Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G-21(e), on Municipal Fund Security Product Advertisements, 31644-31648 [2017-14240]

Download as PDF 31644 Federal Register / Vol. 82, No. 129 / Friday, July 7, 2017 / Notices and routing decisions and for order handling and regulatory compliance. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) 16 of the Act and Rule 19b– 4(f)(6) thereunder.17 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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 Paper Comments asabaliauskas on DSKBBXCHB2PROD with NOTICES • Send paper comments in triplicate to Secretary, Securities and Exchange 16 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 17 17 20:56 Jul 06, 2017 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Brent J. Fields, Secretary. [FR Doc. 2017–14241 Filed 7–6–17; 8:45 am] BILLING CODE 8011–01–P • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2017–70 on the subject line. VerDate Sep<11>2014 Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2017–70. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://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 Exchange. 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– NYSEArca–2017–70, and should be submitted on or before July 28, 2017. Jkt 241001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81065; File No. SR–CBOE– 2017–010] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Withdrawal of a Proposed Rule Change Related to Unusual Market Conditions and the Duty To Systemize Non-Electronic Orders Prior to Representation June 30, 2017. On February 15, 2017, the Chicago Board Options Exchange, Incorporated PO 00000 18 17 CFR 200.30–3(a)(12). Frm 00097 Fmt 4703 Sfmt 4703 (‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend its rules regarding the circumstances in which CBOE Floor Officials may declare a ‘‘fast’’ market and the actions those Floor Officials may take when a fast market is declared, including the ability to suspend the duty to systemize a non-electronic order prior to representing it in open outcry trading. The proposed rule change was published for comment in the Federal Register on March 6, 2017.3 On April 18, 2017, pursuant to Section 19(b)(2) of the Exchange Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On June 2, 2017, the Commission instituted proceedings to determine whether to approve or disapprove the proposed rule change.6 The Commission received no comments on the proposed rule change. On June 26, 2017, CBOE withdrew the proposed rule change (SR–CBOE–2017–010). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Brent J. Fields, Secretary. [FR Doc. 2017–14244 Filed 7–6–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81060; File No. SR–MSRB– 2017–04] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G– 21(e), on Municipal Fund Security Product Advertisements June 30, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 80123 (February 28, 2017), 82 FR 12667 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 80481, 82 FR 18941 (April 24, 2017). The Commission designated June 4, 2017, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 See Securities Exchange Act Release No. 80854, 82 FR 26724 (June 8, 2017). 7 17 CFR 200.30–3(a)(12). 2 17 E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 82, No. 129 / Friday, July 7, 2017 / Notices ‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 22, 2017 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. 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 to amend MSRB Rule G–21(e), on municipal fund security product advertisements, to address important regulatory developments and to enhance investor protection in connection with municipal fund securities (‘‘proposed rule change’’). The MSRB requests that the proposed rule change be approved with an implementation date three months after the Commission approval date for all changes. The text of the proposed rule change is available on the MSRB’s Web site at www.msrb.org/Rules-andInterpretations/SEC-Filings/2017Filings.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 asabaliauskas on DSKBBXCHB2PROD with NOTICES 1. Purpose Background For over 40 years, Section 15B of the Exchange Act has granted the Board with rulemaking authority over the municipal securities transactions effected by brokers, dealers, and 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 20:56 Jul 06, 2017 Jkt 241001 municipal securities dealers (collectively, ‘‘dealers’’). However, following the financial crisis of 2008, Congress expanded that authority with its enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’).3 The DoddFrank Act amended Section 15B of the Exchange Act to establish a new federal regulatory regime requiring municipal advisors to register with the Commission, deeming them to owe a fiduciary duty to their municipal entity clients and granting the MSRB rulemaking authority over them.4 The MSRB, in the exercise of that rulemaking authority, has been developing a comprehensive regulatory framework for municipal advisors and their associated persons. In the context of developing a rule to address advertising by municipal advisors, the Board undertook a holistic review of its advertising rules, and determined to draft amendments to Rule G–21 as well as to develop new draft Rule G–40, on advertising by municipal advisors. The Board sought public comment on the draft amendments to Rule G–21 and new draft Rule G–40,5 and, in response, received 11 comment letters.6 While the Board is considering the comments it received in response to that Request for Comment on various other Law No. 111–203, 124 Stat. 1376 (2010). 15 U.S.C. 78o–4. 5 MSRB Notice 2017–04 (Feb. 16, 2017) (the ‘‘Request for Comment’’). 6 Letter from Noreen P. White, Co-President and Kim M. Whelan, Co-President, Acacia Financial Group, Inc., dated April 7, 2017; Letter from Mike Nicholas, Chief Executive Officer, Bond Dealers of America, dated March 24, 2017; Letter from Norman L. Ashkenas, Chief Compliance Officer, Fidelity Brokerage Services, LLC, Richard J. O’Brien, Chief Compliance Officer, National Financial Services, LLC, and Jason Linde, Chief Compliance Officer, Fidelity Investments Institutional Services Company, LLC, dated March 24, 2017 (‘‘Fidelity’’); Letter from David T. Bellaire, Esq., Executive Vice President & General Counsel, Financial Services Institute, dated March 24, 2017 (‘‘FSI’’); Letter from Laura D. Lewis, Principal, Lewis Young Robertson & Burningham, Inc., dated March 24, 2017; Letter from Susan Gaffney, Executive Director, National Association of Municipal Advisors, dated March 24, 2017; Letter from Leo Karwejna, Chief Compliance Officer, Cheryl Maddox, General Counsel, and Catherine Humphrey-Bennett, Municipal Advisory Compliance Officer, Public Financial Management, Inc. and PFM Financial Advisors LLC, dated March 23, 2017; Letter from Leslie M. Norwood, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, dated March 24, 2017 (‘‘SIFMA’’); Letter from Paul Curley, Director of College Savings Research, Strategic Insight, dated May 16, 2017 (‘‘SI’’); Letter from Donna DiMaria, Chairman of the Board of Directors and Chair of the 3PM Regulatory Committee, Third Party Marketers Association, dated March 23, 2017; and Letter from Robert J. McCarthy, Director, Regulatory Policy, Wells Fargo Advisors, dated March 24, 2017. PO 00000 3 Pub. 4 See Frm 00098 Fmt 4703 Sfmt 4703 31645 potential changes to advertising regulations, the Board has concluded to separately propose rule changes to Rule G–21(e) alone to address important regulatory developments and to enhance investor protection in connection with municipal fund securities.7 Proposed Rule Change In summary, the proposed rule change would amend Rule G–21(e) to: • Reflect relevant regulatory developments; • enhance the ‘‘out-of-state disclosure obligation’’ 8 about the potential other benefits an investor may be provided by investing in a 529 college savings plan offered by the home state of the investor or of the designated beneficiary; • clarify that certain advertisements that contain performance data may include a hyperlink to a Web site that contains more recent performance data; and • include several revisions that are designed to promote understanding of and compliance with the rule. A detailed discussion about the proposed rule change’s enhancements to Rule G–21(e) follows. A. Regulatory Developments The proposed rule change would amend Rule G–21(e) to reflect two regulatory developments—the SEC’s money market reforms and the formation of the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’). Rule G–21(e)(i)(A)(2)(c) requires that a municipal fund security advertisement of an investment option that the issuer holds out as having the characteristics of a money market fund include certain disclosures. The Board designed those disclosures to protect investors by alerting them to the potential risks of investing in that investment option, and modeled the disclosures on the disclosures required for money market fund advertisements by Rule 482(b)(4) 9 under the Securities Act of 1933, as amended (the ‘‘1933 Act’’).10 The proposed rule change would require that a municipal fund security advertisement of an investment option that has the characteristics of a money market fund include enhanced 7 The proposed amendments to Rule G–21(e) have no substantive connection with the draft amendments to the other provisions of Rule G–21 or with draft Rule G–40. 8 See Interpretation on Customer Protection Obligations Relating to the Marketing of 529 College Savings Plans (Aug. 7, 2006) (discussing point-ofsale disclosure obligations under Rule G–17 and defining ‘‘out-of-state disclosure obligation’’). 9 17 CFR 230.482(b)(4). 10 15 U.S.C. 77a; see File No. SR–MSRB–2004–09 (Dec. 16, 2004); Exchange Act Release No. 50919 (Dec. 22, 2004). E:\FR\FM\07JYN1.SGM 07JYN1 31646 Federal Register / Vol. 82, No. 129 / Friday, July 7, 2017 / Notices asabaliauskas on DSKBBXCHB2PROD with NOTICES disclosure about the risks associated with investing in that investment option. Money market funds generally invest in short-term obligations and have a principal investment objective of maintaining a net asset value of $1.00 per share.11 However, during the financial crisis of 2008, money market funds experienced high redemption rates that caused a money market fund to ‘‘break the buck’’ (i.e., maintain a net asset value of less than $1.00 per share).12 Following the financial crisis, the SEC adopted amendments that were designed, among other things, to make money market funds more resilient to certain short-term market risks and to provide greater protections for investors.13 The disclosure that would be required by the proposed rule change reflects the SEC’s money market reforms. The Board tailored the proposed disclosure for each of the three categories of money market funds in which a municipal fund security investment option could invest. Those categories are: (i) Money market funds that are not government money market funds or retail money market funds with floating net asset values that may impose liquidity fees and that may temporarily suspend redemptions; (ii) money market funds that are government money market funds or retail money market funds that maintain stable net asset values that may impose liquidity fees or that may temporarily suspend redemptions; and (iii) money market funds that are government money market funds that maintain stable net asset values and that have elected not to impose liquidity fees or to temporarily suspend redemptions. The proposed rule change to Rule G– 21(e)(i)(A)(2)(c) is substantially similar to the SEC’s amendments to Rule 482(b)(4) under the 1933 Act,14 as modified to reflect the differences in the characteristics between municipal fund securities and money market funds.15 11 Net asset value is the mutual fund’s total assets minus its total liabilities. See Fast answers available at https://www.sec.gov/fast-answers/ answersnavhtm.html. 12 On September 16, 2008, the Reserve Fund announced that its Primary Fund would ‘‘break the buck.’’ See Investment Company Act Rel. No. 28807 (June 30, 2009), 74 FR 32688 (July 8, 2009), note 44. 13 See Securities Act Release No. 9616 (July 23, 2014), 79 FR 47736 (Aug. 14, 2014) (adopting money market reforms); Investment Company Act Rel. No. 28807 (June 30, 2009), 74 FR 32688 (July 8, 2009) (proposing money market reforms). 14 17 CFR 230.482(b)(4). 15 Specifically, an interest in a 529 college savings plan is an interest in an account (a ‘‘unit’’). The account, in turn, may invest in mutual funds such as a money market fund. An investor does not receive shares of the mutual fund; the investor receives units and only indirectly invests in the VerDate Sep<11>2014 20:56 Jul 06, 2017 Jkt 241001 Specifically, the current disclosure required by Rule G–21(e)(i)(A)(2)(c) alerts a 529 college savings plan investor that an investment option that the issuer holds out as having the characteristics of a money market fund (i) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency (unless such guarantee is provided by or on behalf of such issuer) and (ii) if the money market fund is held out as maintaining a stable net asset value, that although the issuer seeks to preserve the value of the investment at $1.00 per share or such other applicable fixed share price, it is possible to lose money by investing in the investment option. In addition to the current disclosure, the proposed rule change would require enhanced disclosure to alert the investor that, as applicable, the underlying mutual fund may impose a liquidity fee or suspend redemptions and that the investor should not expect the underlying fund sponsor to provide financial support to the underlying mutual fund. The proposed rule change also would update Rule G–21(e)(ii)(F) and Rule G– 21(e)(vi) to substitute FINRA for references to the National Association of Securities Dealers, Inc. (‘‘NASD’’). B. Out-of-State Disclosure Obligation The proposed rule change would enhance the out-of-state disclosure required by Rule G–21(e)(i)(A)(2)(b). Under Rule G–21(e)(i)(A)(2)(b), certain advertisements for a 529 college savings plan must provide disclosure that an investor should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investment in such state’s 529 college savings plan. To assist an investor’s understanding of what those other state benefits may include, the proposed rule change would require disclosure that those other state benefits may include financial aid, scholarship funds, and protection from creditors. advertisement of performance data by a municipal fund security. Rule G– 21(e)(i)(A)(3)(a) requires that a municipal fund security’s advertisement of performance data include a legend that discloses that the performance data set forth in the advertisement represents past performance; that past performance does not guarantee future results; that the investment return and the value of the investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost; and that current performance may be lower or higher than the performance data included in the advertisement. The proposed rule change would clarify that an investment option that invests in a government money market fund or a retail money market fund may omit the disclosure required by the legend about principal value fluctuation. That clarification is consistent with Rule 482(b)(3) under the 1933 Act that permits government money market funds and retail money market funds to omit that disclosure.16 Further, Rule G–21(e)(i)(A)(3)(a) requires that the legend in a municipal fund security’s advertisement of performance data that is not current to the most recent month ended seven business days before the date of any use of the advertisement, also must disclose where the investor may obtain more current performance data. The legend must include a toll-free number or a Web site where the investor may obtain that information. The proposed rule change would clarify that the advertisement may provide a hyperlink to the Web site where the investor may obtain total return quotations current to most recent month end for which such total return information is available. The Board believes that the use of the hyperlink to a Web site will assist investors in obtaining more current performance data. Further, the use of a hyperlink to provide certain data is consistent with the rules of other financial regulators.17 C. Performance Data The proposed rule change would provide two clarifications to the legend that must be provided in an D. Enhancements to Terms Used in Rule G–21(e) To assist the reader’s understanding of the disclosure and to assist with a dealer’s compliance with the rule, the proposed rule change would make mutual fund through the units of the account. However, this is not the case with a mutual fund investment. A mutual fund investor directly receives shares in a mutual fund. Therefore, the proposed rule change, unlike Rule 482(b)(4)’s disclosure for mutual funds, refers to an investment in an investment option and an investor only indirectly investing in a money market fund through an underlying mutual fund offered by an investment option. The proposed rule change does not refer to direct investments in a mutual fund. 16 17 CFR 230.482(b)(3) (‘‘[a]n advertisement for a money market fund that is a government money market fund, as defined in § 270.2a–7(a)(16) of this chapter, or a retail money market fund, as defined in § 270.2a–7(a)(25) of this chapter may omit the disclosure about principal value fluctuation’’). 17 See, e.g., FINRA Rule 2213(c)(1)(C) on requirements for the use of bond mutual fund volatility ratings requiring a ‘‘link to, or Web site address for, a Web site that includes the criteria and methodologies used to determine the rating.’’ PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 82, No. 129 / Friday, July 7, 2017 / Notices certain revisions to the provisions of Rule G–21(e). The proposed rule change would amend Rule G–21(e) to use terms more commonly used with municipal fund securities and that are used with the MSRB’s other rules applicable to municipal fund securities (e.g., the term ‘‘investment option’’), such as Rule G– 45, on reporting of information on municipal fund securities. The proposed rule change also would amend Rule G–21(e)(i)(A)(2)(c) and Rule G– 21(e)(i)(A)(3)(c) to clarify that a municipal fund security offers investment options and that those investment options, in turn, may invest in mutual funds. Proposed paragraph .01 of the Supplementary Material would clarify that the term ‘‘investment option’’ shall have the same meaning as defined in Rule G–45(d)(vi). Proposed paragraph .02 of the Supplementary Material would clarify that under Rule G–21(e)(i)(A)(2)(c), a dealer may omit the last sentence of the required disclosure if that disclosure is not applicable to the underlying fund according to Rule 482(b)(4) under the 1933 Act.18 The proposed rule change also would amend Rule G– 21(e)(i)(A)(3)(a) to clarify that an investor receives units in the municipal fund security. 2. Statutory Basis Section 15B(b)(2) of the Exchange Act 19 provides that [t]he Board shall propose and adopt rules to effect the purposes of this title with respect to transactions in municipal securities effected by brokers, dealers, and municipal securities dealers and advice provided to or on behalf of municipal entities or obligated persons by brokers, dealers, municipal securities dealers, and municipal advisors with respect to municipal financial products, the issuance of municipal securities, and solicitations of municipal entities or obligated persons undertaken by brokers, dealers, municipal securities dealers, and municipal advisors. asabaliauskas on DSKBBXCHB2PROD with NOTICES Section 15B(b)(2)(C) of the Exchange Act 20 provides that the MSRB’s rules shall be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities and municipal financial products, to remove impediments to and perfect the mechanism of a free and open market in municipal securities and municipal financial products, and, in general, to protect 18 17 CFR 230.482(b)(4). U.S.C. 78o–4(b)(2). 20 15 U.S.C. 78o–4(b)(2)(C). 19 15 VerDate Sep<11>2014 20:56 Jul 06, 2017 Jkt 241001 investors, municipal entities, obligated persons, and the public interest. The MSRB believes that the proposed rule change is consistent with the provisions of Sections 15B(b)(2) 21 and 15B(b)(2)(C) of the Exchange Act 22 because it would update and modernize the MSRB’s municipal fund security product advertising rule applicable to dealers. The proposed rule change would enhance certain disclosures required by the rule to reflect relevant regulatory developments. Those enhanced disclosures would protect investors by alerting investors about certain risks of investing in investment options that in turn invest in money market funds. Further, the proposed rule change would protect investors by providing the investor with (i) enhanced out-of-state disclosure concerning the potential other benefits that may be offered by investing in the 529 college saving plan offered by the investor’s or the designated beneficiary’s home state and (ii) the ability to obtain more current performance information through the use of a hyperlink to a Web site. By providing investors with enhanced disclosure, an investor has more information to evaluate the municipal fund security advertisement, which in turn, would help prevent fraudulent acts and practices as well as promote just and equitable principles of trade. In addition, the enhanced disclosures would facilitate transactions in municipal fund securities by eliminating certain discordance between the disclosure required by Rule G–21(e) relating to investment options that invest in money market funds and the disclosure required by the advertising rules applicable to money market funds registered with the Commission. By so doing, the Board believes that it would facilitate efficient and uniform examination and enforcement by the regulators that enforce the Board’s rules. B. Self-Regulatory Organization’s Statement on Burden on Competition Section 15B(b)(2)(C) of the Exchange Act 23 requires that MSRB rules not be designed to impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. In accordance with the Board’s policy on the use of economic analysis,24 the MSRB has considered the economic 21 15 22 15 U.S.C. 78o–4(b)(2). U.S.C. 78o–4(b)(2)(C). 23 Id. 24 Policy on the Use of Economic Analysis in MSRB Rulemaking, available at, http:// www.msrb.org/About-MSRB/Financial-and-OtherInformation/FinancialPolicies/Economic-AnalysisPolicy.aspx. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 31647 impact of the proposed rule change— with regard to certain advertisements of municipal fund securities that require additional disclosures as related to 529 college savings plans— including a comparison to reasonable alternative regulatory approaches, relative to the baseline. The MSRB does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The proposed rule change would enhance those additional disclosures as they relate to 529 college savings plans by expanding the disclosure about the other state benefits that are available only for investments in such state’s qualified tuition program. Those other state benefits include financial aid, scholarship funds, and protection from creditors. The proposed rule change would also harmonize that disclosure with disclosure required by the recent amendments made by the SEC to Rule 482 under the 1933 Act applicable to certain mutual fund advertisements. That disclosure includes disclosure about a money market fund’s ability to impose a liquidity fee and to temporarily suspend redemptions. The MSRB does not believe the proposed rule change would create a burden on competition, as all municipal fund securities dealers would be subject to the additional requirements for disclosures. The MSRB believes that the proposed rule change may reduce inefficiencies and confusion for dealers via harmonization of MSRB rule requirements with comparable SEC requirements on advertising. The MSRB believes investors should benefit from better information in the form of more consistent and accurate advertising through updated requirements for certain municipal fund security advertisements, as investors generally value ease of comparison of different financial products. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The MSRB received 11 comment letters in response to the Request for Comment on the draft amendments to Rule G–21 and new draft Rule G–40.25 Of those comment letters, four comment letters addressed the draft amendments to Rule G–21(e).26 All four commenters 25 See supra note 5. FSI, SIFMA and SI. 26 Fidelity, E:\FR\FM\07JYN1.SGM 07JYN1 31648 Federal Register / Vol. 82, No. 129 / Friday, July 7, 2017 / Notices supported the draft amendments,27 and one commenter suggested that the MSRB could easily separate Rule G– 21(e) from the rest of Rule G–21, if necessary.28 Specifically, commenters expressed support for the proposed rule change’s use of hyperlinks, harmonization of Rule G–21(e) with the advertising rules of other financial regulators, and enhanced out-of-state disclosure. The MSRB summarizes the comments received relating to the proposed rule change in the four comment letters by topic below. A. Hyperlinks Fidelity and SIFMA expressed support for the use of hyperlinks to provide more current performance information.29 The MSRB appreciates Fidelity’s and SIFMA’s support for the proposed rule change and their suggestion concerning the expanded use of hyperlinks. The Board anticipates that it will continue to explore the use of hyperlinks in other areas of its rule book. B. Harmonization With Other Financial Regulations FSI supported the proposed rule change’s harmonization with the SEC’s advertising rules applicable to mutual funds.30 C. Out-of-State Disclosure SI supported the enhanced out-ofstate disclosure. SI commented that the ‘‘added detail and clarity’’ will enhance the value of 529 college savings plans for investors and advisors, because the disclosure will assist the reader in more fully understanding what the other benefits may be of investing in a 529 college savings plan offered by the 27 See, e.g., FSI letter at 2. SIFMA letter at 8 (‘‘[t]his section can be easily separated from the rest of the rule, if necessary’’). 29 Specifically, Fidelity stated: We fully support these draft amendments and believe that hyperlinks are a commonly used method of communication, well understood by investors, through which investors can obtain additional details on facts that matter to them. See Fidelity letter at 3. Similarly, SIFMA stated that, ‘‘SIFMA and its members support the ability to use hyperlinks in this rule . . . .’’ See SIFMA letter at 8. 30 Specifically, FSI stated: I. FSI strongly supports efforts to harmonize Rule G–21 with other financial regulations . . . The Proposed Rule also amends Rule G– 21(e) to incorporate the provisions included in the SEC’s amendments to its registered investment company advertising rules. The draft amendments to Rule G–21(e) replace the money market mutual fund disclosure required by current Rule G–21 with a modified version of the money market mutual fund disclosure currently required by SEC rules. See FSI letter at 2. asabaliauskas on DSKBBXCHB2PROD with NOTICES 28 See VerDate Sep<11>2014 22:45 Jul 06, 2017 Jkt 241001 investor’s or the designated beneficiary’s home state.31 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period of up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MSRB–2017–04 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–2017–04. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule stated, in part, that: Strategic Insight appreciates the higher level of detail and clarity by expanding the description of ‘‘other benefits’’ to include reference to ‘‘such as financial aid, scholarship funds, and protection from creditors’’ as these are important factors that investors often overlook. By expanding the description, 529s will also be easier to understand which encourages use of the product. Ultimately, the added detail and clarity will enhance the value of 529s for investors and advisors, as they may not have been able to identify what the ‘‘other benefits’’ were referencing previously. See SI letter. PO 00000 31 SI Frm 00101 Fmt 4703 Sfmt 4703 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– 2017–04 and should be submitted on or before July 28, 2017. For the Commission, pursuant to delegated authority.32 Brent J. Fields, Secretary. [FR Doc. 2017–14240 Filed 7–6–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81068; File No. SR–ICEEU– 2017–007] Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change Relating to Amendments to the ICE Clear Europe Limited Articles of Association June 30, 2017. I. Introduction On May 2, 2017, ICE Clear Europe Limited (‘‘ICE Clear Europe’’), 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 (SR–ICEEU–2017–007) to amend its Articles of Association. The proposed rule change was published for comment in the Federal Register on May 19, 2017.3 The Commission received no comment letters regarding 32 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 34–80674 (May 19, 2017), 82 FR 23080 (May 19, 2017) (SR– ICEEU–2017–007) (the ‘‘Notice’’). 1 15 E:\FR\FM\07JYN1.SGM 07JYN1

Agencies

[Federal Register Volume 82, Number 129 (Friday, July 7, 2017)]
[Notices]
[Pages 31644-31648]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14240]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81060; File No. SR-MSRB-2017-04]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G-
21(e), on Municipal Fund Security Product Advertisements

June 30, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 31645]]

``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on June 22, 2017 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 to amend 
MSRB Rule G-21(e), on municipal fund security product advertisements, 
to address important regulatory developments and to enhance investor 
protection in connection with municipal fund securities (``proposed 
rule change''). The MSRB requests that the proposed rule change be 
approved with an implementation date three months after the Commission 
approval date for all changes.
    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2017-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

Background

    For over 40 years, Section 15B of the Exchange Act has granted the 
Board with rulemaking authority over the municipal securities 
transactions effected by brokers, dealers, and municipal securities 
dealers (collectively, ``dealers''). However, following the financial 
crisis of 2008, Congress expanded that authority with its enactment of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 
``Dodd-Frank Act'').\3\ The Dodd-Frank Act amended Section 15B of the 
Exchange Act to establish a new federal regulatory regime requiring 
municipal advisors to register with the Commission, deeming them to owe 
a fiduciary duty to their municipal entity clients and granting the 
MSRB rulemaking authority over them.\4\ The MSRB, in the exercise of 
that rulemaking authority, has been developing a comprehensive 
regulatory framework for municipal advisors and their associated 
persons.
---------------------------------------------------------------------------

    \3\ Pub. Law No. 111-203, 124 Stat. 1376 (2010).
    \4\ See 15 U.S.C. 78o-4.
---------------------------------------------------------------------------

    In the context of developing a rule to address advertising by 
municipal advisors, the Board undertook a holistic review of its 
advertising rules, and determined to draft amendments to Rule G-21 as 
well as to develop new draft Rule G-40, on advertising by municipal 
advisors. The Board sought public comment on the draft amendments to 
Rule G-21 and new draft Rule G-40,\5\ and, in response, received 11 
comment letters.\6\
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    \5\ MSRB Notice 2017-04 (Feb. 16, 2017) (the ``Request for 
Comment'').
    \6\ Letter from Noreen P. White, Co-President and Kim M. Whelan, 
Co-President, Acacia Financial Group, Inc., dated April 7, 2017; 
Letter from Mike Nicholas, Chief Executive Officer, Bond Dealers of 
America, dated March 24, 2017; Letter from Norman L. Ashkenas, Chief 
Compliance Officer, Fidelity Brokerage Services, LLC, Richard J. 
O'Brien, Chief Compliance Officer, National Financial Services, LLC, 
and Jason Linde, Chief Compliance Officer, Fidelity Investments 
Institutional Services Company, LLC, dated March 24, 2017 
(``Fidelity''); Letter from David T. Bellaire, Esq., Executive Vice 
President & General Counsel, Financial Services Institute, dated 
March 24, 2017 (``FSI''); Letter from Laura D. Lewis, Principal, 
Lewis Young Robertson & Burningham, Inc., dated March 24, 2017; 
Letter from Susan Gaffney, Executive Director, National Association 
of Municipal Advisors, dated March 24, 2017; Letter from Leo 
Karwejna, Chief Compliance Officer, Cheryl Maddox, General Counsel, 
and Catherine Humphrey-Bennett, Municipal Advisory Compliance 
Officer, Public Financial Management, Inc. and PFM Financial 
Advisors LLC, dated March 23, 2017; Letter from Leslie M. Norwood, 
Managing Director and Associate General Counsel, Securities Industry 
and Financial Markets Association, dated March 24, 2017 (``SIFMA''); 
Letter from Paul Curley, Director of College Savings Research, 
Strategic Insight, dated May 16, 2017 (``SI''); Letter from Donna 
DiMaria, Chairman of the Board of Directors and Chair of the 3PM 
Regulatory Committee, Third Party Marketers Association, dated March 
23, 2017; and Letter from Robert J. McCarthy, Director, Regulatory 
Policy, Wells Fargo Advisors, dated March 24, 2017.
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    While the Board is considering the comments it received in response 
to that Request for Comment on various other potential changes to 
advertising regulations, the Board has concluded to separately propose 
rule changes to Rule G-21(e) alone to address important regulatory 
developments and to enhance investor protection in connection with 
municipal fund securities.\7\
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    \7\ The proposed amendments to Rule G-21(e) have no substantive 
connection with the draft amendments to the other provisions of Rule 
G-21 or with draft Rule G-40.
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Proposed Rule Change

    In summary, the proposed rule change would amend Rule G-21(e) to:
     Reflect relevant regulatory developments;
     enhance the ``out-of-state disclosure obligation'' \8\ 
about the potential other benefits an investor may be provided by 
investing in a 529 college savings plan offered by the home state of 
the investor or of the designated beneficiary;
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    \8\ See Interpretation on Customer Protection Obligations 
Relating to the Marketing of 529 College Savings Plans (Aug. 7, 
2006) (discussing point-of-sale disclosure obligations under Rule G-
17 and defining ``out-of-state disclosure obligation'').
---------------------------------------------------------------------------

     clarify that certain advertisements that contain 
performance data may include a hyperlink to a Web site that contains 
more recent performance data; and
     include several revisions that are designed to promote 
understanding of and compliance with the rule.
    A detailed discussion about the proposed rule change's enhancements 
to Rule G-21(e) follows.

A. Regulatory Developments

    The proposed rule change would amend Rule G-21(e) to reflect two 
regulatory developments--the SEC's money market reforms and the 
formation of the Financial Industry Regulatory Authority, Inc. 
(``FINRA'').
    Rule G-21(e)(i)(A)(2)(c) requires that a municipal fund security 
advertisement of an investment option that the issuer holds out as 
having the characteristics of a money market fund include certain 
disclosures. The Board designed those disclosures to protect investors 
by alerting them to the potential risks of investing in that investment 
option, and modeled the disclosures on the disclosures required for 
money market fund advertisements by Rule 482(b)(4) \9\ under the 
Securities Act of 1933, as amended (the ``1933 Act'').\10\
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    \9\ 17 CFR 230.482(b)(4).
    \10\ 15 U.S.C. 77a; see File No. SR-MSRB-2004-09 (Dec. 16, 
2004); Exchange Act Release No. 50919 (Dec. 22, 2004).
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    The proposed rule change would require that a municipal fund 
security advertisement of an investment option that has the 
characteristics of a money market fund include enhanced

[[Page 31646]]

disclosure about the risks associated with investing in that investment 
option. Money market funds generally invest in short-term obligations 
and have a principal investment objective of maintaining a net asset 
value of $1.00 per share.\11\ However, during the financial crisis of 
2008, money market funds experienced high redemption rates that caused 
a money market fund to ``break the buck'' (i.e., maintain a net asset 
value of less than $1.00 per share).\12\ Following the financial 
crisis, the SEC adopted amendments that were designed, among other 
things, to make money market funds more resilient to certain short-term 
market risks and to provide greater protections for investors.\13\
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    \11\ Net asset value is the mutual fund's total assets minus its 
total liabilities. See Fast answers available at https://www.sec.gov/fast-answers/answersnavhtm.html.
    \12\ On September 16, 2008, the Reserve Fund announced that its 
Primary Fund would ``break the buck.'' See Investment Company Act 
Rel. No. 28807 (June 30, 2009), 74 FR 32688 (July 8, 2009), note 44.
    \13\ See Securities Act Release No. 9616 (July 23, 2014), 79 FR 
47736 (Aug. 14, 2014) (adopting money market reforms); Investment 
Company Act Rel. No. 28807 (June 30, 2009), 74 FR 32688 (July 8, 
2009) (proposing money market reforms).
---------------------------------------------------------------------------

    The disclosure that would be required by the proposed rule change 
reflects the SEC's money market reforms. The Board tailored the 
proposed disclosure for each of the three categories of money market 
funds in which a municipal fund security investment option could 
invest. Those categories are: (i) Money market funds that are not 
government money market funds or retail money market funds with 
floating net asset values that may impose liquidity fees and that may 
temporarily suspend redemptions; (ii) money market funds that are 
government money market funds or retail money market funds that 
maintain stable net asset values that may impose liquidity fees or that 
may temporarily suspend redemptions; and (iii) money market funds that 
are government money market funds that maintain stable net asset values 
and that have elected not to impose liquidity fees or to temporarily 
suspend redemptions. The proposed rule change to Rule G-
21(e)(i)(A)(2)(c) is substantially similar to the SEC's amendments to 
Rule 482(b)(4) under the 1933 Act,\14\ as modified to reflect the 
differences in the characteristics between municipal fund securities 
and money market funds.\15\
---------------------------------------------------------------------------

    \14\ 17 CFR 230.482(b)(4).
    \15\ Specifically, an interest in a 529 college savings plan is 
an interest in an account (a ``unit''). The account, in turn, may 
invest in mutual funds such as a money market fund. An investor does 
not receive shares of the mutual fund; the investor receives units 
and only indirectly invests in the mutual fund through the units of 
the account. However, this is not the case with a mutual fund 
investment. A mutual fund investor directly receives shares in a 
mutual fund. Therefore, the proposed rule change, unlike Rule 
482(b)(4)'s disclosure for mutual funds, refers to an investment in 
an investment option and an investor only indirectly investing in a 
money market fund through an underlying mutual fund offered by an 
investment option. The proposed rule change does not refer to direct 
investments in a mutual fund.
---------------------------------------------------------------------------

    Specifically, the current disclosure required by Rule G-
21(e)(i)(A)(2)(c) alerts a 529 college savings plan investor that an 
investment option that the issuer holds out as having the 
characteristics of a money market fund (i) is not insured or guaranteed 
by the Federal Deposit Insurance Corporation or any other government 
agency (unless such guarantee is provided by or on behalf of such 
issuer) and (ii) if the money market fund is held out as maintaining a 
stable net asset value, that although the issuer seeks to preserve the 
value of the investment at $1.00 per share or such other applicable 
fixed share price, it is possible to lose money by investing in the 
investment option. In addition to the current disclosure, the proposed 
rule change would require enhanced disclosure to alert the investor 
that, as applicable, the underlying mutual fund may impose a liquidity 
fee or suspend redemptions and that the investor should not expect the 
underlying fund sponsor to provide financial support to the underlying 
mutual fund.
    The proposed rule change also would update Rule G-21(e)(ii)(F) and 
Rule G-21(e)(vi) to substitute FINRA for references to the National 
Association of Securities Dealers, Inc. (``NASD'').

B. Out-of-State Disclosure Obligation

    The proposed rule change would enhance the out-of-state disclosure 
required by Rule G-21(e)(i)(A)(2)(b). Under Rule G-21(e)(i)(A)(2)(b), 
certain advertisements for a 529 college savings plan must provide 
disclosure that an investor should consider, before investing, whether 
the investor's or the designated beneficiary's home state offers any 
state tax or other benefits that are only available for investment in 
such state's 529 college savings plan. To assist an investor's 
understanding of what those other state benefits may include, the 
proposed rule change would require disclosure that those other state 
benefits may include financial aid, scholarship funds, and protection 
from creditors.

C. Performance Data

    The proposed rule change would provide two clarifications to the 
legend that must be provided in an advertisement of performance data by 
a municipal fund security. Rule G-21(e)(i)(A)(3)(a) requires that a 
municipal fund security's advertisement of performance data include a 
legend that discloses that the performance data set forth in the 
advertisement represents past performance; that past performance does 
not guarantee future results; that the investment return and the value 
of the investment will fluctuate so that an investor's shares, when 
redeemed, may be worth more or less than their original cost; and that 
current performance may be lower or higher than the performance data 
included in the advertisement. The proposed rule change would clarify 
that an investment option that invests in a government money market 
fund or a retail money market fund may omit the disclosure required by 
the legend about principal value fluctuation. That clarification is 
consistent with Rule 482(b)(3) under the 1933 Act that permits 
government money market funds and retail money market funds to omit 
that disclosure.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 230.482(b)(3) (``[a]n advertisement for a money 
market fund that is a government money market fund, as defined in 
Sec.  270.2a-7(a)(16) of this chapter, or a retail money market 
fund, as defined in Sec.  270.2a-7(a)(25) of this chapter may omit 
the disclosure about principal value fluctuation'').
---------------------------------------------------------------------------

    Further, Rule G-21(e)(i)(A)(3)(a) requires that the legend in a 
municipal fund security's advertisement of performance data that is not 
current to the most recent month ended seven business days before the 
date of any use of the advertisement, also must disclose where the 
investor may obtain more current performance data. The legend must 
include a toll-free number or a Web site where the investor may obtain 
that information. The proposed rule change would clarify that the 
advertisement may provide a hyperlink to the Web site where the 
investor may obtain total return quotations current to most recent 
month end for which such total return information is available. The 
Board believes that the use of the hyperlink to a Web site will assist 
investors in obtaining more current performance data. Further, the use 
of a hyperlink to provide certain data is consistent with the rules of 
other financial regulators.\17\
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    \17\ See, e.g., FINRA Rule 2213(c)(1)(C) on requirements for the 
use of bond mutual fund volatility ratings requiring a ``link to, or 
Web site address for, a Web site that includes the criteria and 
methodologies used to determine the rating.''
---------------------------------------------------------------------------

D. Enhancements to Terms Used in Rule G-21(e)

    To assist the reader's understanding of the disclosure and to 
assist with a dealer's compliance with the rule, the proposed rule 
change would make

[[Page 31647]]

certain revisions to the provisions of Rule G-21(e). The proposed rule 
change would amend Rule G-21(e) to use terms more commonly used with 
municipal fund securities and that are used with the MSRB's other rules 
applicable to municipal fund securities (e.g., the term ``investment 
option''), such as Rule G-45, on reporting of information on municipal 
fund securities. The proposed rule change also would amend Rule G-
21(e)(i)(A)(2)(c) and Rule G-21(e)(i)(A)(3)(c) to clarify that a 
municipal fund security offers investment options and that those 
investment options, in turn, may invest in mutual funds. Proposed 
paragraph .01 of the Supplementary Material would clarify that the term 
``investment option'' shall have the same meaning as defined in Rule G-
45(d)(vi). Proposed paragraph .02 of the Supplementary Material would 
clarify that under Rule G-21(e)(i)(A)(2)(c), a dealer may omit the last 
sentence of the required disclosure if that disclosure is not 
applicable to the underlying fund according to Rule 482(b)(4) under the 
1933 Act.\18\ The proposed rule change also would amend Rule G-
21(e)(i)(A)(3)(a) to clarify that an investor receives units in the 
municipal fund security.
---------------------------------------------------------------------------

    \18\ 17 CFR 230.482(b)(4).
---------------------------------------------------------------------------

2. Statutory Basis
    Section 15B(b)(2) of the Exchange Act \19\ provides that
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78o-4(b)(2).

    [t]he Board shall propose and adopt rules to effect the purposes 
of this title with respect to transactions in municipal securities 
effected by brokers, dealers, and municipal securities dealers and 
advice provided to or on behalf of municipal entities or obligated 
persons by brokers, dealers, municipal securities dealers, and 
municipal advisors with respect to municipal financial products, the 
issuance of municipal securities, and solicitations of municipal 
entities or obligated persons undertaken by brokers, dealers, 
---------------------------------------------------------------------------
municipal securities dealers, and municipal advisors.

    Section 15B(b)(2)(C) of the Exchange Act \20\ provides that the 
MSRB's rules shall
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78o-4(b)(2)(C).

    be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in municipal securities and 
municipal financial products, to remove impediments to and perfect 
the mechanism of a free and open market in municipal securities and 
municipal financial products, and, in general, to protect investors, 
---------------------------------------------------------------------------
municipal entities, obligated persons, and the public interest.

    The MSRB believes that the proposed rule change is consistent with 
the provisions of Sections 15B(b)(2) \21\ and 15B(b)(2)(C) of the 
Exchange Act \22\ because it would update and modernize the MSRB's 
municipal fund security product advertising rule applicable to dealers. 
The proposed rule change would enhance certain disclosures required by 
the rule to reflect relevant regulatory developments. Those enhanced 
disclosures would protect investors by alerting investors about certain 
risks of investing in investment options that in turn invest in money 
market funds. Further, the proposed rule change would protect investors 
by providing the investor with (i) enhanced out-of-state disclosure 
concerning the potential other benefits that may be offered by 
investing in the 529 college saving plan offered by the investor's or 
the designated beneficiary's home state and (ii) the ability to obtain 
more current performance information through the use of a hyperlink to 
a Web site. By providing investors with enhanced disclosure, an 
investor has more information to evaluate the municipal fund security 
advertisement, which in turn, would help prevent fraudulent acts and 
practices as well as promote just and equitable principles of trade. In 
addition, the enhanced disclosures would facilitate transactions in 
municipal fund securities by eliminating certain discordance between 
the disclosure required by Rule G-21(e) relating to investment options 
that invest in money market funds and the disclosure required by the 
advertising rules applicable to money market funds registered with the 
Commission. By so doing, the Board believes that it would facilitate 
efficient and uniform examination and enforcement by the regulators 
that enforce the Board's rules.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78o-4(b)(2).
    \22\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

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

    Section 15B(b)(2)(C) of the Exchange Act \23\ requires that MSRB 
rules not be designed to impose any burden on competition not necessary 
or appropriate in furtherance of the purposes of the Exchange Act. In 
accordance with the Board's policy on the use of economic analysis,\24\ 
the MSRB has considered the economic impact of the proposed rule 
change--with regard to certain advertisements of municipal fund 
securities that require additional disclosures as related to 529 
college savings plans-- including a comparison to reasonable 
alternative regulatory approaches, relative to the baseline. The MSRB 
does not believe that the proposed rule change would impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Exchange Act.
---------------------------------------------------------------------------

    \23\ Id.
    \24\ Policy on the Use of Economic Analysis in MSRB Rulemaking, 
available at, http://www.msrb.org/About-MSRB/Financial-and-Other-Information/FinancialPolicies/Economic-Analysis-Policy.aspx.
---------------------------------------------------------------------------

    The proposed rule change would enhance those additional disclosures 
as they relate to 529 college savings plans by expanding the disclosure 
about the other state benefits that are available only for investments 
in such state's qualified tuition program. Those other state benefits 
include financial aid, scholarship funds, and protection from 
creditors. The proposed rule change would also harmonize that 
disclosure with disclosure required by the recent amendments made by 
the SEC to Rule 482 under the 1933 Act applicable to certain mutual 
fund advertisements. That disclosure includes disclosure about a money 
market fund's ability to impose a liquidity fee and to temporarily 
suspend redemptions.
    The MSRB does not believe the proposed rule change would create a 
burden on competition, as all municipal fund securities dealers would 
be subject to the additional requirements for disclosures.
    The MSRB believes that the proposed rule change may reduce 
inefficiencies and confusion for dealers via harmonization of MSRB rule 
requirements with comparable SEC requirements on advertising. The MSRB 
believes investors should benefit from better information in the form 
of more consistent and accurate advertising through updated 
requirements for certain municipal fund security advertisements, as 
investors generally value ease of comparison of different financial 
products.

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

    The MSRB received 11 comment letters in response to the Request for 
Comment on the draft amendments to Rule G-21 and new draft Rule G-
40.\25\ Of those comment letters, four comment letters addressed the 
draft amendments to Rule G-21(e).\26\ All four commenters

[[Page 31648]]

supported the draft amendments,\27\ and one commenter suggested that 
the MSRB could easily separate Rule G-21(e) from the rest of Rule G-21, 
if necessary.\28\ Specifically, commenters expressed support for the 
proposed rule change's use of hyperlinks, harmonization of Rule G-21(e) 
with the advertising rules of other financial regulators, and enhanced 
out-of-state disclosure. The MSRB summarizes the comments received 
relating to the proposed rule change in the four comment letters by 
topic below.
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    \25\ See supra note 5.
    \26\ Fidelity, FSI, SIFMA and SI.
    \27\ See, e.g., FSI letter at 2.
    \28\ See SIFMA letter at 8 (``[t]his section can be easily 
separated from the rest of the rule, if necessary'').
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A. Hyperlinks

    Fidelity and SIFMA expressed support for the use of hyperlinks to 
provide more current performance information.\29\ The MSRB appreciates 
Fidelity's and SIFMA's support for the proposed rule change and their 
suggestion concerning the expanded use of hyperlinks. The Board 
anticipates that it will continue to explore the use of hyperlinks in 
other areas of its rule book.
---------------------------------------------------------------------------

    \29\ Specifically, Fidelity stated:
    We fully support these draft amendments and believe that 
hyperlinks are a commonly used method of communication, well 
understood by investors, through which investors can obtain 
additional details on facts that matter to them.
    See Fidelity letter at 3.
    Similarly, SIFMA stated that, ``SIFMA and its members support 
the ability to use hyperlinks in this rule . . . .'' See SIFMA 
letter at 8.
---------------------------------------------------------------------------

B. Harmonization With Other Financial Regulations

    FSI supported the proposed rule change's harmonization with the 
SEC's advertising rules applicable to mutual funds.\30\
---------------------------------------------------------------------------

    \30\ Specifically, FSI stated:
    I. FSI strongly supports efforts to harmonize Rule G-21 with 
other financial regulations
     . . . The Proposed Rule also amends Rule G-21(e) to incorporate 
the provisions included in the SEC's amendments to its registered 
investment company advertising rules. The draft amendments to Rule 
G-21(e) replace the money market mutual fund disclosure required by 
current Rule G-21 with a modified version of the money market mutual 
fund disclosure currently required by SEC rules.
    See FSI letter at 2.
---------------------------------------------------------------------------

C. Out-of-State Disclosure

    SI supported the enhanced out-of-state disclosure. SI commented 
that the ``added detail and clarity'' will enhance the value of 529 
college savings plans for investors and advisors, because the 
disclosure will assist the reader in more fully understanding what the 
other benefits may be of investing in a 529 college savings plan 
offered by the investor's or the designated beneficiary's home 
state.\31\
---------------------------------------------------------------------------

    \31\ SI stated, in part, that:
    Strategic Insight appreciates the higher level of detail and 
clarity by expanding the description of ``other benefits'' to 
include reference to ``such as financial aid, scholarship funds, and 
protection from creditors'' as these are important factors that 
investors often overlook. By expanding the description, 529s will 
also be easier to understand which encourages use of the product. 
Ultimately, the added detail and clarity will enhance the value of 
529s for investors and advisors, as they may not have been able to 
identify what the ``other benefits'' were referencing previously.
     See SI letter.
---------------------------------------------------------------------------

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period of up to 90 days (i) as 
the Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2017-04 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-2017-04. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://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-2017-04 and should be 
submitted on or before July 28, 2017.

    For the Commission, pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2017-14240 Filed 7-6-17; 8:45 am]
 BILLING CODE 8011-01-P