Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of a Proposed Rule Change Consisting of Proposed Amendments to Rule A-3, on Membership on the Board, 15582-15585 [2016-06452]
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15582
Federal Register / Vol. 81, No. 56 / Wednesday, March 23, 2016 / Notices
incorporate by reference the Application
for Non-Public Treatment originally
filed in this docket for the protection of
information that it has filed under seal.
Notice at 1–2.
Modification Two amends Annex 1 of
the agreement, setting forth the postage
prices for Priority Mail Express
International and Priority Mail
International mail. Id. at 1; see id.
Attachment 1 at 3.
The Postal Service intends for
Modification Two to become effective
on April 1, 2016. Notice at 1. The Postal
Service asserts that Modification Two
will not impair the ability of the
contract to comply with 39 U.S.C. 3633.
Id. Attachment 2.
II. Notice of Filings
The Commission invites comments on
whether the changes presented in the
Postal Service’s Notice are consistent
with the policies of 39 U.S.C. 3632,
3633, or 3642, 39 CFR 3015.5, and 39
CFR part 3020, subpart B. Comments are
due no later than March 24, 2016. The
public portions of these filings can be
accessed via the Commission’s Web site
(https://www.prc.gov).
The Commission appoints Jennaca D.
Upperman to represent the interests of
the general public (Public
Representative) in this docket.
III. Ordering Paragraphs
It is ordered:
1. The Commission reopens Docket
No. CP2015–75 for consideration of
matters raised by the Postal Service’s
Notice.
2. Pursuant to 39 U.S.C. 505, the
Commission appoints Jennaca D.
Upperman to serve as an officer of the
Commission (Public Representative) to
represent the interests of the general
public in this proceeding.
3. Comments are due no later than
March 24, 2016.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Stacy L. Ruble,
Secretary.
jstallworth on DSK7TPTVN1PROD with NOTICES
BILLING CODE 7710–FW–P
POSTAL SERVICE
Temporary Emergency Committee of
the Board of Governors; Sunshine Act
Meeting
Wednesday, March 30,
2016, at 10:00 a.m.
PLACE: via Teleconference.
DATES AND TIMES:
15:26 Mar 22, 2016
Wednesday, March 30, 2016, at 10:00
a.m.
1. Strategic Issues.
2. Financial Matters.
3. Pricing/Product Development
Matters.
4. Personnel Matters and
Compensation Issues.
5. Executive Session—Discussion of
prior agenda items and Board
governance.
GENERAL COUNSEL CERTIFICATION: The
General Counsel of the United States
Postal Service has certified that the
meeting may be closed under the
Government in the Sunshine Act.
CONTACT PERSON FOR INFORMATION:
Requests for information about the
meeting should be addressed to the
Secretary of the Board, Julie S. Moore,
at 202–268–4800.
Julie S. Moore.
Secretary, Board of Governors.
[FR Doc. 2016–06610 Filed 3–21–16; 11:15 am]
BILLING CODE 7710–12–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77390; File No. SR–MSRB–
2016–01]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Order Granting Approval of a
Proposed Rule Change Consisting of
Proposed Amendments to Rule A–3,
on Membership on the Board
March 17, 2016.
[FR Doc. 2016–06471 Filed 3–22–16; 8:45 am]
VerDate Sep<11>2014
Committee Changes the Date
and Time of its meeting scheduled for
March 21, 2016: On March 17, 2016, the
Temporary Emergency Committee of the
Board of Governors of the United States
Postal Service agreed unanimously to
change the date of the meeting
previously scheduled for March 21,
2016, via teleconference, to March 30,
2016, and to begin its closed meeting
session at 10:00 a.m., rather than the
previously announced time of 4:00 p.m.
MATTERS TO BE CONSIDERED:
STATUS:
Jkt 238001
I. Introduction
On January 15, 2016, 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
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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amendments to the MSRB Rule A–3, on
membership on the Board (the
‘‘proposed rule change’’).
The proposed rule change was
published for comment in the Federal
Register on February 4, 2016.3 The
Commission received two comment
letters on the proposed rule change.4
This order approves the proposed rule
change.
II. Description of the Proposed Rule
Change
The Board is comprised of 21
members 5 who, collectively, govern the
MSRB to carry out its mission primarily
by regulating dealers and municipal
advisors, providing market transparency
through its Electronic Municipal Market
Access (EMMA) Web site, and
conducting market leadership, outreach
and education. Many general and some
more detailed aspects of the Board’s
composition are set forth in the Act.6 It
categorizes the members of the Board
into two broad groups: Individuals who
must be associated with a broker, dealer
or municipal securities dealer (‘‘dealer’’)
or municipal advisor (collectively,
‘‘Regulated Representatives’’), and
individuals who must be independent
of any dealer or municipal advisor
(‘‘Public Representatives’’).7 The Act
then specifies that the number of Public
Representatives must at all times exceed
the number of Regulated
Representatives,8 and sets minimum
requirements for certain types of
individuals to serve in the two groups.9
Congress also delegated authority to
the MSRB to determine many aspects of
Board composition by rule, including
the size of the Board and the length of
the term of Board member service.10
Currently, the Board is divided into
three seven-member classes that serve
staggered, three-year terms.11 The MSRB
stated that under this framework, total
3 Securities Exchange Act Release No. 76999 (Jan.
29, 2016), 81 FR 6088 (Feb. 4, 2016) (the ‘‘Proposing
Release’’).
4 See Letters from Lisa S. Good, Executive
Director, National Federation of Municipal Analysts
(‘‘NFMA’’), dated February 25, 2016 (‘‘NFMA
Letter’’); and Michael Nicholas, Chief Executive
Officer, Bond Dealers of America (‘‘BDA’’), dated
February 25, 2016 (‘‘BDA Letter’’).
5 See MSRB Rule A–3(a).
6 See 15 U.S.C. 78o–4(b)(1). MSRB Rule A–3
further establishes the Board’s composition.
7 See 15 U.S.C. 78o–4(b)(1); MSRB Rule A–3(a)(i)–
(ii).
8 See 15 U.S.C. 78o–4(b)(2)(B)(i).
9 See 15 U.S.C. 78o–4(b)(1); MSRB Rule A–3(a).
10 The Act provides that ‘‘[t]he members of the
Board shall serve as members for a term of 3 years
or for such other terms as specified by rules of the
Board,’’ and that the rules of the Board ‘‘specify the
length or lengths of terms members shall serve.’’ 15
U.S.C. 78o–4 (b)(1), (b)(2)(B)(ii).
11 See MSRB Rule A–3(b)(i).
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Federal Register / Vol. 81, No. 56 / Wednesday, March 23, 2016 / Notices
Board tenure typically is no more than
three years because Board members may
only serve consecutive terms under two
limited scenarios: (1) By invitation from,
and due to special circumstances as
determined by, the Board; or (2) having
filled a vacancy and, therefore, having
served only a partial term.12
According to the MSRB, the proposed
rule change would lengthen the term of
Board member service from three years
to four years, and facilitate the new,
longer term length by increasing the
number of Board classes and adjusting
their sizes.13 Additionally, the MSRB
has stated that the proposed rule change
would limit the number of consecutive
terms a Board member can serve to two,
and eliminate the requirement that there
be at least one non-dealer municipal
advisor per Board class.14 Finally, the
MSRB has stated that the proposed
amendments would delete an obsolete
provision from the rule and provide a
technical update to the name of a Board
committee.15 The MSRB believes that
the proposed rule change would ensure
greater continuity and institutional
knowledge from year to year,
particularly through the rulemaking
process, and increase overall efficiency,
while maintaining the benefits of having
a significant number of new Board
members join the organization each
year.16 A full description of the
proposed rule change is contained in
the Proposing Release.
jstallworth on DSK7TPTVN1PROD with NOTICES
1. Lengthening the Term of Board
Member Service and Increasing the
Number of Board Classes
The MSRB has proposed increasing
both the Board member term length
from three years to four years and the
number of Board classes from three to
four.17 The MSRB has proposed that one
class would be comprised of six
members and three classes comprised of
five members.18 The MSRB has stated
that it believes that having members
serve on the Board for a fourth year
would improve the continuity and
institutional knowledge of the Board
from year to year which is important for
the MSRB rulemaking process which
can often span multiple years from
conception to full implementation.19
The MSRB has further stated that the
proposed changes would ensure that the
MSRB nominates and elects new
members every year, maintains classes
that are as evenly distributed in size as
possible, and has a Board composition
that always satisfies the statutorilyrequired position allocations.20
According to the MSRB, such changes
would result in a consistent and
manageable turnover from year to
year.21 The MSRB has further
represented that the classes would
continue to be as evenly divided in
number as possible between Public
Representatives and Regulated
Representatives, while also remaining
majority public as is required by the Act
and Rule A–3(a) and (b)(i).22
2. Establishing a Limit on Consecutive
Terms
The MSRB has proposed that a Board
member could serve no more than two
consecutive terms, eight years in total,
which could only occur under the a
special circumstances exception.23 The
MSRB has stated that this added
provision would ensure that the special
circumstances exception is not
overused, mitigate some commenters’
concerns of Board members becoming
too dominant and unduly influential,
assure appropriate turnover of Board
membership, and help maintain a robust
pool of applicants for Board service.24
The MSRB believes this modification
reflects good corporate governance
practices as applied to the particular
characteristics of the MSRB.25
3. Eliminating Requirement of One NonDealer Municipal Advisor
The MSRB has proposed eliminating
the requirement that there be at least
one non-dealer municipal advisor per
class.26 The MSRB has stated that it is
proposing this change because the
proposed amendments would result in
the creation of four classes which would
create an obligation that the Board
always includes four non-dealer
municipal advisors, which could
potentially diminish representation of
other regulated entities.27 The MSRB
has represented that the proposed rule
change would not affect the existing
requirement in Rule A–3(a)(ii)(3) that
for the Board as a whole ‘‘at least one,
and not less than 30 percent of the total
number of [R]egulated [R]epresentatives,
shall be associated with and
representative of municipal advisors
and shall not be associated with a
broker, dealer or municipal securities
15583
dealer.’’ 28 The MSRB has stated that
nothing in this proposed change would
reduce the minimum required
representation of municipal advisors
and such proposed change would not
prohibit the MSRB from deciding to
include more than three non-dealer
municipal advisors on the Board.29 The
MSRB has represented that all other
provisions in Rule A–3(b)(i) would
remain unchanged.30
Clarifying and Technical Amendments
The MSRB has proposed two
amendments to delete an obsolete
provision and make a technical update.
The MSRB believes that these changes
will improve the clarity and readability
of MSRB Rule A–3.
The MSRB has stated that MSRB Rule
A–3(h) currently describes the transition
process the MSRB used to increase its
Board size from 15 to 21 members
during its fiscal years 2013 and 2014.31
The MSRB has stated that the proposed
rule change would delete this provision
from MSRB Rule A–3 because that
process has been completed and the
provision is therefore obsolete.32
Additionally, MSRB Rule A–3(g)(ii)
makes reference to the ‘‘Nominating
Committee,’’ which is now called the
‘‘Nominating and Governance
Committee.’’ 33 The MSRB has stated
that the proposed rule change would
provide a technical update to the
reference of the current name of the
committee which would promote the
accuracy of the rule.34
Transition Plan
In order to effectuate the changes in
term length and the number and size of
classes, the MSRB has proposed a
transition plan (the ‘‘Transition Plan’’),
under which each Board member, who
was elected prior to, and whose term
ends on or after the end of, the MSRB’s
fiscal year 2016,35 could be considered
for a term extension not exceeding one
year.36 The MSRB has represented that
this process would occur over fiscal
years 2017, 2018 and 2019 and that the
transition would proceed as follows: (1)
For fiscal year 2017, one Public
Representative from the Board class of
2016 (i.e., members who began a threeyear term on October 1, 2013) would
28 Id.
29 Id.
30 Id.
20 Id.
31 Id.
21 Id.
32 Id.
14 Id.
22 Id.
33 Id.
15 Id.
23 See
34 Id.
12 Id.
13 See
supra note 3.
Rule A–3(b)(i).
24 See supra note 3.
25 Id.
26 Id.
27 Id.
16 Id.
17 Id.
18 Id.
19 Id.
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15:26 Mar 22, 2016
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35 The MSRB’s fiscal year commences on October
1 of a given year and ends on September 30 of the
following year.
36 See supra note 3.
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Federal Register / Vol. 81, No. 56 / Wednesday, March 23, 2016 / Notices
receive a one-year extension and six
new members would join the Board; (2)
for fiscal year 2018, one Public and two
Regulated Representatives from the
Board class of 2017 (i.e., members who
began a three-year term on October 1,
2014) each would receive a one-year
extension and five new members would
join the Board; and (3) for fiscal year
2019, three Public and two Regulated
Representatives from the Board class of
2018 (i.e., members who began a threeyear term on October 1, 2015) each
would receive a one-year extension and
five new members would join the
Board.37 The MSRB has stated that the
full Board would vote by ballot on all
members eligible for term extensions to
determine who receives them.38
Further, the MSRB has noted that the
selection of Board members whose
terms would be extended would be in
compliance with the statutorily-required
compositional requirements of the
Board, and the Board would continue to
consist of 21 members with a majority
of Public Representatives.39 The MSRB
has represented that in fiscal year 2020,
no further extensions would be required
and five new members would join the
Board, completing the transition to four
classes and from that point forward, the
Board would repeatedly nominate and
elect classes in the sequence of six, five,
five, and five members.40 The MSRB has
further stated that while there are
numerous possible combinations of the
number of Board classes and the
number of members in each class, they
believe this specific combination would
achieve the transition expeditiously and
efficiently while minimizing any
disruption from the changes.41
III. Summary of Comments Received
jstallworth on DSK7TPTVN1PROD with NOTICES
As noted previously, the Commission
received two comment letters on the
proposed rule change.42 The NFMA
Letter expressed general support and
agreement with the proposed rule
change.43 The BDA Letter also
expressed general support and
agreement with the proposed rule
change, but noted interest in seeing the
MSRB continue to strengthen its
training of future Board members and to
continue to reevaluate its training
program to ensure it reflects changes in
market practices and new regulations.44
BDA made a substantially similar
37 Id.
38 Id.
39 See
40 See
supra notes 3, 5 and 7–9.
supra note 3.
41 Id.
42 See
supra note 4.
NFMA Letter.
44 See BDA Letter.
43 See
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15:26 Mar 22, 2016
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comment 45 in response to the MSRB’s
Request for Comment,46, and the MSRB
responded to such comment in the
Proposing Release.47 Full descriptions
of the comments are contained in the
comment letters.48
Increase in Term Length—Training
The MSRB noted that this comment
by BDA addresses internal MSRB
matters and does not suggest any
revision to the language of the
amendments in the proposed rule
change.49 The MSRB further stated that
the MSRB already allocates significant
resources to educating new Board
members as part of a robust and
dedicated orientation process that
begins prior to the commencement of
their terms and focuses on
organizational and other substantive
matters, including, but not limited to,
rulemaking and other large initiatives.50
Finally, the MSRB represented that it
already routinely revises and improves
this process with the benefit of each
successive experience orienting new
Board members.51
IV. Discussion and Commission
Findings
The Commission has carefully
considered the proposed rule change as
well as the comments received. 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 rule change is consistent with
Section 15B(b)(2)(B) of the Act, which
provides that the MSRB’s rules shall:
establish fair procedures for the nomination
and election of members of the Board and
assure fair representation in such
nominations and elections of [P]ublic
[R]epresentatives, broker dealer
representatives, bank representatives, and
advisor representatives. Such rules—
(i) shall provide that the number of [P]ublic
[R]epresentatives of the Board shall at all
times exceed the total number of [R]egulated
[R]epresentatives and that the membership
shall at all times be as evenly divided in
number as possible between [P]ublic
[R]epresentatives and [R]egulated
[R]epresentatives;
(ii) shall specify the length or lengths of
terms members shall serve;
45 See Letter from Michael Nicholas, Chief
Executive Officer, BDA, dated November 19, 2015.
46 Request for Comment on Draft Amendments to
MSRB Rule A–3 to Lengthen the Term of Board
Member Service, MSRB Notice 2015–18 (Oct. 5,
2015) (‘‘MSRB Request for Comment’’).
47 See supra note 3.
48 See supra notes 4 and 33.
49 Id.
50 Id.
51 Id.
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(iii) may increase the number of members
which shall constitute the whole Board,
provided that such number is an odd
number; and
(iv) shall establish requirements regarding
the independence of public representatives.
The Commission believes the increase
of the term length from three to four
years, the change in the number and
size of Board classes from three classes
of seven members to one class of six and
three classes of five, and the elimination
of the requirement that there be one
non-dealer municipal advisor per class
are consistent with the Act in that the
composition of the Board would
continue to satisfy the requirements of
the Act. Further, the Commission
believes the limitation of consecutive
terms to two, totaling a maximum of
eight years of consecutive service, is
consistent with the Act in that it
specifies the length of term that Board
members can serve when the MSRB
invokes the special circumstances
exception.
Further, the Commission finds that
the proposed deletion of the transition
process described in MSRB Rule A–3(h)
is consistent with the Act because
removing the obsolete provision
improves the clarity and readability of
the rule. The Commission also believes
the proposed update to the reference to
the ‘‘Nominating and Governance
Committee’’ in MSRB Rule A–3(g)(ii) is
consistent with the Act because it
enhances the accuracy of the rule in
regard to a reference to a component of
the Board’s governance structure.
In approving the proposed rule
change, the Commission has also
considered the proposed rule change’s
impact on efficiency, competition, and
capital formation.52 The Commission
believes that the effect of the proposed
rule is beneficial and the proposed
changes will improve the effectiveness
and efficiency of the Board by providing
the Board with increased continuity and
institutional knowledge particularly in
connection with the rulemaking
process. 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.
For the reasons noted above, the
Commission believes that the proposed
rule change is consistent with the Act.
MSRB Execution of the Transition Plan
In evaluating the proposed rule
change, the Commission has considered
the Transition Plan to effectuate the
changes in term length and the number
52 15
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U.S.C. 78c(f).
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Federal Register / Vol. 81, No. 56 / Wednesday, March 23, 2016 / Notices
and size of Board classes proposed by
the MSRB in the Proposing Release.53
The Commission’s approval of the
proposed rule change is premised on the
MSRB executing the Transition Plan.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,54 that the
proposed rule change (SR–MSRB–2016–
01) be, and hereby is,approved.
For the Commission, pursuant to delegated
authority.55
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–06452 Filed 3–22–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77401; File No. SR–
NYSEMKT–2016–12]
Self-Regulatory Organizations; NYSE
MKT LLC; Order Approving Proposed
Rule Change Amending the NYSE MKT
Company Guide To Create a New
Section 146 Under Which a Certain
Category of Newly Listed Issuers
Would Be Entitled To Receive
Complimentary Products and Services
From the Exchange
March 17, 2016.
jstallworth on DSK7TPTVN1PROD with NOTICES
I. Introduction
On January 14, 2016, NYSE MKT LLC
(the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed
with the Securities and Exchange
Commission (‘‘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 to amend the NYSE MKT
Company Guide (‘‘Company Guide’’) to
create a new Section 146 under which
a certain category of newly listed issuers
(‘‘Eligible New Listings’’) would be
entitled to receive complimentary
products and services from the
Exchange. The proposed rule change
was published for comment in the
Federal Register on February 3, 2016.3
No comment letters were received in
response to the Notice. This order
approves the proposed rule change.
II. Description of the Proposed Rule
Change
The Exchange proposes to adopt
Section 146 of the Company Guide to
53 See
supra note 3.
U.S.C. 78s(b)(2).
55 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 76996
(January 28, 2016), 81 FR 5803 (‘‘Notice’’).
54 15
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18:26 Mar 22, 2016
Jkt 238001
offer the following complimentary
products and services to Eligible New
Listings 4 on the Exchange: Web-hosting
products and services (with an
approximate commercial value of
$16,000 per year), web-casting services
(with an approximate commercial value
of $6,500 per year), whistleblower
hotline services (with an approximate
commercial value of $4,000 per year),
news distribution products and services
(with an approximate commercial value
of $20,000 per year), and corporate
governance tools (with an approximate
commercial value of $15,000 per year).5
The Exchange proposes to provide
Eligible New Listings with such
products and services for a period of 24
calendar months, which period would
begin on the date of listing on the
Exchange.6 Notwithstanding the
foregoing, however, the proposal
provides that if an Eligible New Listing
begins to use a particular product or
service under proposed Section 146
within 30 days of its initial listing date,
the complimentary period will begin on
the date of first use.7 Under the
proposal, Eligible New Listings may
elect to receive some or all of the
products and services for which they are
eligible under Section 146 of the
Company Guide and are under no
obligation to accept any product or
service for which they are eligible.8
The Exchange states that the specific
products and services offered by the
Exchange will be developed by the
Exchange or by third-party vendors.9
The Exchange states that NYSE
Governance Services, an entity that is
owned by the Exchange’s parent
company that provides corporate
governance, risk, and compliance
4 For the purposes of the proposed rule, the term
‘‘Eligible New Listing’’ means (i) any U.S. company
that lists common stock on the Exchange for the
first time and any non-U.S. company that lists an
equity security on the Exchange under Section 101
or 110 of the Company Guide for the first time,
regardless of whether such U.S. or non-U.S.
company conducts an offering, (ii) any U.S. or nonU.S. company that transfers its listing of common
stock or equity securities, respectively, to the
Exchange from another national securities exchange
and (iii) any U.S. or non-U.S. company emerging
from a bankruptcy, spinoff (where a company lists
new shares in the absence of a public offering), and
carve-out (where a company carves out a business
line or division, which then conducts a separate
initial public offering). For purposes of the
proposed rule, ‘‘equity securities’’ means common
stock or common share equivalents such as
ordinary shares, New York shares, global shares,
American Depository Receipts, or Global Depository
Receipts. See proposed Section 146 of the Company
Guide.
5 See proposed Section 146 of the Company
Guide.
6 Id.
7 Id.
8 Id.
9 See Notice, supra note 3, at 5804.
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15585
services to its clients, which include
companies listed on the Exchange, will
offer and develop the corporate
governance tools provided to Eligible
New Listings, but will not provide any
other service related to the proposed
rule.10
The Exchange proposes to codify in
proposed Section 146 of the Company
Guide that all companies listed on the
Exchange are entitled to certain
complimentary products and services
via the Exchange’s Market Access
Center, as described on the Exchange’s
Web site.11 The Exchange represents
that all issuers listed on the Exchange
have access to the Exchange’s Market
Access Center on the same basis and
that the products and services currently
available through the Exchange’s Market
Access Center have a commercial value
of approximately $50,000.12
III. Discussion and Commission
Findings
The Commission has carefully
reviewed the proposed rule change and
finds that it is consistent with the
requirements of Section 6 of the Act.13
10 Id. In its filing, the Exchange stated its belief
that NYSE Governance Services is not a ‘‘facility’’
of the Exchange as defined in 15 U.S.C. 78c(a)(2),
and noted that its proposed rule change is being
filed with the Commission under Section 19(b)(2)
of the Act because it relates to services offered in
connection with a listing on the Exchange. See id.
at 5804 n.6. The Commission notes that the
definition of a ‘‘facility’’ of an exchange is broad
under the Act, and ‘‘includes its premises, tangible
or intangible property whether on the premises or
not, any right to the use of such premises or
property or any service thereof for the purpose of
effecting or reporting a transaction on an exchange
. . . and any right of the exchange to the use of any
property or service.’’ The Commission further notes
that any determination as to whether a service or
other product is a facility of an exchange requires
an analysis of the particular facts and
circumstances.
11 See Notice, supra note 3, at 5804. According to
the Exchange, the Market Access Center is a market
information analytics platform that is a combination
of technology-enabled market intelligence insight
and a team of highly skilled market professionals.
According to the Exchange, the platform was
created to provide issuers with better market insight
and information across all exchanges and trading
venues and includes products and services that
were (i) developed by the Exchange using
proprietary data and/or intellectual property or (ii)
built by a third-party expressly for the Exchange’s
listed companies. According to the Exchange,
within this platform all issuers have access to tools
and information related to market intelligence,
education, investor outreach, media visibility,
corporate governance, and advocacy initiatives. For
example, the Market Access Center offers daily
trading summaries, a trading alert system
highlighting user-defined trading or market events,
and a Web site featuring timely content for
Exchange-listed senior executives featuring trading
information, market data, and institutional
ownership. Id.
12 See id.
13 15 U.S.C. 78f. In approving this proposed rule
change, the Commission has considered the
E:\FR\FM\23MRN1.SGM
Continued
23MRN1
]]>Agencies
[Federal Register Volume 81, Number 56 (Wednesday, March 23, 2016)]
[Notices]
[Pages 15582-15585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06452]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77390; File No. SR-MSRB-2016-01]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Granting Approval of a Proposed Rule Change Consisting of
Proposed Amendments to Rule A-3, on Membership on the Board
March 17, 2016.
I. Introduction
On January 15, 2016, 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 the MSRB Rule A-3, on membership on the Board (the
``proposed rule change'').
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on February 4, 2016.\3\ The Commission received two comment
letters on the proposed rule change.\4\ This order approves the
proposed rule change.
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\3\ Securities Exchange Act Release No. 76999 (Jan. 29, 2016),
81 FR 6088 (Feb. 4, 2016) (the ``Proposing Release'').
\4\ See Letters from Lisa S. Good, Executive Director, National
Federation of Municipal Analysts (``NFMA''), dated February 25, 2016
(``NFMA Letter''); and Michael Nicholas, Chief Executive Officer,
Bond Dealers of America (``BDA''), dated February 25, 2016 (``BDA
Letter'').
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II. Description of the Proposed Rule Change
The Board is comprised of 21 members \5\ who, collectively, govern
the MSRB to carry out its mission primarily by regulating dealers and
municipal advisors, providing market transparency through its
Electronic Municipal Market Access (EMMA) Web site, and conducting
market leadership, outreach and education. Many general and some more
detailed aspects of the Board's composition are set forth in the
Act.\6\ It categorizes the members of the Board into two broad groups:
Individuals who must be associated with a broker, dealer or municipal
securities dealer (``dealer'') or municipal advisor (collectively,
``Regulated Representatives''), and individuals who must be independent
of any dealer or municipal advisor (``Public Representatives'').\7\ The
Act then specifies that the number of Public Representatives must at
all times exceed the number of Regulated Representatives,\8\ and sets
minimum requirements for certain types of individuals to serve in the
two groups.\9\
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\5\ See MSRB Rule A-3(a).
\6\ See 15 U.S.C. 78o-4(b)(1). MSRB Rule A-3 further establishes
the Board's composition.
\7\ See 15 U.S.C. 78o-4(b)(1); MSRB Rule A-3(a)(i)-(ii).
\8\ See 15 U.S.C. 78o-4(b)(2)(B)(i).
\9\ See 15 U.S.C. 78o-4(b)(1); MSRB Rule A-3(a).
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Congress also delegated authority to the MSRB to determine many
aspects of Board composition by rule, including the size of the Board
and the length of the term of Board member service.\10\ Currently, the
Board is divided into three seven-member classes that serve staggered,
three-year terms.\11\ The MSRB stated that under this framework, total
[[Page 15583]]
Board tenure typically is no more than three years because Board
members may only serve consecutive terms under two limited scenarios:
(1) By invitation from, and due to special circumstances as determined
by, the Board; or (2) having filled a vacancy and, therefore, having
served only a partial term.\12\
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\10\ The Act provides that ``[t]he members of the Board shall
serve as members for a term of 3 years or for such other terms as
specified by rules of the Board,'' and that the rules of the Board
``specify the length or lengths of terms members shall serve.'' 15
U.S.C. 78o-4 (b)(1), (b)(2)(B)(ii).
\11\ See MSRB Rule A-3(b)(i).
\12\ Id.
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According to the MSRB, the proposed rule change would lengthen the
term of Board member service from three years to four years, and
facilitate the new, longer term length by increasing the number of
Board classes and adjusting their sizes.\13\ Additionally, the MSRB has
stated that the proposed rule change would limit the number of
consecutive terms a Board member can serve to two, and eliminate the
requirement that there be at least one non-dealer municipal advisor per
Board class.\14\ Finally, the MSRB has stated that the proposed
amendments would delete an obsolete provision from the rule and provide
a technical update to the name of a Board committee.\15\ The MSRB
believes that the proposed rule change would ensure greater continuity
and institutional knowledge from year to year, particularly through the
rulemaking process, and increase overall efficiency, while maintaining
the benefits of having a significant number of new Board members join
the organization each year.\16\ A full description of the proposed rule
change is contained in the Proposing Release.
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\13\ See supra note 3.
\14\ Id.
\15\ Id.
\16\ Id.
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1. Lengthening the Term of Board Member Service and Increasing the
Number of Board Classes
The MSRB has proposed increasing both the Board member term length
from three years to four years and the number of Board classes from
three to four.\17\ The MSRB has proposed that one class would be
comprised of six members and three classes comprised of five
members.\18\ The MSRB has stated that it believes that having members
serve on the Board for a fourth year would improve the continuity and
institutional knowledge of the Board from year to year which is
important for the MSRB rulemaking process which can often span multiple
years from conception to full implementation.\19\ The MSRB has further
stated that the proposed changes would ensure that the MSRB nominates
and elects new members every year, maintains classes that are as evenly
distributed in size as possible, and has a Board composition that
always satisfies the statutorily-required position allocations.\20\
According to the MSRB, such changes would result in a consistent and
manageable turnover from year to year.\21\ The MSRB has further
represented that the classes would continue to be as evenly divided in
number as possible between Public Representatives and Regulated
Representatives, while also remaining majority public as is required by
the Act and Rule A-3(a) and (b)(i).\22\
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\17\ Id.
\18\ Id.
\19\ Id.
\20\ Id.
\21\ Id.
\22\ Id.
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2. Establishing a Limit on Consecutive Terms
The MSRB has proposed that a Board member could serve no more than
two consecutive terms, eight years in total, which could only occur
under the a special circumstances exception.\23\ The MSRB has stated
that this added provision would ensure that the special circumstances
exception is not overused, mitigate some commenters' concerns of Board
members becoming too dominant and unduly influential, assure
appropriate turnover of Board membership, and help maintain a robust
pool of applicants for Board service.\24\ The MSRB believes this
modification reflects good corporate governance practices as applied to
the particular characteristics of the MSRB.\25\
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\23\ See Rule A-3(b)(i).
\24\ See supra note 3.
\25\ Id.
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3. Eliminating Requirement of One Non-Dealer Municipal Advisor
The MSRB has proposed eliminating the requirement that there be at
least one non-dealer municipal advisor per class.\26\ The MSRB has
stated that it is proposing this change because the proposed amendments
would result in the creation of four classes which would create an
obligation that the Board always includes four non-dealer municipal
advisors, which could potentially diminish representation of other
regulated entities.\27\ The MSRB has represented that the proposed rule
change would not affect the existing requirement in Rule A-3(a)(ii)(3)
that for the Board as a whole ``at least one, and not less than 30
percent of the total number of [R]egulated [R]epresentatives, shall be
associated with and representative of municipal advisors and shall not
be associated with a broker, dealer or municipal securities dealer.''
\28\ The MSRB has stated that nothing in this proposed change would
reduce the minimum required representation of municipal advisors and
such proposed change would not prohibit the MSRB from deciding to
include more than three non-dealer municipal advisors on the Board.\29\
The MSRB has represented that all other provisions in Rule A-3(b)(i)
would remain unchanged.\30\
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\26\ Id.
\27\ Id.
\28\ Id.
\29\ Id.
\30\ Id.
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Clarifying and Technical Amendments
The MSRB has proposed two amendments to delete an obsolete
provision and make a technical update. The MSRB believes that these
changes will improve the clarity and readability of MSRB Rule A-3.
The MSRB has stated that MSRB Rule A-3(h) currently describes the
transition process the MSRB used to increase its Board size from 15 to
21 members during its fiscal years 2013 and 2014.\31\ The MSRB has
stated that the proposed rule change would delete this provision from
MSRB Rule A-3 because that process has been completed and the provision
is therefore obsolete.\32\
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\31\ Id.
\32\ Id.
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Additionally, MSRB Rule A-3(g)(ii) makes reference to the
``Nominating Committee,'' which is now called the ``Nominating and
Governance Committee.'' \33\ The MSRB has stated that the proposed rule
change would provide a technical update to the reference of the current
name of the committee which would promote the accuracy of the rule.\34\
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\33\ Id.
\34\ Id.
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Transition Plan
In order to effectuate the changes in term length and the number
and size of classes, the MSRB has proposed a transition plan (the
``Transition Plan''), under which each Board member, who was elected
prior to, and whose term ends on or after the end of, the MSRB's fiscal
year 2016,\35\ could be considered for a term extension not exceeding
one year.\36\ The MSRB has represented that this process would occur
over fiscal years 2017, 2018 and 2019 and that the transition would
proceed as follows: (1) For fiscal year 2017, one Public Representative
from the Board class of 2016 (i.e., members who began a three-year term
on October 1, 2013) would
[[Page 15584]]
receive a one-year extension and six new members would join the Board;
(2) for fiscal year 2018, one Public and two Regulated Representatives
from the Board class of 2017 (i.e., members who began a three-year term
on October 1, 2014) each would receive a one-year extension and five
new members would join the Board; and (3) for fiscal year 2019, three
Public and two Regulated Representatives from the Board class of 2018
(i.e., members who began a three-year term on October 1, 2015) each
would receive a one-year extension and five new members would join the
Board.\37\ The MSRB has stated that the full Board would vote by ballot
on all members eligible for term extensions to determine who receives
them.\38\ Further, the MSRB has noted that the selection of Board
members whose terms would be extended would be in compliance with the
statutorily-required compositional requirements of the Board, and the
Board would continue to consist of 21 members with a majority of Public
Representatives.\39\ The MSRB has represented that in fiscal year 2020,
no further extensions would be required and five new members would join
the Board, completing the transition to four classes and from that
point forward, the Board would repeatedly nominate and elect classes in
the sequence of six, five, five, and five members.\40\ The MSRB has
further stated that while there are numerous possible combinations of
the number of Board classes and the number of members in each class,
they believe this specific combination would achieve the transition
expeditiously and efficiently while minimizing any disruption from the
changes.\41\
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\35\ The MSRB's fiscal year commences on October 1 of a given
year and ends on September 30 of the following year.
\36\ See supra note 3.
\37\ Id.
\38\ Id.
\39\ See supra notes 3, 5 and 7-9.
\40\ See supra note 3.
\41\ Id.
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III. Summary of Comments Received
As noted previously, the Commission received two comment letters on
the proposed rule change.\42\ The NFMA Letter expressed general support
and agreement with the proposed rule change.\43\ The BDA Letter also
expressed general support and agreement with the proposed rule change,
but noted interest in seeing the MSRB continue to strengthen its
training of future Board members and to continue to reevaluate its
training program to ensure it reflects changes in market practices and
new regulations.\44\ BDA made a substantially similar comment \45\ in
response to the MSRB's Request for Comment,\46\, and the MSRB responded
to such comment in the Proposing Release.\47\ Full descriptions of the
comments are contained in the comment letters.\48\
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\42\ See supra note 4.
\43\ See NFMA Letter.
\44\ See BDA Letter.
\45\ See Letter from Michael Nicholas, Chief Executive Officer,
BDA, dated November 19, 2015.
\46\ Request for Comment on Draft Amendments to MSRB Rule A-3 to
Lengthen the Term of Board Member Service, MSRB Notice 2015-18 (Oct.
5, 2015) (``MSRB Request for Comment'').
\47\ See supra note 3.
\48\ See supra notes 4 and 33.
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Increase in Term Length--Training
The MSRB noted that this comment by BDA addresses internal MSRB
matters and does not suggest any revision to the language of the
amendments in the proposed rule change.\49\ The MSRB further stated
that the MSRB already allocates significant resources to educating new
Board members as part of a robust and dedicated orientation process
that begins prior to the commencement of their terms and focuses on
organizational and other substantive matters, including, but not
limited to, rulemaking and other large initiatives.\50\ Finally, the
MSRB represented that it already routinely revises and improves this
process with the benefit of each successive experience orienting new
Board members.\51\
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\49\ Id.
\50\ Id.
\51\ Id.
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IV. Discussion and Commission Findings
The Commission has carefully considered the proposed rule change as
well as the comments received. 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 rule change is
consistent with Section 15B(b)(2)(B) of the Act, which provides that
the MSRB's rules shall:
establish fair procedures for the nomination and election of members
of the Board and assure fair representation in such nominations and
elections of [P]ublic [R]epresentatives, broker dealer
representatives, bank representatives, and advisor representatives.
Such rules--
(i) shall provide that the number of [P]ublic [R]epresentatives
of the Board shall at all times exceed the total number of
[R]egulated [R]epresentatives and that the membership shall at all
times be as evenly divided in number as possible between [P]ublic
[R]epresentatives and [R]egulated [R]epresentatives;
(ii) shall specify the length or lengths of terms members shall
serve;
(iii) may increase the number of members which shall constitute
the whole Board, provided that such number is an odd number; and
(iv) shall establish requirements regarding the independence of
public representatives.
The Commission believes the increase of the term length from three
to four years, the change in the number and size of Board classes from
three classes of seven members to one class of six and three classes of
five, and the elimination of the requirement that there be one non-
dealer municipal advisor per class are consistent with the Act in that
the composition of the Board would continue to satisfy the requirements
of the Act. Further, the Commission believes the limitation of
consecutive terms to two, totaling a maximum of eight years of
consecutive service, is consistent with the Act in that it specifies
the length of term that Board members can serve when the MSRB invokes
the special circumstances exception.
Further, the Commission finds that the proposed deletion of the
transition process described in MSRB Rule A-3(h) is consistent with the
Act because removing the obsolete provision improves the clarity and
readability of the rule. The Commission also believes the proposed
update to the reference to the ``Nominating and Governance Committee''
in MSRB Rule A-3(g)(ii) is consistent with the Act because it enhances
the accuracy of the rule in regard to a reference to a component of the
Board's governance structure.
In approving the proposed rule change, the Commission has also
considered the proposed rule change's impact on efficiency,
competition, and capital formation.\52\ The Commission believes that
the effect of the proposed rule is beneficial and the proposed changes
will improve the effectiveness and efficiency of the Board by providing
the Board with increased continuity and institutional knowledge
particularly in connection with the rulemaking process. 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.
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\52\ 15 U.S.C. 78c(f).
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For the reasons noted above, the Commission believes that the
proposed rule change is consistent with the Act.
MSRB Execution of the Transition Plan
In evaluating the proposed rule change, the Commission has
considered the Transition Plan to effectuate the changes in term length
and the number
[[Page 15585]]
and size of Board classes proposed by the MSRB in the Proposing
Release.\53\ The Commission's approval of the proposed rule change is
premised on the MSRB executing the Transition Plan.
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\53\ See supra note 3.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\54\ that the proposed rule change (SR-MSRB-2016-01) be, and hereby
is, approved.
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\54\ 15 U.S.C. 78s(b)(2).
\55\ 17 CFR 200.30-3(a)(12).
For the Commission, pursuant to delegated authority.\55\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06452 Filed 3-22-16; 8:45 am]
BILLING CODE 8011-01-P
