the regulatory activities, systems development and operational activities undertaken by the MSRB. Proxies used by the Board for fairly allocating to regulated entities the cost of MSRB regulation include, but are not limited to: Being registered to engage in municipal securities or municipal advisory activities; the level of dealer market activity as determined by the number of transactions executed and total par value of transactions executed; E:\FR\FM\28AUN1.SGM 28AUN1 52354 Federal Register / Vol. 80, No. 167 / Friday, August 28, 2015 / Notices and the number of associated persons engaged in municipal advisory activities on behalf of a registered municipal advisor. Recognizing that in any given year there could be more or less activity by a particular class of regulated entities, the Board, as it has historically, sought to establish a fee structure that would result in a balanced and reasonable contribution over the long run from all regulated entities to defray the costs and expenses of operating and administering the MSRB. The proposed changes resulting from the Board’s holistic fee review are summarized below. Lhorne on DSK5TPTVN1PROD with NOTICES Annual and Initial Fees Under MSRB Rule A–12 The current annual registration fee of $500 pursuant to Rule A–12 is paid by each of the over 2,000 regulated entities registered with the MSRB. While the annual fee amount has not been changed since 2009,10 the share of total expenses that the annual fees defray has continued to decrease. For example, the total annual fees collected in 2009 defrayed nearly 5% of total expenses whereas the total annual fee amounts currently defray only approximately 3.5% of total expenses despite an increase in the number of regulated entities associated with the registration of municipal advisors post Dodd-Frank. In addition, approximately 35% of the entities registered with the MSRB as dealers do not regularly engage in any municipal securities trade activity subject to market activity fee assessments under Rule A–13. Therefore, the annual fee is the primary way dealers who may only engage in municipal fund securities business (i.e., 529 college savings plan sales and Local Government Investment Pool sales) or have the occasional municipal bond sale share in the costs and expenses of operating and administering the MSRB. Thus, an increase in the annual fee from $500 to $1,000 provides for all regulated entities to more fairly contribute to defraying the costs and expenses of operating and administering the MSRB. Similarly, the Board concluded that an increase in the initial registration fee under Rule A–12 from $100 to $1,000 was reasonable to help defray a significant portion of the administrative and operational costs associated with processing an initial registration. The fee for initial registration has not been increased since its inception in 1975 and, as a result, is low for an initial 10 See Exchange Act Release No. 60528 (Aug. 18, 2009), 74 FR 43205 (Aug. 26, 2009) (File No. SR– MSRB–2009–13). VerDate Sep<11>2014 14:19 Aug 27, 2015 Jkt 235001 registration fee.11 In an effort to not overburden the municipal advisor community, the Board did not consider an increase to the initial registration fee throughout the post Dodd-Frank initial registration process.12 Together, the increase in the annual and initial fees would provide approximately $1 million in annual revenue. The MSRB believes the proposed increase in registration fees will equitably defray the expenses of MSRB operations and allow the MSRB to lower underwriting fees by an offsetting amount to achieve a more balanced distribution of fees. Market Activity Fees Under MSRB Rule A–13 The market activity fees (i.e., underwriting, transaction and technology fees) assessed under Rule A– 13 represent 85% of the MSRB’s fiscal year 2014 total revenue. In 2014, of the over 2000 dealers and municipal advisors registered with the MSRB, roughly 140 dealers were assessed underwriting fees and 840 dealers were assessed transaction and technology fees. The underwriting and transaction fees, which are generally proportionate to a dealer’s relative dollar volume of activity within the industry, are based on the par value amount of underwriting and customer and interdealer transactions during the year. The technology fee is based on a dealer’s participation in the market as measured by the total number of inter-dealer and customer sales reported to the MSRB, rather than par value, and coupled with the transaction and underwriting fees, contribute to an equitable distribution of the market activity assessments for dealers. However, the assessment of these market activity fees is highly concentrated among a small number of dealers; based on fiscal year 2014 fee revenue, less than a dozen dealers paid 52% of all such fees. The Board determined that, notwithstanding this concentration, these market activity fees are reasonable in light of the level of participation in the municipal securities market by these dealers. 11 For example, the fee for initial registration as a broker-dealer or investment adviser with the vast majority (47) of state regulators is currently more than $100. Moreover, the fee for initial registration with the Financial Industry Regulatory Authority currently starts at $7,500. 12 Post Dodd-Frank, 925 non-dealer municipal advisors registered with the MSRB (exclusive of municipal advisors that are also registered dealers), each of which paid $100 to register. There are currently approximately 590 non-dealer municipal advisors registered with the MSRB. PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 Underwriting Fee With organizational reserves (operating reserves and the technology renewal fund) currently above targeted levels and future year financial pro formas indicating declines in aggregate reserve levels (while remaining slightly above targeted levels), coupled with the increase in registration fees, the Board determined to decrease the underwriting fee from .003% ($.03) to .00275% ($.0275) per $1,000 of the par value. Based on underwriting volume ranging from $300 billion to $400 billion annually, the decrease in the underwriting fee will reduce MSRB revenue by approximately $1 million annually.13 The Board decided to lower the underwriting fee for several reasons. First, the fee is based on the assessment factor (i.e., par value of underwriting) that is the most volatile year over year. Second, as noted above, underwriting fees are paid primarily by a small number of dealers, all of which also pay significant transaction and technology fees, making some relief to such firms equitable. Additionally, for each new underwriting, the sales of the initial offering are subject to all three market activity fees such that a decrease in the underwriting fee on initial bond sales is fair and reasonable. Technology Fee The technology fee was implemented in January 2011 to fund capitalized hardware and software for the MSRB market transparency systems.14 At that time, the MSRB stated the assessment of the technology fee would be reviewed periodically. The MSRB’s market transparency systems collect municipal market data, disclosures and statistics and make this information available to investors and the public, primarily through the EMMA Web site, at no cost. Almost five years after the implementation of the technology fee, the ongoing information technology support and operational costs of maintaining and servicing EMMA, the Real-time Transaction Reporting System (‘‘RTRS’’), the Short-term Obligation Rate Transparency (‘‘SHORT’’) system, as well as other market transparency systems, exceeds capital needs for new hardware and software. In fact, the annual operating costs of the market transparency systems in fiscal year 2014 were approximately $14 million, which represents an almost doubling of the expenses for the market transparency systems from $7.2 million in fiscal year 13 As noted above, this $1 million reduction in revenue will be recouped through the increase in registration fees. 14 See note 6 supra. E:\FR\FM\28AUN1.SGM 28AUN1 Federal Register / Vol. 80, No. 167 / Friday, August 28, 2015 / Notices Lhorne on DSK5TPTVN1PROD with NOTICES 2008 prior to the launch of EMMA, and far exceeds the approximately $7 million generated annually from the technology fee. The Board evaluated reducing the technology fee because the target to maintain three-times the annual information technology depreciation expenses has been met. However, based on its analysis, the Board recognized that without proposing a new fee on regulated entities, the total revenue generated from all sources, excluding the technology fee, would be inadequate to fund projected operational expenses of the organization. When the technology fee was introduced in 2011, it was believed that assessing a fee on a per trade basis established a more balanced distribution of fees on dealers and their activities, which the Board continues to support. The Board determined during the holistic fee review that, if a new fee for regulated entities was proposed, assessing the fee based on the number of trades would be the appropriate measure. The Board considered the potential for additional operational and compliance costs to both dealers and the MSRB in implementing a new fee assessment and did not believe additional costs were warranted when, instead of implementing a new fee based on the number of trades, it would be reasonable to continue to assess the technology fee at its current amount, provided that the revenue collected would be available for funding all MSRB operations. Understanding that technology related expenses currently account for nearly 50% of the costs and expenses of operating and administering the MSRB, the Board concluded that all fees collected from regulated entities should be aggregated and available for the most appropriate organizational uses.15 Therefore, to achieve adequate funding aligned with expense levels, the Board determined to continue to assess a technology fee ($1.00 per transaction for each inter-dealer municipal securities sale and for each sale to customers), but that the revenue from the technology fee will no longer be designated exclusively for capitalized hardware and software expenses. 15 Based on the fiscal year 2014 audited financial statements of the MSRB, total operational expenses were $29.5 million, of that, 48% was spent on market information transparency programs and operations, 20% was spent on rulemaking and policy development, 7% was spent on market leadership, outreach and education, 6% was spent on Board governance and rulemaking oversight, and 19% was spent on administration. VerDate Sep<11>2014 14:19 Aug 27, 2015 Jkt 235001 Transaction Fee The transaction fee is assessed on the total par value of inter-dealer and customer sales reported to the MSRB by dealers under Rule G–14(b). Rule A– 13(c)(iii) exempts from this fee sale transactions in municipal securities that have a final stated maturity of nine months or less or that, at the time of trade, may be tendered at the option of the holder to an issuer of such securities or its designated agent for redemption or purchase at par value or more at least as frequently as every nine months until maturity, earlier redemption, or purchase by an issuer or its designated agent. The Board continues to support such exemptions recognizing that, given the traditionally low short-term interest rates on such short-term instruments, charging fees on such instruments may impair the market for these products. While the transaction fee has never been applicable to commercial paper, which usually has a final stated maturity of nine months or less, there are occasions when the maturity date of commercial paper is extended past a nine-month maturity date, which raises a question as to whether the transaction fee would then apply. During its holistic fee review, the Board confirmed that, even in cases of the extended maturity date, commercial paper issues should remain exempt from the transaction fee. Accordingly, the proposed rule change adds language to the exemption provisions in MSRB Rule A–13(c)(iii) to clarify that the exemption from the transaction fee assessment also applies to securities issued pursuant to a commercial paper program.16 Fees Not Being Modified The municipal advisor professional fee under Rule A–11 currently assesses $300 per professional for each Form MA–I filed with the Commission as of January 31 of each year.17 In establishing that fee, the MSRB had targeted fees generated from municipal advisors under Rule A–11 to provide revenue of approximately $2 million annually, or approximately 5% of total MSRB revenue; however, such fees are currently expected to generate only approximately $1.17 million, or approximately 3% of total revenue in fiscal year 2016. This decrease is a result of the number of municipal advisor professionals for whom Forms MA–I have been filed with the 16 Furthermore, this revision clarifies that the transaction fee exemption is not limited to ‘‘commercial paper’’ as specifically defined in MSRB Rule G–32(d)(xiii). 17 See Exchange Act Release No. 72019 (Apr. 25, 2014), 79 FR 24798 (May 1, 2014) (File No. SR– MSRB–2014–03). PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 52355 Commission being fewer than originally estimated. The Board recognized the significant costs associated with developing a new regulatory regime for municipal advisors for the protection of investors, municipal entities and obligated persons and acknowledged that to generate the targeted revenue level, the professional fee for each person that engages in municipal advisory activities on behalf of a municipal advisor may need to be increased. However, the Board determined to not make any changes to the professional fee at this time but to revisit the fee in the future providing additional time for the municipal advisor regulations and business models to more fully develop. The professional examination fees established under Rule A–16 were increased from $60 to $150 effective April 1, 2015.18 The Board believes that no further adjustment is currently warranted. Data subscription service fees were studied and examined in fiscal year 2014 and revised effective April 1, 2014.19 Fees for the Comprehensive Transaction data service, the RTRS service and the SHORT service were increased by 10% at that time. Since that increase, the number of subscribers has increased by 4.4%, indicating the continuing reasonableness of the prior fee increase. The Board believes that no further adjustments are currently warranted. 2. Statutory Basis The MSRB believes that the proposed rule change is consistent with section 15B(b)(2)(J) of the Act 20 which requires, in pertinent part, that the MSRB’s rules shall provide that each municipal securities broker, municipal securities dealer, and municipal advisor shall pay to the Board such reasonable fees and charges as may be necessary or appropriate to defray the costs and expenses of operating and administering the Board and that such rules shall specify the amount of such fees and charges. The MSRB believes that its rules provide for reasonable dues, fees and other charges among registered entities. The MSRB believes that the proposed fees are reasonable and necessary to fund MSRB services in a manner that ensures long-term sustainability, seeking to achieve an equitable balance 18 See Exchange Act Release No. 74561 (Mar. 23, 2015), 80 FR 16485 (Mar. 27, 2015) (File No. SR– MSRB–2015–01). 19 See Exchange Act Release No. 71690 (Mar. 11, 2014), 78 FR 14769 (Mar. 17, 2014) (File No. SR– MSRB–2014–02). 20 15 U.S.C. 78o–4(b)(2)(J). E:\FR\FM\28AUN1.SGM 28AUN1 52356 Federal Register / Vol. 80, No. 167 / Friday, August 28, 2015 / Notices Lhorne on DSK5TPTVN1PROD with NOTICES among regulated entities and a fair allocation of the expenses of the regulatory activities, system development and operational activities undertaken by the MSRB. The proposed rule change would maintain the total amount of fees collected by the MSRB at approximately the same levels while continuing to ensure that the MSRB maintains sufficient reserves to meet its regulatory responsibilities. B. Self-Regulatory Organization’s Statement on Burden on Competition Section 15B(b)(2)(C) of the Act 21 requires that MSRB rules not be designed to impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In addition, section 15B(b)(2)(L)(iv) of the Act 22 provides 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.’’ In considering these standards, the MSRB was guided by the Board’s Policy on the Use of Economic Analysis. The MSRB does not believe that the proposed rule changes will impose additional burdens on competition that are not necessary or appropriate in furtherance of the purposes of the Act. The Board believes the increase in the initial fee under Rule A–12 from $100 to $1,000 is necessary and appropriate to ensure that new registrants cover a significant portion of the MSRB administrative costs of processing an initial registration. The MSRB recognizes the possibility that these fees may represent an initial barrier to entry. The Board is not aware of data or other information that would allow for a quantification of the potential impact of this fee increase, but based on experience expects the impact to be small and unlikely to negatively impact the competitiveness of municipal securities or municipal advisor markets in which the registrants participate. Further, the Board notes that firms wishing to engage in municipal securities activities and/or municipal advisory activities face other costs associated with complying with applicable laws and regulations. Based on the Board’s experience, the one-time initial fee for registration, even at its proposed new level of $1,000, represents a relatively small share of the typically associated legal and regulatory 21 15 22 15 U.S.C. 78o–4(b)(2)(C). U.S.C. 78o–4(b)(2)(L)(iv). VerDate Sep<11>2014 14:19 Aug 27, 2015 Jkt 235001 compliance costs. The MSRB anticipates that a potential market entrant who is actually deterred by this fee may likely find it difficult to fully comply with the other regulatory and legal requirements associated with the market in which it wishes to offer services. The Board believes the increase in the annual fee under Rule A–12 from $500 to $1,000 is necessary and appropriate to ensure that MSRB registrants that do not regularly engage in the market activities assessed under Rule A–13, but nonetheless participate in the municipal securities market more broadly, share in the costs and expenses of operating and administering the MSRB. The MSRB recognizes that it is possible that these fees may cause a small number of firms with limited attachment to the municipal securities market to exit or further reduce their activity. The Board is not aware of data or other information that would allow for a quantification of this potential impact, but based on experience expects the impact to be small and unlikely to negatively impact the competitiveness of the municipal securities or municipal advisor markets in which registrants participate. Further, the Board notes that firms wishing to engage in municipal securities activities and/or municipal advisory activities face other costs associated with complying with applicable laws and regulations. Based on the Board’s experience, the annual fee, even at its proposed new level of $1,000, represents a relatively small share of the typically associated annual legal and regulatory compliance costs. The MSRB anticipates that a registrant who is adversely impacted by a $500 per year increase may likely find it difficult to fully comply with the other regulatory and legal requirements associated with the market in which it wishes to offer services. The Board is not making any changes to the municipal advisor professional fee under Rule A–11 at this time. Therefore, the only fee increase affecting small municipal advisors is that to the annual, per-firm registration fee. The MSRB recognizes that any fee that is assessed on a per firm basis, rather than activity basis, will likely represent a greater share of a small firm’s revenue than it will a larger firm’s revenue and that this could cause some small firms to exit the market. However, the Board believes that in most cases, the annual fee will represent a very small percentage of a firm’s revenue. As noted above, the Board also believes that a firm that is adversely impacted by a $500 per year increase may find it difficult to fully comply with the other regulatory and legal requirements PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 associated with the market in which it wishes to offer services. Further, as the SEC concluded in its final rule on the permanent registration of municipal advisors, the market would be likely to remain competitive despite the potential exit of some municipal advisors (including small entity municipal advisors), consolidation of municipal advisors, or lack of new entrants into the market. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The forgoing rule change has become effective pursuant to section 19(b)(3)(A) of the Act 23 and paragraph (f) of Rule 19b–4 24 thereunder. The amendments to Rule A–12 will have an implementation date of October 1, 2015 and the amendments to Rule A–13 will have an implementation date of January 1, 2016. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MSRB–2015–08 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–2015–08. This file number should be included on the 23 15 24 17 E:\FR\FM\28AUN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 28AUN1 Federal Register / Vol. 80, No. 167 / Friday, August 28, 2015 / Notices 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– 2015–08 and should be submitted on or before September 18, 2015. For the Commission, pursuant to delegated authority.25 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–21296 Filed 8–27–15; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration [Summary Notice No. PE–2015–50] Petition for Exemption; Summary of Petition Received; Chevron Aircraft Operations Federal Aviation Administration (FAA), DOT. ACTION: Notice. AGENCY: This notice contains a summary of a petition seeking relief from specified requirements of title 14 of the Code of Federal Regulations. The purpose of this notice is to improve the public’s awareness of, and participation in, the FAA’s exemption process. Neither publication of this notice nor the inclusion or omission of information Lhorne on DSK5TPTVN1PROD with NOTICES SUMMARY: 25 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 14:19 Aug 27, 2015 Jkt 235001 in the summary is intended to affect the legal status of the petition or its final disposition. DATES: Comments on this petition must identify the petition docket number and must be received on or before September 17, 2015. ADDRESSES: Send comments identified by docket number FAA–2014–1111 using any of the following methods: • Federal eRulemaking Portal: Go to https://www.regulations.gov and follow the online instructions for sending your comments electronically. • Mail: Send comments to Docket Operations, M–30; U.S. Department of Transportation (DOT), 1200 New Jersey Avenue SE., Room W12–140, West Building Ground Floor, Washington, DC 20590–0001. • Hand Delivery or Courier: Take comments to Docket Operations in Room W12–140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. • Fax: Fax comments to Docket Operations at 202–493–2251. Privacy: In accordance with 5 U.S.C. 553(c), DOT solicits comments from the public to better inform its rulemaking process. DOT posts these comments, without edit, including any personal information the commenter provides, to https://www.regulations.gov, as described in the system of records notice (DOT/ALL–14 FDMS), which can be reviewed at https://www.dot.gov/ privacy. Docket: Background documents or comments received may be read at https://www.regulations.gov at any time. Follow the online instructions for accessing the docket or go to the Docket Operations in Room W12–140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Keira Jones (202) 267–4025, Office of Rulemaking, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591. This notice is published pursuant to 14 CFR 11.85. Issued in Washington, DC, on August 25, 2015. Lirio Liu, Director, Office of Rulemaking. Petition For Exemption Docket No.: FAA–2014–1111. Petitioner: Chevron Aircraft Operations. Section(s) of 14 CFR Affected: § 91.9(a). PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 52357 Description of Relief Sought: Chevron Aircraft Operations (Chevron) requests relief from § 91.9(a), which states that no person may operate a civil aircraft without complying with the operating limitations specified in the approved Airplane or Rotorcraft Flight Manual, markings, and placards, or as otherwise prescribed by the certificating authority of the country of registry. In a letter dated June 24, 2015, Chevron clarified that the specific limitation that it seeks to not comply with is the Agusta Westland AW–139 Rotorcraft Flight Manual, Supplements 12 and 50. These supplements prescribe, in part, a heliport or helideck minimum size limitation of 50 feet by 50 feet or 50 foot diameter. Chevron wishes to operate the AW139 using Category A procedures from a helideck that is smaller than 50 feet by 50 feet or 50 foot diameter for its offshore operations. [FR Doc. 2015–21308 Filed 8–27–15; 8:45 am] BILLING CODE 4910–13–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Meeting: RTCA Program Management Committee (PMC) Federal Aviation Administration (FAA), U.S. Department of Transportation (DOT). ACTION: Notice of RTCA Program Management Committee Meeting. AGENCY: The FAA is issuing this notice to advise the public of a RTCA Program Management Committee meeting. DATES: The meeting will be held September 22nd from 8:30 a.m.–4:30 p.m. ADDRESSES: The meeting will be held at RTCA Headquarters, 1150 18th Street NW., Suite 910, Washington, DC 20036, Tel: (202) 330–0680. FOR FURTHER INFORMATION CONTACT: The RTCA Secretariat, 1150 18th Street NW., Suite 910, Washington, DC 20036, or by telephone at (202) 833–9339, fax at (202) 833–9434, or Web site at https:// www.rtca.org or Karan Hofmann, Program Director, RTCA, Inc., khofmann@rtca.org, (202) 330–0680. SUPPLEMENTARY INFORMATION: Pursuant to section 10(a) (2) of the Federal Advisory Committee Act (Pub. L. 92– 463, 5 U.S.C., App.), notice is hereby given for a meeting of the RTCA Program Management Committee. The agenda will include the following: SUMMARY: Tuesday, September 22, 2015 1. WELCOME AND INTRODUCTIONS 2. REVIEW/APPROVE E:\FR\FM\28AUN1.SGM 28AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 167 (Friday, August 28, 2015)]
[Notices]
[Pages 52352-52357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21296]

=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75751; File No. SR-MSRB-2015-08]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change Consisting of Amendments to MSRB Rule A-12, on Registration, and
MSRB Rule A-13, on Underwriting and Transaction Assessments for
Brokers, Dealers and Municipal Securities Dealers

August 24, 2015.
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 August 10, 2015, the Municipal Securities Rulemaking Board (the
``MSRB'' or ``Board'') filed with the Securities and Exchange
Commission (the ``SEC'' or ``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the MSRB. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The MSRB filed with the Commission a proposed rule change
consisting of amendments to MSRB Rule A-12, on registration, and MSRB
Rule A-13, on underwriting and transaction assessments for brokers,
dealers and municipal securities dealers (``proposed rule change'').
The MSRB designated the proposed rule change as ``establishing or
changing a due, fee or other charge'' under section 19(b)(3)(A)(ii) of
the Act \3\ and Rule 19b-4(f)(2) \4\ thereunder, which renders the
proposal effective upon filing with the Commission. The implementation
date of the proposed amendment to Rule A-12 is October 1, 2015 and the
implementation date for the proposed amendment to Rule A-13 is January
1, 2016.
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\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2015-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.

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

In its filing with the Commission, the MSRB included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in sections
A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose
The purpose of the proposed rule change is to adjust certain
existing MSRB fees applicable to dealers and municipal advisors that
engage in municipal securities and municipal advisory activities
(collectively ``regulated entities'') to continue to assess reasonable
fees necessary to

[[Page 52353]]

defray the costs and expenses of operating and administering the MSRB.
The proposed rule change would amend Rule A-13 to decrease the
existing underwriting fee from $.03 per $1,000 of par value to $.0275
per $1,000 of par value. Additionally, the proposed rule change would
amend Rule A-12 to (i) increase the initial registration fee from $100
to $1,000 and (ii) increase the annual registration fee from $500 to
$1,000. Further, the proposed rule change would amend Rule A-13(c)(iii)
to clarify that securities issued pursuant to a commercial paper
program are not subject to the transaction fee.
Holistic Review of MSRB Fees
The MSRB assesses regulated entities various fees designed to
defray the cost of its operations, including rulemaking, market
transparency and educational initiatives that fulfill its Congressional
mandate to, among other things, protect investors and municipal
entities by promoting the fairness and efficiency of the $3.7 trillion
municipal securities market. The MSRB provides investors, state and
local governments and other market participants with free access to
disclosure and transparency information in the municipal securities
market through its Electronic Municipal Market Access (EMMA[supreg])
\5\ Web site, the official repository for information on virtually all
municipal bonds. Additionally, the MSRB serves as an objective resource
on the municipal market, conducts extensive education and outreach to
market participants, and provides market leadership on key issues
impacting the municipal securities market.
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\5\ EMMA is a registered trademark of the MSRB.
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Section 15B(b)(2)(J) of the Act \6\ provides, in pertinent part,
that each dealer and municipal advisor shall pay to the Board such
reasonable fees and charges as may be necessary or appropriate to
defray the costs and expenses of operating and administering the Board
and that the MSRB shall have rules specifying the amount of such fees.
The current MSRB fees are:
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\6\ 15 U.S.C. 78o-4(b)(2)(J).
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1. Municipal advisor professional fee (Rule A-11) $300 annual fee
to be paid for each Form MA-I filed with the SEC by the municipal
advisor;
2. Initial registration fee (Rule A-12) $100 one-time registration
fee to be paid by each dealer to register with the MSRB prior to
engaging in municipal securities activities and each municipal advisor
to register with the MSRB prior to engaging in municipal advisory
activities;
3. Annual registration fee (Rule A-12) $500 annual fee to be paid
by each dealer and municipal advisor registered with the MSRB;
4. Underwriting fee (Rule A-13) .003% ($.03 per $1,000) of the par
value to be paid by a dealer, except in limited circumstances, for all
municipal securities purchased from an issuer by or through such
dealer, whether acting as principal or agent, as part of a primary
offering;
5. Transaction fee (Rule A-13) .001% ($.01 per $1,000) of the total
par value to be paid by a dealer, except in limited circumstances, for
inter-dealer sales and customer sales reported to the MSRB pursuant to
MSRB Rule G-14(b);
6. Technology fee (Rule A-13) $1.00 paid by a dealer per
transaction for each inter-dealer sale and for each sale to customers
reported to the MSRB pursuant to MSRB Rule G-14(b); and
7. Examination fee (Rule A-16) $150 test development fee assessed
per candidate for each MSRB examination.
In addition, the MSRB charges data subscription and service fees
for subscribers, including dealers and municipal advisors, seeking
direct electronic delivery of municipal trade data and disclosure
documents associated with municipal bond issues.\7\
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\7\ This information is available without direct electronic
delivery on the MSRB's EMMA Web site at no charge.
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Over the course of the current fiscal year, the Board has
undertaken a holistic review of the fees assessed on regulated
entities. The last such review occurred in 2010 and culminated with
amendments to Rule A-13, specifically a transaction fee increase from
$.005 to $.01 per $1,000 of the total par value of inter-dealer and
customer sales reported to the MSRB and the establishment of a $1.00
technology fee per transaction for each inter-dealer and customer sale
reported to the MSRB.\8\ These two changes were necessitated by
increasing costs, including those associated with implementing the
mandates of the Dodd-Frank Wall Street Reform and Consumer Protection
Act (``Dodd-Frank'') \9\ and the need for additional revenue to replace
aging and outdated information technology software and hardware and
ensure the operational integrity of the MSRB's information systems. The
funds generated from the technology fee have been segregated for
accounting purposes and dedicated solely to funding capital expenses
for technology investments in capitalized hardware and software.
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\8\ These fees became effective on January 1, 2011. See Exchange
Act Release No. 63621 (Dec. 29, 2010), 76 FR 604 (Jan. 5, 2011)
(File No. SR-MSRB-2010-10).
\9\ Public Law 111-203, 124 Stat. 1376 (2010).
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Since 2011, the MSRB has successfully reached and now exceeds the
operating reserve target of twelve months of operating expenses and has
accumulated the reserve target of three times the annual information
technology depreciation expenses. The annual technology fee revenues
exceed the annual information technology capital draws and have
provided the funding to establish the targeted technology renewal fund.
In fact, once the reserve target was met, excess revenues created a
surplus over the reserve target, resulting in the Board approving a
technology fee rebate of $3.6 million in July 2014.
The Board recognized that, with the current revenue and information
technology capital spend rate for capitalized hardware and software,
the surplus in the segregated technology fund would continue to grow.
Meanwhile, the Board noted that operating reserves are projected to
fall to 12 months of operating expenses in fiscal year 2017 and
continue to decline thereafter because operating expenses continue to
modestly rise annually while the current primary revenue sources to
fund these operating expenses are projected to be effectively flat.
This decline in reserves could accelerate if bond and trade volumes
fall below projected levels causing funds from market activity fees to
decrease. The inverse relationship between the projected growing
surplus in the technology renewal fund and the potential erosion of
operating reserves in the next few years was the catalyst for the Board
to conduct a holistic fee review.
The Board evaluated the assessment of MSRB fees on regulated
entities with the goal of better aligning revenue sources with
operating expenses and all capital needs. The Board strives to
diversify funding sources among regulated entities and other entities
that fund MSRB services in a manner that ensures long-term
sustainability, while continuing to strike an equitable balance among
regulated entities and a fair allocation of the expenses of the
regulatory activities, systems development and operational activities
undertaken by the MSRB. Proxies used by the Board for fairly allocating
to regulated entities the cost of MSRB regulation include, but are not
limited to: Being registered to engage in municipal securities or
municipal advisory activities; the level of dealer market activity as
determined by the number of transactions executed and total par value
of transactions executed;

[[Page 52354]]

and the number of associated persons engaged in municipal advisory
activities on behalf of a registered municipal advisor. Recognizing
that in any given year there could be more or less activity by a
particular class of regulated entities, the Board, as it has
historically, sought to establish a fee structure that would result in
a balanced and reasonable contribution over the long run from all
regulated entities to defray the costs and expenses of operating and
administering the MSRB.
The proposed changes resulting from the Board's holistic fee review
are summarized below.
Annual and Initial Fees Under MSRB Rule A-12
The current annual registration fee of $500 pursuant to Rule A-12
is paid by each of the over 2,000 regulated entities registered with
the MSRB. While the annual fee amount has not been changed since
2009,\10\ the share of total expenses that the annual fees defray has
continued to decrease. For example, the total annual fees collected in
2009 defrayed nearly 5% of total expenses whereas the total annual fee
amounts currently defray only approximately 3.5% of total expenses
despite an increase in the number of regulated entities associated with
the registration of municipal advisors post Dodd-Frank. In addition,
approximately 35% of the entities registered with the MSRB as dealers
do not regularly engage in any municipal securities trade activity
subject to market activity fee assessments under Rule A-13. Therefore,
the annual fee is the primary way dealers who may only engage in
municipal fund securities business (i.e., 529 college savings plan
sales and Local Government Investment Pool sales) or have the
occasional municipal bond sale share in the costs and expenses of
operating and administering the MSRB. Thus, an increase in the annual
fee from $500 to $1,000 provides for all regulated entities to more
fairly contribute to defraying the costs and expenses of operating and
administering the MSRB.
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\10\ See Exchange Act Release No. 60528 (Aug. 18, 2009), 74 FR
43205 (Aug. 26, 2009) (File No. SR-MSRB-2009-13).
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Similarly, the Board concluded that an increase in the initial
registration fee under Rule A-12 from $100 to $1,000 was reasonable to
help defray a significant portion of the administrative and operational
costs associated with processing an initial registration. The fee for
initial registration has not been increased since its inception in 1975
and, as a result, is low for an initial registration fee.\11\ In an
effort to not overburden the municipal advisor community, the Board did
not consider an increase to the initial registration fee throughout the
post Dodd-Frank initial registration process.\12\
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\11\ For example, the fee for initial registration as a broker-
dealer or investment adviser with the vast majority (47) of state
regulators is currently more than $100. Moreover, the fee for
initial registration with the Financial Industry Regulatory
Authority currently starts at $7,500.
\12\ Post Dodd-Frank, 925 non-dealer municipal advisors
registered with the MSRB (exclusive of municipal advisors that are
also registered dealers), each of which paid $100 to register. There
are currently approximately 590 non-dealer municipal advisors
registered with the MSRB.
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Together, the increase in the annual and initial fees would provide
approximately $1 million in annual revenue. The MSRB believes the
proposed increase in registration fees will equitably defray the
expenses of MSRB operations and allow the MSRB to lower underwriting
fees by an offsetting amount to achieve a more balanced distribution of
fees.
Market Activity Fees Under MSRB Rule A-13
The market activity fees (i.e., underwriting, transaction and
technology fees) assessed under Rule A-13 represent 85% of the MSRB's
fiscal year 2014 total revenue. In 2014, of the over 2000 dealers and
municipal advisors registered with the MSRB, roughly 140 dealers were
assessed underwriting fees and 840 dealers were assessed transaction
and technology fees. The underwriting and transaction fees, which are
generally proportionate to a dealer's relative dollar volume of
activity within the industry, are based on the par value amount of
underwriting and customer and inter-dealer transactions during the
year. The technology fee is based on a dealer's participation in the
market as measured by the total number of inter-dealer and customer
sales reported to the MSRB, rather than par value, and coupled with the
transaction and underwriting fees, contribute to an equitable
distribution of the market activity assessments for dealers. However,
the assessment of these market activity fees is highly concentrated
among a small number of dealers; based on fiscal year 2014 fee revenue,
less than a dozen dealers paid 52% of all such fees. The Board
determined that, notwithstanding this concentration, these market
activity fees are reasonable in light of the level of participation in
the municipal securities market by these dealers.
Underwriting Fee
With organizational reserves (operating reserves and the technology
renewal fund) currently above targeted levels and future year financial
pro formas indicating declines in aggregate reserve levels (while
remaining slightly above targeted levels), coupled with the increase in
registration fees, the Board determined to decrease the underwriting
fee from .003% ($.03) to .00275% ($.0275) per $1,000 of the par value.
Based on underwriting volume ranging from $300 billion to $400 billion
annually, the decrease in the underwriting fee will reduce MSRB revenue
by approximately $1 million annually.\13\ The Board decided to lower
the underwriting fee for several reasons. First, the fee is based on
the assessment factor (i.e., par value of underwriting) that is the
most volatile year over year. Second, as noted above, underwriting fees
are paid primarily by a small number of dealers, all of which also pay
significant transaction and technology fees, making some relief to such
firms equitable. Additionally, for each new underwriting, the sales of
the initial offering are subject to all three market activity fees such
that a decrease in the underwriting fee on initial bond sales is fair
and reasonable.
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\13\ As noted above, this $1 million reduction in revenue will
be recouped through the increase in registration fees.
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Technology Fee
The technology fee was implemented in January 2011 to fund
capitalized hardware and software for the MSRB market transparency
systems.\14\ At that time, the MSRB stated the assessment of the
technology fee would be reviewed periodically. The MSRB's market
transparency systems collect municipal market data, disclosures and
statistics and make this information available to investors and the
public, primarily through the EMMA Web site, at no cost. Almost five
years after the implementation of the technology fee, the ongoing
information technology support and operational costs of maintaining and
servicing EMMA, the Real-time Transaction Reporting System (``RTRS''),
the Short-term Obligation Rate Transparency (``SHORT'') system, as well
as other market transparency systems, exceeds capital needs for new
hardware and software. In fact, the annual operating costs of the
market transparency systems in fiscal year 2014 were approximately $14
million, which represents an almost doubling of the expenses for the
market transparency systems from $7.2 million in fiscal year

[[Page 52355]]

2008 prior to the launch of EMMA, and far exceeds the approximately $7
million generated annually from the technology fee.
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\14\ See note 6 supra.
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The Board evaluated reducing the technology fee because the target
to maintain three-times the annual information technology depreciation
expenses has been met. However, based on its analysis, the Board
recognized that without proposing a new fee on regulated entities, the
total revenue generated from all sources, excluding the technology fee,
would be inadequate to fund projected operational expenses of the
organization. When the technology fee was introduced in 2011, it was
believed that assessing a fee on a per trade basis established a more
balanced distribution of fees on dealers and their activities, which
the Board continues to support. The Board determined during the
holistic fee review that, if a new fee for regulated entities was
proposed, assessing the fee based on the number of trades would be the
appropriate measure. The Board considered the potential for additional
operational and compliance costs to both dealers and the MSRB in
implementing a new fee assessment and did not believe additional costs
were warranted when, instead of implementing a new fee based on the
number of trades, it would be reasonable to continue to assess the
technology fee at its current amount, provided that the revenue
collected would be available for funding all MSRB operations.
Understanding that technology related expenses currently account for
nearly 50% of the costs and expenses of operating and administering the
MSRB, the Board concluded that all fees collected from regulated
entities should be aggregated and available for the most appropriate
organizational uses.\15\ Therefore, to achieve adequate funding aligned
with expense levels, the Board determined to continue to assess a
technology fee ($1.00 per transaction for each inter-dealer municipal
securities sale and for each sale to customers), but that the revenue
from the technology fee will no longer be designated exclusively for
capitalized hardware and software expenses.
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\15\ Based on the fiscal year 2014 audited financial statements
of the MSRB, total operational expenses were $29.5 million, of that,
48% was spent on market information transparency programs and
operations, 20% was spent on rulemaking and policy development, 7%
was spent on market leadership, outreach and education, 6% was spent
on Board governance and rulemaking oversight, and 19% was spent on
administration.
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Transaction Fee
The transaction fee is assessed on the total par value of inter-
dealer and customer sales reported to the MSRB by dealers under Rule G-
14(b). Rule A-13(c)(iii) exempts from this fee sale transactions in
municipal securities that have a final stated maturity of nine months
or less or that, at the time of trade, may be tendered at the option of
the holder to an issuer of such securities or its designated agent for
redemption or purchase at par value or more at least as frequently as
every nine months until maturity, earlier redemption, or purchase by an
issuer or its designated agent. The Board continues to support such
exemptions recognizing that, given the traditionally low short-term
interest rates on such short-term instruments, charging fees on such
instruments may impair the market for these products. While the
transaction fee has never been applicable to commercial paper, which
usually has a final stated maturity of nine months or less, there are
occasions when the maturity date of commercial paper is extended past a
nine-month maturity date, which raises a question as to whether the
transaction fee would then apply. During its holistic fee review, the
Board confirmed that, even in cases of the extended maturity date,
commercial paper issues should remain exempt from the transaction fee.
Accordingly, the proposed rule change adds language to the exemption
provisions in MSRB Rule A-13(c)(iii) to clarify that the exemption from
the transaction fee assessment also applies to securities issued
pursuant to a commercial paper program.\16\
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\16\ Furthermore, this revision clarifies that the transaction
fee exemption is not limited to ``commercial paper'' as specifically
defined in MSRB Rule G-32(d)(xiii).
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Fees Not Being Modified
The municipal advisor professional fee under Rule A-11 currently
assesses $300 per professional for each Form MA-I filed with the
Commission as of January 31 of each year.\17\ In establishing that fee,
the MSRB had targeted fees generated from municipal advisors under Rule
A-11 to provide revenue of approximately $2 million annually, or
approximately 5% of total MSRB revenue; however, such fees are
currently expected to generate only approximately $1.17 million, or
approximately 3% of total revenue in fiscal year 2016. This decrease is
a result of the number of municipal advisor professionals for whom
Forms MA-I have been filed with the Commission being fewer than
originally estimated. The Board recognized the significant costs
associated with developing a new regulatory regime for municipal
advisors for the protection of investors, municipal entities and
obligated persons and acknowledged that to generate the targeted
revenue level, the professional fee for each person that engages in
municipal advisory activities on behalf of a municipal advisor may need
to be increased. However, the Board determined to not make any changes
to the professional fee at this time but to revisit the fee in the
future providing additional time for the municipal advisor regulations
and business models to more fully develop.
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\17\ See Exchange Act Release No. 72019 (Apr. 25, 2014), 79 FR
24798 (May 1, 2014) (File No. SR-MSRB-2014-03).
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The professional examination fees established under Rule A-16 were
increased from $60 to $150 effective April 1, 2015.\18\ The Board
believes that no further adjustment is currently warranted.
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\18\ See Exchange Act Release No. 74561 (Mar. 23, 2015), 80 FR
16485 (Mar. 27, 2015) (File No. SR-MSRB-2015-01).
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Data subscription service fees were studied and examined in fiscal
year 2014 and revised effective April 1, 2014.\19\ Fees for the
Comprehensive Transaction data service, the RTRS service and the SHORT
service were increased by 10% at that time. Since that increase, the
number of subscribers has increased by 4.4%, indicating the continuing
reasonableness of the prior fee increase. The Board believes that no
further adjustments are currently warranted.
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\19\ See Exchange Act Release No. 71690 (Mar. 11, 2014), 78 FR
14769 (Mar. 17, 2014) (File No. SR-MSRB-2014-02).
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2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
section 15B(b)(2)(J) of the Act \20\ which requires, in pertinent part,
that the MSRB's rules shall provide that each municipal securities
broker, municipal securities dealer, and municipal advisor shall pay to
the Board such reasonable fees and charges as may be necessary or
appropriate to defray the costs and expenses of operating and
administering the Board and that such rules shall specify the amount of
such fees and charges.
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\20\ 15 U.S.C. 78o-4(b)(2)(J).
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The MSRB believes that its rules provide for reasonable dues, fees
and other charges among registered entities. The MSRB believes that the
proposed fees are reasonable and necessary to fund MSRB services in a
manner that ensures long-term sustainability, seeking to achieve an
equitable balance

[[Page 52356]]

among regulated entities and a fair allocation of the expenses of the
regulatory activities, system development and operational activities
undertaken by the MSRB. The proposed rule change would maintain the
total amount of fees collected by the MSRB at approximately the same
levels while continuing to ensure that the MSRB maintains sufficient
reserves to meet its regulatory responsibilities.

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

Section 15B(b)(2)(C) of the Act \21\ requires that MSRB rules not
be designed to impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. In addition,
section 15B(b)(2)(L)(iv) of the Act \22\ provides 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.''
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\21\ 15 U.S.C. 78o-4(b)(2)(C).
\22\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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In considering these standards, the MSRB was guided by the Board's
Policy on the Use of Economic Analysis. The MSRB does not believe that
the proposed rule changes will impose additional burdens on competition
that are not necessary or appropriate in furtherance of the purposes of
the Act.
The Board believes the increase in the initial fee under Rule A-12
from $100 to $1,000 is necessary and appropriate to ensure that new
registrants cover a significant portion of the MSRB administrative
costs of processing an initial registration. The MSRB recognizes the
possibility that these fees may represent an initial barrier to entry.
The Board is not aware of data or other information that would allow
for a quantification of the potential impact of this fee increase, but
based on experience expects the impact to be small and unlikely to
negatively impact the competitiveness of municipal securities or
municipal advisor markets in which the registrants participate.
Further, the Board notes that firms wishing to engage in municipal
securities activities and/or municipal advisory activities face other
costs associated with complying with applicable laws and regulations.
Based on the Board's experience, the one-time initial fee for
registration, even at its proposed new level of $1,000, represents a
relatively small share of the typically associated legal and regulatory
compliance costs. The MSRB anticipates that a potential market entrant
who is actually deterred by this fee may likely find it difficult to
fully comply with the other regulatory and legal requirements
associated with the market in which it wishes to offer services.
The Board believes the increase in the annual fee under Rule A-12
from $500 to $1,000 is necessary and appropriate to ensure that MSRB
registrants that do not regularly engage in the market activities
assessed under Rule A-13, but nonetheless participate in the municipal
securities market more broadly, share in the costs and expenses of
operating and administering the MSRB. The MSRB recognizes that it is
possible that these fees may cause a small number of firms with limited
attachment to the municipal securities market to exit or further reduce
their activity. The Board is not aware of data or other information
that would allow for a quantification of this potential impact, but
based on experience expects the impact to be small and unlikely to
negatively impact the competitiveness of the municipal securities or
municipal advisor markets in which registrants participate. Further,
the Board notes that firms wishing to engage in municipal securities
activities and/or municipal advisory activities face other costs
associated with complying with applicable laws and regulations. Based
on the Board's experience, the annual fee, even at its proposed new
level of $1,000, represents a relatively small share of the typically
associated annual legal and regulatory compliance costs. The MSRB
anticipates that a registrant who is adversely impacted by a $500 per
year increase may likely find it difficult to fully comply with the
other regulatory and legal requirements associated with the market in
which it wishes to offer services.
The Board is not making any changes to the municipal advisor
professional fee under Rule A-11 at this time. Therefore, the only fee
increase affecting small municipal advisors is that to the annual, per-
firm registration fee. The MSRB recognizes that any fee that is
assessed on a per firm basis, rather than activity basis, will likely
represent a greater share of a small firm's revenue than it will a
larger firm's revenue and that this could cause some small firms to
exit the market. However, the Board believes that in most cases, the
annual fee will represent a very small percentage of a firm's revenue.
As noted above, the Board also believes that a firm that is adversely
impacted by a $500 per year increase may find it difficult to fully
comply with the other regulatory and legal requirements associated with
the market in which it wishes to offer services. Further, as the SEC
concluded in its final rule on the permanent registration of municipal
advisors, the market would be likely to remain competitive despite the
potential exit of some municipal advisors (including small entity
municipal advisors), consolidation of municipal advisors, or lack of
new entrants into the market.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received on the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

The forgoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \23\ and paragraph (f) of Rule 19b-4 \24\
thereunder. The amendments to Rule A-12 will have an implementation
date of October 1, 2015 and the amendments to Rule A-13 will have an
implementation date of January 1, 2016. At any time within 60 days of
the filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act.
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MSRB-2015-08 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-2015-08. This
file number should be included on the

[[Page 52357]]

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-2015-08 and should be submitted on or before
September 18, 2015.

For the Commission, pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-21296 Filed 8-27-15; 8:45 am]
BILLING CODE 8011-01-P

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