Political Contributions by Certain Investment Advisers: Ban on Third-Party Solicitation; Notice of Order With Respect to MSRB Rule G-37, 60651-60653 [2016-20890]
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60651
Dated: August 22, 2016.
Mark Cohen,
Principal Deputy Special Counsel.
[FR Doc. 2016–20527 Filed 9–1–16; 8:45 am]
BILLING CODE 7405–01–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 275
[Release No. IA–4512; File No. S7–17–16]
Political Contributions by Certain
Investment Advisers: Ban on ThirdParty Solicitation; Notice of Order With
Respect to MSRB Rule G–37
Securities and Exchange
Commission.
ACTION: Notice of intent to issue order.
AGENCY:
The Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
intends to issue an order pursuant to
section 206 of the Investment Advisers
Act of 1940 (the ‘‘Advisers Act’’) and
rule 206(4)–5 thereunder (the ‘‘SEC Pay
to Play Rule’’) finding that the
Municipal Securities Rulemaking Board
(‘‘MSRB’’) rule G–37 (the ‘‘MSRB Pay to
Play Rule’’) imposes substantially
equivalent or more stringent restrictions
on municipal advisors than the SEC Pay
to Play Rule imposes on investment
advisers and is consistent with the
objectives of the SEC Pay to Play Rule.
DATES: Hearing requests should be
received by the Commission by 5:30
p.m. on September 19, 2016.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
FOR FURTHER INFORMATION CONTACT:
Sirimal R. Mukerjee, Senior Counsel,
Melissa Roverts Harke, Senior Special
Counsel, or Sara Cortes, Assistant
Director, at (202) 551–6787 or IArules@
sec.gov, Investment Adviser Regulation
Office, Division of Investment
Management, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–8549.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Hearing or Notification of Hearing
An order will be issued unless the
Commission orders a hearing. Interested
persons may request a hearing by
writing to the Commission’s Secretary.
Hearing requests should be received by
the Commission by 5:30 p.m. on
September 19, 2016. Pursuant to rule 0–
5 under the Advisers Act, hearing
requests should state the nature of the
writer’s interest, any facts bearing upon
the desirability of a hearing on the
matter, the reason for the request, and
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60652
Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Proposed Rules
the issues contested. Persons who wish
to be notified of a hearing may request
notification by writing to the
Commission’s Secretary.
The Commission intends to issue an
order under the Advisers Act.1
Lhorne on DSK30JT082PROD with PROPOSALS
I. Background
The Commission adopted the SEC Pay
to Play Rule [17 CFR 275.206(4)–5]
under the Advisers Act [15 U.S.C. 80b]
to prohibit an investment adviser from
providing advisory services for
compensation to a government client for
two years after the adviser or certain of
its executives or employees (‘‘covered
associates’’) make a contribution to
certain elected officials or candidates.2
Rule 206(4)–5 also prohibits an adviser
and its covered associates from
providing or agreeing to provide,
directly or indirectly, payment to any
third-party for a solicitation of advisory
business from any government entity on
behalf of such adviser, unless such
third-party is a ‘‘regulated person’’
(‘‘third-party solicitor ban’’).3 Rule
206(4)–5 defines a ‘‘regulated person’’ as
an SEC-registered investment adviser,4 a
registered broker or dealer subject to pay
to play restrictions adopted by a
registered national securities association
that prohibit members from engaging in
distribution or solicitation activities if
certain political contributions have been
made,5 or a registered municipal advisor
subject to pay to play restrictions
adopted by the MSRB that prohibit
members from engaging in distribution
or solicitation activities if certain
political contributions have been made.6
In addition, in order for a broker-dealer
or municipal advisor to be a regulated
person under rule 206(4)–5, the
Commission must find, by order, that
1 15 U.S.C. 80b. Unless otherwise noted, all
references to statutory sections are to the Advisers
Act, and all references to rules under the Advisers
Act, including rule 206(4)–5, are to Title 17, Part
275 of the Code of Federal Regulations [17 CFR part
275].
2 Political Contributions by Certain Investment
Advisers, Investment Advisers Act Rel. No. 3043
(July 1, 2010) [75 FR 41018 (July 14, 2010)] (‘‘SEC
Pay to Play Rule Release’’).
3 See id. at section II.B.2.(b). See also 17 CFR
275.206(4)–5(a)(2)(i)(A).
4 See 17 CFR 275.206(4)–5(f)(9)(i).
5 See 17 CFR 275.206(4)–5(f)(9)(ii).
6 See 17 CFR 275.206(4)–5(f)(9)(iii). On June 22,
2011, the Commission amended the SEC Pay to Play
Rule to add municipal advisors to the definition of
‘‘regulated persons.’’ See Rules Implementing
Amendments to the Investment Advisers Act of
1940, Investment Advisers Act Rel. No. 3221 (June
22, 2011) [76 FR 42950 (July 19, 2011)] (‘‘Municipal
Advisor Addition Release’’). The Commission
adopted final rules with respect to the registration
of municipal advisors on September 20, 2013. See
Registration of Municipal Advisors, Exchange Act
Rel. No. 70462 (Sept. 20, 2013) [78 FR 67468 (Nov.
12, 2013)] (‘‘Municipal Advisor Registration
Release’’).
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these pay to play rules: (i) Impose
substantially equivalent or more
stringent restrictions on broker-dealers
or municipal advisors than the SEC Pay
to Play Rule imposes on investment
advisers; and (ii) are consistent with the
objectives of the SEC Pay to Play Rule.7
Rule 206(4)–5 became effective on
September 13, 2010 and the compliance
date for the third-party solicitor ban was
set to September 13, 2011.8 When the
Commission added municipal advisors
to the definition of regulated person, the
Commission also extended the thirdparty solicitor ban’s compliance date to
June 13, 2012.9 In the absence of a final
municipal advisor registration rule, the
Commission extended the third-party
solicitor ban’s compliance date from
June 13, 2012 to nine months after the
compliance date of the final rule,10
which was July 31, 2015.11 On June 25,
2015, the Commission issued notice of
the July 31, 2015 compliance date.12
On December 16, 2015, the MSRB
filed with the Commission proposed
amendments to the MSRB Pay to Play
Rule to extend its application to
municipal advisors, which the
Commission published for notice and
comment on December 23, 2015
pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’) and rule 19b–4
thereunder.13 On February 17, 2016, the
7 See
17 CFR 275.206(4)–5(f)(9).
SEC Pay to Play Rule Release, supra
footnote 2, at section III.
9 See Municipal Advisor Addition Release, supra
footnote 6, at section II.D.1.
10 See Political Contributions by Certain
Investment Advisers: Ban on Third-Party
Solicitation; Extension of Compliance Date,
Investment Advisers Act Rel. No. 3418 (June 8,
2012) [77 FR 35263 (June 13, 2012)].
11 The final date on which a municipal advisor
must file a complete application for registration was
October 31, 2014. See Municipal Advisor
Registration Release, supra footnote 6, at section V.
12 See Political Contributions by Certain
Investment Advisers: Ban on Third-Party
Solicitation; Notice of Compliance Date, Investment
Advisers Act Rel. No. 4129 (June 25, 2015) [80 FR
37538 (July 2, 2015)]. On June 25, 2015, the
Division of Investment Management published an
FAQ that provides that the Division would not
recommend enforcement action to the Commission
against any investment adviser or its covered
associates for the payment to any third person to
solicit a government entity for investment advisory
services until the later of (i) the effective date of a
pay to play rule adopted by the Financial Industry
Regulatory Authority or (ii) the effective date of a
pay to play rule adopted by the MSRB. See https://
www.sec.gov/divisions/investment/pay-to-playfaq.htm#1.4.
13 See Self-Regulatory Organizations; Municipal
Securities Rulemaking Board; Notice of Filing of a
Proposed Rule Change Consisting of Proposed
Amendments to Rule G–37, on Political
Contributions and Prohibitions on Municipal
Securities Business, Rule G–8, on Books and
Records, Rule G–9, on Preservation of Records, and
Forms G–37 and G–37x, Exchange Act Rel. No.
76763 (Dec. 24, 2015) [80 FR 81710 (Dec. 30, 2015)]
(the ‘‘MSRB Pay to Play Release’’).
8 See
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MSRB published a regulatory notice
announcing that the proposed
amendments to the MSRB Pay to Play
Rule were deemed approved by the
Commission under section 19(b)(2)(D) of
the Exchange Act on February 13, 2016
and the effective date of the rule is
August 17, 2016.14 Prior to its
amendment, the MSRB Pay to Play Rule
only applied to brokers, dealers and
municipal securities dealers.
II. Discussion of Order
Pursuant to section 206 of the
Advisers Act and rule 206(4)–
5(f)(9)(iii)(B) thereunder, the
Commission is providing notice 15 that
the Commission intends to issue an
order finding that the MSRB Pay to Play
Rule (i) imposes substantially
equivalent or more stringent restrictions
on municipal advisors than the SEC Pay
to Play Rule imposes on investment
advisers and (ii) is consistent with the
objectives of the SEC Pay to Play Rule.
The MSRB Pay to Play Rule imposes
substantially similar requirements for
municipal advisors as the SEC Pay to
Play Rule imposes on investment
advisers. For example, the MSRB Pay to
Play Rule will:
• Prohibit a municipal advisor from
engaging in municipal advisory
business with a municipal entity for two
years, subject to exceptions, following
the making of a contribution to certain
officials of the municipal entity by the
municipal advisor, a municipal advisor
professional of the municipal advisor, or
a political action committee controlled
14 On August 4, 2016, the MSRB published a
regulatory notice announcing that it filed with the
Commission an amendment to the MSRB Pay to
Play Rule, effective on August 17, 2016, to clarify
that contributions by persons who become
associated with a dealer and become municipal
finance professionals of the dealer, if made prior to
August 17, 2016, are subject to the two-year lookback and may subject a dealer to a prohibition on
municipal securities business. This amendment
does not change the rule’s application to municipal
advisors. See MSRB Files Amendment to Rule G–
37 to Clarify its Application to Contributions before
August 17, 2016, Regulatory Notice 2016–18, dated
August 4, 2016, available at https://msrb.org/∼/
media/Files/Regulatory-Notices/Announcements/
2016-18.ashx?n=1. A dealer may become subject to
a ban on municipal securities business for a period
of two years from the making of a contribution,
even if the contribution is made by a person who,
although not a municipal finance professional of
the dealer at the time of the contribution, becomes
a municipal financial professional of the dealer
within two years of making the contribution
(frequently referred to as the ‘‘two-year look-back’’).
See Proposed Rule Change to Clarify an Existing
Requirement in Rule G–37 Regarding the Two-Year
Look-Back, SR–MSRB–2016–10 (Aug. 4, 2016),
available at https://msrb.org/∼/media/Files/SECFilings/2016/MSRB-2016-10.ashx.
15 See section 211(c) of the Advisers Act
(requiring the Commission to provide appropriate
notice and opportunity for hearing for orders issued
under the Advisers Act).
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Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Proposed Rules
by the municipal advisor or a municipal
advisor professional of the municipal
advisor; 16
• Prohibit municipal advisors and
municipal advisor professionals from
soliciting contributions, or coordinating
contributions, to certain officials of a
municipal entity with which the
municipal advisor is engaging, or
seeking to engage, in municipal
advisory business; 17
• Prohibit municipal advisors and
certain municipal advisor professionals
from soliciting payments, or
coordinating payments, to political
parties of states and localities with
which the municipal advisor is engaging
in, or seeking to engage in, municipal
advisory business; 18
• Prohibit municipal advisors and
municipal advisor professionals from
committing indirect violations of the
MSRB Pay to Play Rule; 19
• Extend applicable interpretive
guidance under the existing MSRB pay
to play rule to municipal advisors; 20
and
• Include a new defined term
(‘‘municipal advisor third-party
solicitor’’) for municipal advisors that
undertake a solicitation of a municipal
entity on behalf of a third-party dealer,
municipal advisor or investment
adviser. Certain aspects of the rule will
apply to this distinct type of municipal
advisor.
The Commission believes that the rule
imposes substantially equivalent or
more stringent restrictions on municipal
advisors than rule 206(4)–5 imposes on
investment advisers and would be
consistent with the objectives of rule
206(4)–5.
By the Commission.
Dated: August 25, 2016.
Brent J. Fields,
Secretary.
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BILLING CODE 8011–01–P
16 MSRB Pay to Play Release, supra footnote 13,
at 81712.
17 Id.
18 Id.
19 Id.
20 Id.
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SECURITIES AND EXCHANGE
COMMISSION
The Commission intends to issue an
order under the Advisers Act.1
17 CFR Part 275
I. Background
[Release No. IA–4511; File No. S7–16–16]
Political Contributions by Certain
Investment Advisers: Ban on ThirdParty Solicitation; Notice of Order With
Respect to FINRA Rule 2030
Securities and Exchange
Commission.
ACTION: Notice of intent to issue order.
AGENCY:
The Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’)
intends to issue an order pursuant to
section 206 of the Investment Advisers
Act of 1940 (the ‘‘Advisers Act’’) and
rule 206(4)–5 thereunder (the ‘‘SEC Pay
to Play Rule’’) finding that Financial
Industry Regulatory Authority
(‘‘FINRA’’) rule 2030 (the ‘‘FINRA Pay
to Play Rule’’), which was approved by
the Commission on August 25, 2016,
imposes substantially equivalent or
more stringent restrictions on brokersdealers than the SEC Pay to Play Rule
imposes on investment advisers and is
consistent with the objectives of the SEC
Pay to Play Rule.
DATES: Hearing requests should be
received by the Commission by 5:30
p.m. on September 19, 2016.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
FOR FURTHER INFORMATION CONTACT:
Sirimal R. Mukerjee, Senior Counsel,
Melissa Roverts Harke, Senior Special
Counsel, or Sara Cortes, Assistant
Director, at (202) 551–6787 or IArules@
sec.gov, Investment Adviser Regulation
Office, Division of Investment
Management, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–8549.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Hearing or Notification of Hearing
[FR Doc. 2016–20890 Filed 9–1–16; 8:45 am]
Jkt 238001
60653
An order will be issued unless the
Commission orders a hearing. Interested
persons may request a hearing by
writing to the Commission’s Secretary.
Hearing requests should be received by
the Commission by 5:30 p.m. on
September 19, 2016. Pursuant to rule 0–
5 under the Advisers Act, hearing
requests should state the nature of the
writer’s interest, any facts bearing upon
the desirability of a hearing on the
matter, the reason for the request, and
the issues contested. Persons who wish
to be notified of a hearing may request
notification by writing to the
Commission’s Secretary.
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
The Commission adopted the SEC Pay
to Play Rule [17 CFR 275.206(4)–5]
under the Advisers Act [15 U.S.C. 80b]
to prohibit an investment adviser from
providing advisory services for
compensation to a government client for
two years after the adviser or certain of
its executives or employees (‘‘covered
associates’’) make a contribution to
certain elected officials or candidates.2
Rule 206(4)–5 also prohibits an adviser
and its covered associates from
providing or agreeing to provide,
directly or indirectly, payment to any
third-party for a solicitation of advisory
business from any government entity on
behalf of such adviser, unless such
third-party is a ‘‘regulated person’’
(‘‘third-party solicitor ban’’).3 Rule
206(4)–5 defines a ‘‘regulated person’’ as
an SEC-registered investment adviser,4 a
registered broker or dealer subject to pay
to play restrictions adopted by a
registered national securities association
that prohibit members from engaging in
distribution or solicitation activities if
certain political contributions have been
made,5 or a registered municipal advisor
subject to pay to play restrictions
adopted by the Municipal Securities
Rulemaking Board (the ‘‘MSRB’’) that
prohibit members from engaging in
distribution or solicitation activities if
certain political contributions have been
made.6 In addition, in order for a
broker-dealer or municipal advisor to be
a regulated person under rule 206(4)–5,
the Commission must find, by order,
that these pay to play rules: (i) Impose
substantially equivalent or more
stringent restrictions on broker-dealers
or municipal advisors than the SEC Pay
to Play Rule imposes on investment
1 15 U.S.C. 80b. Unless otherwise noted, all
references to statutory sections are to the Advisers
Act, and all references to rules under the Advisers
Act, including rule 206(4)–5, are to Title 17, Part
275 of the Code of Federal Regulations [17 CFR part
275].
2 Political Contributions by Certain Investment
Advisers, Investment Advisers Act Rel. No. 3043
(July 1, 2010) [75 FR 41018 (July 14, 2010)] (‘‘SEC
Pay to Play Rule Release’’).
3 See id. at section II.B.2.(b). See also 17 CFR
275.206(4)–5(a)(2)(i)(A).
4 See 17 CFR 275.206(4)–5(f)(9)(i).
5 See 17 CFR 275.206(4)–5(f)(9)(ii). While rule
206(4)–5 applies to any registered national
securities association, FINRA is currently the only
registered national securities association under
section 19(a) of the Securities Exchange Act of 1934
[15 U.S.C. 78s(b)] (the ‘‘Exchange Act’’). As such,
for convenience, we will refer directly to FINRA in
this Notice when describing the exception for
certain broker-dealers from the third-party solicitor
ban.
6 See 17 CFR 275.206(4)–5(f)(9)(iii).
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Agencies
[Federal Register Volume 81, Number 171 (Friday, September 2, 2016)]
[Proposed Rules]
[Pages 60651-60653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20890]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 275
[Release No. IA-4512; File No. S7-17-16]
Political Contributions by Certain Investment Advisers: Ban on
Third-Party Solicitation; Notice of Order With Respect to MSRB Rule G-
37
AGENCY: Securities and Exchange Commission.
ACTION: Notice of intent to issue order.
-----------------------------------------------------------------------
SUMMARY: The Securities and Exchange Commission (``Commission'' or
``SEC'') intends to issue an order pursuant to section 206 of the
Investment Advisers Act of 1940 (the ``Advisers Act'') and rule 206(4)-
5 thereunder (the ``SEC Pay to Play Rule'') finding that the Municipal
Securities Rulemaking Board (``MSRB'') rule G-37 (the ``MSRB Pay to
Play Rule'') imposes substantially equivalent or more stringent
restrictions on municipal advisors than the SEC Pay to Play Rule
imposes on investment advisers and is consistent with the objectives of
the SEC Pay to Play Rule.
DATES: Hearing requests should be received by the Commission by 5:30
p.m. on September 19, 2016.
ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090.
FOR FURTHER INFORMATION CONTACT: Sirimal R. Mukerjee, Senior Counsel,
Melissa Roverts Harke, Senior Special Counsel, or Sara Cortes,
Assistant Director, at (202) 551-6787 or IArules@sec.gov, Investment
Adviser Regulation Office, Division of Investment Management,
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-8549.
SUPPLEMENTARY INFORMATION:
Hearing or Notification of Hearing
An order will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary. Hearing requests should be received by the Commission by
5:30 p.m. on September 19, 2016. Pursuant to rule 0-5 under the
Advisers Act, hearing requests should state the nature of the writer's
interest, any facts bearing upon the desirability of a hearing on the
matter, the reason for the request, and
[[Page 60652]]
the issues contested. Persons who wish to be notified of a hearing may
request notification by writing to the Commission's Secretary.
The Commission intends to issue an order under the Advisers Act.\1\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 80b. Unless otherwise noted, all references to
statutory sections are to the Advisers Act, and all references to
rules under the Advisers Act, including rule 206(4)-5, are to Title
17, Part 275 of the Code of Federal Regulations [17 CFR part 275].
---------------------------------------------------------------------------
I. Background
The Commission adopted the SEC Pay to Play Rule [17 CFR 275.206(4)-
5] under the Advisers Act [15 U.S.C. 80b] to prohibit an investment
adviser from providing advisory services for compensation to a
government client for two years after the adviser or certain of its
executives or employees (``covered associates'') make a contribution to
certain elected officials or candidates.\2\ Rule 206(4)-5 also
prohibits an adviser and its covered associates from providing or
agreeing to provide, directly or indirectly, payment to any third-party
for a solicitation of advisory business from any government entity on
behalf of such adviser, unless such third-party is a ``regulated
person'' (``third-party solicitor ban'').\3\ Rule 206(4)-5 defines a
``regulated person'' as an SEC-registered investment adviser,\4\ a
registered broker or dealer subject to pay to play restrictions adopted
by a registered national securities association that prohibit members
from engaging in distribution or solicitation activities if certain
political contributions have been made,\5\ or a registered municipal
advisor subject to pay to play restrictions adopted by the MSRB that
prohibit members from engaging in distribution or solicitation
activities if certain political contributions have been made.\6\ In
addition, in order for a broker-dealer or municipal advisor to be a
regulated person under rule 206(4)-5, the Commission must find, by
order, that these pay to play rules: (i) Impose substantially
equivalent or more stringent restrictions on broker-dealers or
municipal advisors than the SEC Pay to Play Rule imposes on investment
advisers; and (ii) are consistent with the objectives of the SEC Pay to
Play Rule.\7\
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\2\ Political Contributions by Certain Investment Advisers,
Investment Advisers Act Rel. No. 3043 (July 1, 2010) [75 FR 41018
(July 14, 2010)] (``SEC Pay to Play Rule Release'').
\3\ See id. at section II.B.2.(b). See also 17 CFR 275.206(4)-
5(a)(2)(i)(A).
\4\ See 17 CFR 275.206(4)-5(f)(9)(i).
\5\ See 17 CFR 275.206(4)-5(f)(9)(ii).
\6\ See 17 CFR 275.206(4)-5(f)(9)(iii). On June 22, 2011, the
Commission amended the SEC Pay to Play Rule to add municipal
advisors to the definition of ``regulated persons.'' See Rules
Implementing Amendments to the Investment Advisers Act of 1940,
Investment Advisers Act Rel. No. 3221 (June 22, 2011) [76 FR 42950
(July 19, 2011)] (``Municipal Advisor Addition Release''). The
Commission adopted final rules with respect to the registration of
municipal advisors on September 20, 2013. See Registration of
Municipal Advisors, Exchange Act Rel. No. 70462 (Sept. 20, 2013) [78
FR 67468 (Nov. 12, 2013)] (``Municipal Advisor Registration
Release'').
\7\ See 17 CFR 275.206(4)-5(f)(9).
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Rule 206(4)-5 became effective on September 13, 2010 and the
compliance date for the third-party solicitor ban was set to September
13, 2011.\8\ When the Commission added municipal advisors to the
definition of regulated person, the Commission also extended the third-
party solicitor ban's compliance date to June 13, 2012.\9\ In the
absence of a final municipal advisor registration rule, the Commission
extended the third-party solicitor ban's compliance date from June 13,
2012 to nine months after the compliance date of the final rule,\10\
which was July 31, 2015.\11\ On June 25, 2015, the Commission issued
notice of the July 31, 2015 compliance date.\12\
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\8\ See SEC Pay to Play Rule Release, supra footnote 2, at
section III.
\9\ See Municipal Advisor Addition Release, supra footnote 6, at
section II.D.1.
\10\ See Political Contributions by Certain Investment Advisers:
Ban on Third-Party Solicitation; Extension of Compliance Date,
Investment Advisers Act Rel. No. 3418 (June 8, 2012) [77 FR 35263
(June 13, 2012)].
\11\ The final date on which a municipal advisor must file a
complete application for registration was October 31, 2014. See
Municipal Advisor Registration Release, supra footnote 6, at section
V.
\12\ See Political Contributions by Certain Investment Advisers:
Ban on Third-Party Solicitation; Notice of Compliance Date,
Investment Advisers Act Rel. No. 4129 (June 25, 2015) [80 FR 37538
(July 2, 2015)]. On June 25, 2015, the Division of Investment
Management published an FAQ that provides that the Division would
not recommend enforcement action to the Commission against any
investment adviser or its covered associates for the payment to any
third person to solicit a government entity for investment advisory
services until the later of (i) the effective date of a pay to play
rule adopted by the Financial Industry Regulatory Authority or (ii)
the effective date of a pay to play rule adopted by the MSRB. See
https://www.sec.gov/divisions/investment/pay-to-play-faq.htm#1.4.
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On December 16, 2015, the MSRB filed with the Commission proposed
amendments to the MSRB Pay to Play Rule to extend its application to
municipal advisors, which the Commission published for notice and
comment on December 23, 2015 pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the ``Exchange Act'') and rule 19b-4
thereunder.\13\ On February 17, 2016, the MSRB published a regulatory
notice announcing that the proposed amendments to the MSRB Pay to Play
Rule were deemed approved by the Commission under section 19(b)(2)(D)
of the Exchange Act on February 13, 2016 and the effective date of the
rule is August 17, 2016.\14\ Prior to its amendment, the MSRB Pay to
Play Rule only applied to brokers, dealers and municipal securities
dealers.
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\13\ See Self-Regulatory Organizations; Municipal Securities
Rulemaking Board; Notice of Filing of a Proposed Rule Change
Consisting of Proposed Amendments to Rule G-37, on Political
Contributions and Prohibitions on Municipal Securities Business,
Rule G-8, on Books and Records, Rule G-9, on Preservation of
Records, and Forms G-37 and G-37x, Exchange Act Rel. No. 76763 (Dec.
24, 2015) [80 FR 81710 (Dec. 30, 2015)] (the ``MSRB Pay to Play
Release'').
\14\ On August 4, 2016, the MSRB published a regulatory notice
announcing that it filed with the Commission an amendment to the
MSRB Pay to Play Rule, effective on August 17, 2016, to clarify that
contributions by persons who become associated with a dealer and
become municipal finance professionals of the dealer, if made prior
to August 17, 2016, are subject to the two-year look-back and may
subject a dealer to a prohibition on municipal securities business.
This amendment does not change the rule's application to municipal
advisors. See MSRB Files Amendment to Rule G-37 to Clarify its
Application to Contributions before August 17, 2016, Regulatory
Notice 2016-18, dated August 4, 2016, available at https://msrb.org/
~/media/Files/Regulatory-Notices/Announcements/2016-18.ashx?n=1. A
dealer may become subject to a ban on municipal securities business
for a period of two years from the making of a contribution, even if
the contribution is made by a person who, although not a municipal
finance professional of the dealer at the time of the contribution,
becomes a municipal financial professional of the dealer within two
years of making the contribution (frequently referred to as the
``two-year look-back''). See Proposed Rule Change to Clarify an
Existing Requirement in Rule G-37 Regarding the Two-Year Look-Back,
SR-MSRB-2016-10 (Aug. 4, 2016), available at https://msrb.org/~/
media/Files/SEC-Filings/2016/MSRB-2016-10.ashx.
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II. Discussion of Order
Pursuant to section 206 of the Advisers Act and rule 206(4)-
5(f)(9)(iii)(B) thereunder, the Commission is providing notice \15\
that the Commission intends to issue an order finding that the MSRB Pay
to Play Rule (i) imposes substantially equivalent or more stringent
restrictions on municipal advisors than the SEC Pay to Play Rule
imposes on investment advisers and (ii) is consistent with the
objectives of the SEC Pay to Play Rule. The MSRB Pay to Play Rule
imposes substantially similar requirements for municipal advisors as
the SEC Pay to Play Rule imposes on investment advisers. For example,
the MSRB Pay to Play Rule will:
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\15\ See section 211(c) of the Advisers Act (requiring the
Commission to provide appropriate notice and opportunity for hearing
for orders issued under the Advisers Act).
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Prohibit a municipal advisor from engaging in municipal
advisory business with a municipal entity for two years, subject to
exceptions, following the making of a contribution to certain officials
of the municipal entity by the municipal advisor, a municipal advisor
professional of the municipal advisor, or a political action committee
controlled
[[Page 60653]]
by the municipal advisor or a municipal advisor professional of the
municipal advisor; \16\
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\16\ MSRB Pay to Play Release, supra footnote 13, at 81712.
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Prohibit municipal advisors and municipal advisor
professionals from soliciting contributions, or coordinating
contributions, to certain officials of a municipal entity with which
the municipal advisor is engaging, or seeking to engage, in municipal
advisory business; \17\
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\17\ Id.
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Prohibit municipal advisors and certain municipal advisor
professionals from soliciting payments, or coordinating payments, to
political parties of states and localities with which the municipal
advisor is engaging in, or seeking to engage in, municipal advisory
business; \18\
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\18\ Id.
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Prohibit municipal advisors and municipal advisor
professionals from committing indirect violations of the MSRB Pay to
Play Rule; \19\
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\19\ Id.
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Extend applicable interpretive guidance under the existing
MSRB pay to play rule to municipal advisors; \20\ and
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\20\ Id.
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Include a new defined term (``municipal advisor third-
party solicitor'') for municipal advisors that undertake a solicitation
of a municipal entity on behalf of a third-party dealer, municipal
advisor or investment adviser. Certain aspects of the rule will apply
to this distinct type of municipal advisor.
The Commission believes that the rule imposes substantially
equivalent or more stringent restrictions on municipal advisors than
rule 206(4)-5 imposes on investment advisers and would be consistent
with the objectives of rule 206(4)-5.
By the Commission.
Dated: August 25, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-20890 Filed 9-1-16; 8:45 am]
BILLING CODE 8011-01-P