Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to MSRB Rule A-11, on Assessments for Municipal Advisor Professionals, To Amend the Annual Municipal Advisor Professional Fee, 48135-48140 [2017-22262]
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Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices
investors and the marketplace. As noted
above, the Exchange has in place
surveillance procedures relating to
trading in the Shares of the Fund and
may obtain information via ISG from
other exchanges that are members of ISG
or with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition, as noted
above, investors will have ready access
to information regarding the Fund’s
holdings, the PIV, the Disclosed
Portfolio for the Fund, and quotation
and last sale information for the Shares
of the Fund.
Electronic Comments
B. Self-Regulatory Organization’s
Statement on Burden on Competition
All submissions should refer to File
Number SR–NYSEArca–2017–87. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the 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–2017–87 and should be
submitted on or before November 6,
2017.
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of an
additional type of actively-managed
exchange-traded product that holds
fixed income securities, equity
securities and derivatives and that will
enhance competition among market
participants, to the benefit of investors
and the marketplace.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
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
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2017–87 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–22263 Filed 10–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81841; File No. SR–MSRB–
2017–07]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change to MSRB Rule A–11, on
Assessments for Municipal Advisor
Professionals, To Amend the Annual
Municipal Advisor Professional Fee
October 10, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 notice is hereby
given that on September 29, 2017 the
Municipal Securities Rulemaking Board
(‘‘MSRB’’ or ‘‘Board’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) 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 A–11, on assessments for
municipal advisor professionals, to
increase the annual municipal advisor
professional fee from $300 to $500 and
make other technical changes (the
‘‘proposed rule change’’). The MSRB has
designated the proposed rule change for
immediate effectiveness. The MSRB will
send the first invoice at the new fee
level to firms in April 2018 for payment
by April 30, 2018.
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
1 15
29 17
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices
in Item IV below. The MSRB has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to increase the existing annual
municipal advisor professional fee
assessment to help defray the costs and
expenses of operating and administering
the MSRB, particularly the MSRB’s
regulatory and related activities in
connection with municipal advisors. In
the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010
(‘‘Dodd-Frank Act’’),3 Congress charged
the Commission and the MSRB with the
regulation of municipal advisors and
specifically granted the MSRB authority
to charge municipal advisors reasonable
fees to defray the costs of the operation
of the MSRB.4 In its exercise of
authority granted by Congress, the
MSRB has since developed a
comprehensive regulatory framework
for municipal advisors.5 To help defray
the costs of this and related activities, in
2014, the MSRB adopted Rule A–11, on
assessments for municipal advisor
professionals.
Pursuant to Rule A–11, each
municipal advisor firm that is registered
3 Public
Law No. 111–203, 124 Stat. 1376 (2010).
15 U.S.C. 78o–4(b)(2)(J).
5 In furtherance of this framework, the MSRB
developed a professional qualification exam,
adopted new rules for municipal advisors and
extended existing rules to municipal advisors that
previously applied only to brokers, dealers and
municipal securities dealers (collectively,
‘‘dealers.’’) These include, but are not limited to:
Rule G–44 regarding the supervisory and
compliance obligations of municipal advisors, see
Release No. 34–73415 (October 23, 2014), 79 FR
64423 (October 29, 2014) (File No. SR–MSRB–
2014–06) (SEC order approving Rule G–44); Rule G–
42 regarding the duties of non-solicitor municipal
advisors, see Release No. 34–76753 (December 23,
2015), 80 FR 81614 (December 30, 2015) (File No.
SR–MSRB–2015–03) (SEC order approving Rule G–
42); amendments to Rule G–20, on gifts, gratuities
and non-cash compensation, to extend provisions of
the rule to municipal advisors, see Release No. 34–
76381 (November 6, 2015), 80 FR 70271 (November
13, 2015) (File No. SR–MSRB–2015–09) (SEC order
approving amendments to Rule G–20); amendments
to Rule G–37, on political contributions and
prohibitions on municipal securities business, to
extend its provisions to municipal advisors, see
Release No. 34–76763 (December 23, 2015), 80 FR
81710 (December 30, 2015) (File No. SR–MSRB–
2015–14) (Notice of filing of proposed amendments
to Rule G–37); and amendments to Rule G–3 to
establish registration and professional qualification
requirements for municipal advisors, see Release
No. 34–74384 (February 26, 2015), 80 FR 11706
(March 4, 2015) (File No. SR–MSRB–2014–08) (SEC
order approving registration and professional
qualification requirements for municipal advisor
representatives and municipal advisor principals).
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4 See
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with the Commission is required to pay
to the Board a recurring annual fee
equal to $300 for each Form MA–I filed
with the Commission by such municipal
advisor as of January 31 of each year.
Rule A–11 also provides for late fees on
assessments that are not paid in full,
and includes a transitional provision
that, at the time of Rule A–11’s
adoption, was necessary to take into
account the timing of the phased-in
compliance period for the SEC’s
permanent municipal advisor
registration process.
The proposed rule change would
amend Rule A–11(a) to provide that
each municipal advisor that is registered
with the Commission shall pay to the
Board a recurring annual fee, equal to
$500 for each person associated with the
municipal advisor who is qualified as a
municipal advisor representative in
accordance with Rule G–3 and for
whom the municipal advisor has on file
with the Commission a Form MA–I as
of January 31 of each year (‘‘covered
persons’’).6 Amended Rule A–11(a)
would increase the amount of the
current assessment from $300 to $500
and delete a now-outdated reference to
the fiscal year for which the annual
municipal advisor professional fee first
became due. In addition, a minor
amendment to section (a) would help
streamline the rule by deleting the
unnecessary clause ‘‘and shall be
payable’’ from the final sentence in that
section. Lastly, amendments to Rule A–
11(a) would provide that the assessment
payable would be determined based on
the number of Form MA-Is on file with
the Commission (as it is currently
determined) and based on the number of
associated persons qualified as a
municipal advisor representative in
accordance with Rule G–3. A person is
qualified as a municipal advisor
representative in accordance with Rule
G–3(d) when such person has taken and
passed the Municipal Advisor
Representative Qualification
Examination (the ‘‘Series 50 exam’’).7
6 While the MSRB has designated the proposed
rule change for immediate effectiveness, by its
terms, the assessment at the $500 per covered
person rate would be based on covered persons as
of January 31 of each year. As noted above, the
MSRB will send the first invoice at the new fee
level (measured as of January 31, 2018) to firms in
April 2018 for payment by April 30, 2018.
7 As of September 12, 2017, only an associated
person of a municipal advisor firm who has passed
the Series 50 exam may engage in municipal
advisory activities on behalf of the municipal
advisor firm. Additionally, municipal advisor
principals must likewise qualify as a municipal
advisor representative by passing the Series 50
exam. See MSRB Notice 2017–09, MSRB Reminds
Municipal Advisors that the Series 50 Exam
Deadline is September 12, 2017 (May 8, 2017).
Because all municipal advisor principals must also
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An amendment to Rule A–11(b)
would provide that a municipal advisor
that fails to timely pay in full ‘‘the total’’
annual municipal advisor professional
fee due under section (a) shall pay a
monthly late fee equal to $25 for such
failure, while another amendment
would delete the reference to the
monthly fee being payable ‘‘for each
$300 assessment not paid in full.’’
Together, these amendments to section
(b) are intended to make clear that a
separate $25 monthly late fee would not
be due for each covered person for
which the $300 fee was not timely paid.
Rather, a municipal advisor firm would
be required to pay only one $25
monthly late fee (regardless of the
number of its covered persons for which
the per professional fee was not timely
paid) if it fails timely to pay in full the
total fee due under section (a).8 Finally,
the proposed rule change would delete
Rule A–11(c) because that provision
pertains to a transitional municipal
advisor professional fee that no longer
has application. A related minor
technical amendment to Rule A–11(b)
would delete a reference to Rule A–
11(c).
The MSRB believes that the proposed
fee increase reflected in the proposed
amendments to Rule A–11(a) is
reasonable as well as necessary and
appropriate to help defray the costs of
operating and administering the MSRB.
It is also a step towards achieving the
MSRB’s strategic goal of promoting
long-term financial stability by assessing
fair and equitable fees, and diversifying
funding sources. The MSRB believes the
proposed rule change will help the
organization provide for assessments
that are increasingly more fairly and
equitably apportioned among all
registrants. The MSRB notes that,
consistent with the Board’s longstanding prohibition on charging or
otherwise passing through to issuers the
fees required under Rule A–13,9
municipal advisors similarly would be
prohibited from charging or otherwise
passing through the fees required under
Rule A–11 to issuers.
qualify as a municipal advisor representative, the
$500 assessment would equally apply to municipal
advisor principals.
8 This late fee would be in addition to a late fee
on the total overdue balance based on the Prime
Rate.
9 See Release No. 34–81264 (July 31, 2017), 82 FR
36472, n. 18 (August 4, 2017) (File No. SR–MSRB–
2017–05) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Assess
an Underwriting Fee on Dealers That Are
Underwriters of Primary Offerings of Plans).
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Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices
The Board’s Holistic Review of MSRB
Fees
The MSRB assesses dealers and
municipal advisors (collectively,
‘‘regulated entities’’) various fees
designed to defray the costs of its
operations and administration,
including rulemaking, market
transparency, and educational and
market outreach initiatives that fulfill its
Congressional mandate to, among other
things, protect investors, state and local
governments and other municipal
entities, obligated persons and the
public interest and promote a fair and
efficient municipal securities market.10
Section 15B(b)(2)(J) of the Act 11
provides, in pertinent part, that each
regulated entity shall pay to the Board
such reasonable fees and charges as may
be necessary or appropriate to defray the
costs of operating and administering the
Board, and that the MSRB shall have
rules specifying the amount of such
fees. The current fees so specified by
MSRB rules are:
1. Municipal Advisor Professional Fee
(Rule A–11)
$300 annually per Form MA–I on file
with the SEC by the municipal advisor;
2. Late Fee (Rules A–11 and A–12)
$25 monthly late fee and a late fee on
the overdue balance (computed
according to the prime rate) until paid
on balances not paid within 30 days of
the invoice date by the dealer or
municipal advisor;
3. Initial Registration Fee (Rule A–12)
$1,000 one-time registration fee to be
paid by each dealer to register with the
MSRB before engaging in municipal
securities activities and by each
municipal advisor to register with the
MSRB before engaging in municipal
advisory activities;
4. Annual Registration Fee (Rule A–12)
$1,000 annual fee to be paid by each
dealer and municipal advisor registered
with the MSRB;
offering, except in limited
circumstances; and in the case of an
underwriter (as defined in Rule G–45) of
a primary offering of certain municipal
fund securities, $.005 per $1,000 of the
total aggregate assets for the reporting
period; 12
6. Transaction Fee (Rule A–13)
.001% ($.01 per $1,000) of the total
par value to be paid by a dealer, except
in limited circumstances, for interdealer sales and customer sales reported
to the MSRB pursuant to Rule G–14(b),
on transaction reporting requirements;
7. Technology Fee (Rule A–13)
$1.00 paid by a dealer per transaction
for each inter-dealer sale and for each
sale to customers reported to the MSRB
pursuant to Rule G–14(b); and
8. Professional Qualification
Examination Fee (Rule A–16)
$150 test development fee assessed
per candidate for each MSRB
professional qualification
examination.13
Initiated in 2015, the Board’s holistic
review of fees that the Board assesses on
regulated entities continues. The Board
evaluates those fees with the goal of
better aligning revenue sources with
operating expenses and all capital
needs. The Board strives to diversify
funding sources among regulated
entities and other entities that fund
MSRB activities in a manner that
ensures long-term sustainability, while
continuing to strike an equitable balance
among regulated entities and a fair
allocation of the expenses of the
regulatory activities, systems
development and operational activities
undertaken by the MSRB. In
determining the fair allocation of the
cost of MSRB regulation to regulated
entities, the Board considers, among
other things: Registration to engage in
municipal securities or municipal
advisory activities; the level of dealer
market activity; and the number of
associated persons engaged in
municipal advisory activities on behalf
5. Underwriting Fee (Rule A–13)
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$.0275 per $1,000 of the par value
paid by a dealer, on all municipal
securities purchased from an issuer by
or through such dealer, whether acting
as principal or agent as part of a primary
10 See Section 15B(b)(2) of the Act (15 U.S.C. 78o–
4(b)(2)) (in relevant part, requiring the Board to
propose and adopt rules for 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).
11 15 U.S.C. 78o–4(b)(2)(J).
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12 Beginning in May 2018, the Board will invoice
underwriters of a primary offering of certain
municipal fund securities for the assessments due.
See Release No. 34–81264 (July 31, 2017), 82 FR
36472 (August 4, 2017) (File No. SR–MSRB–2017–
05) (Notice of Filing and Immediate Effectiveness of
a Proposed Rule Change to Assess an Underwriting
Fee on Dealers That Are Underwriters of Primary
Offerings of Plans).
13 In addition, the MSRB charges data
subscription and service fees for subscribers,
including regulated entities, seeking direct
electronic delivery of municipal trade data and
disclosure documents associated with municipal
bond issues. However, this information is available
without direct electronic delivery on the EMMA
Web site without charge.
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48137
of a municipal advisor. Recognizing that
in any given year there could be more
or less activity by a particular class of
regulated entities, the Board, as it has
historically, seeks to maintain a fee
structure that results in a balanced and
reasonable contribution over time from
all regulated entities to defray costs and
expenses of operating and administering
the MSRB.
As part of the Board’s ongoing review
and examination of fees, the Board
reviewed the amount of the $300 per
professional fee charged under Rule A–
11. This fee was originally established
in 2014 as a reasonable initial starting
amount to help defray the costs and
expenses of operating and administering
the MSRB, particularly the MSRB’s
regulatory and related activities in
connection with municipal advisors.14
These regulatory activities include the
development and implementation of a
comprehensive regulatory framework
for municipal advisors, including: The
extension to municipal advisors of rules
that previously only applied to dealers
on the subject of fair dealing and
specified forms of conflicts of interest; 15
the adoption of new rules for municipal
advisors that establish the core
standards of conduct for non-solicitor
municipal advisors and that establish
supervisory and compliance obligations
for municipal advisor firms; 16 the
creation of new municipal advisor
recordkeeping requirements and
municipal advisory client education and
protection provisions; 17 and the
development and implementation of
professional standards for municipal
advisors to help ensure that all
14 See Release No. 34–72019 (April 25, 2014), 79
FR 24798, 24798 (May 1, 2014) (File No. SR–
MSRB–2014–03) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change Consisting
of New Rule A–11, on Assessments for Municipal
Advisor Professionals); see also MSRB Notice 2014–
09, MSRB to Implement New MSRB Rule A–11
Establishing Fees for Municipal Advisor
Professionals (April 17, 2014).
15 See Rule G–17, Conduct of Municipal
Securities and Municipal Advisory Activities; Rule
G–20, Gifts Gratuities, Non-Cash Compensation and
Expenses of Issuance; and Rule G–37, Political
Contributions and Prohibitions on Municipal
Securities Business and Municipal Advisory
Business available at https://msrb.org/Rules-andInterpretations/MSRB-Rules.aspx.
16 See Rule G–42, Duties of Non-Solicitor
Municipal Advisors; Rule G–44, Supervisory and
Compliance Obligations of Municipal Advisors
available at https://msrb.org/Rules-andInterpretations/MSRB-Rules.aspx.
17 See Rule G–8, Books and Records to be Made
by Brokers, Dealers, and Municipal Securities
Dealers and Municipal Advisors; and Rule G–10,
Investor and Municipal Advisory Client Education
and Protection available at https://msrb.org/Rulesand-Interpretations/MSRB-Rules.aspx. Effective
October 13, 2017, current Rule G–10, Delivery of
Investor Brochure, will be replaced in its entirety
by new Rule G–10.
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Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices
municipal advisors are competent and
qualified.18 As part of the
implementation of this latter category of
rules, the MSRB also established the
Series 50 exam, a baseline test of a
municipal advisor’s competency and
knowledge of applicable rules.
To assist municipal advisors in
understanding and complying with this
new regulatory framework, the MSRB
has undertaken considerable education,
outreach and compliance activities.
These include, but are not limited to:
The creation of educational documents,
resources and compliance-oriented
notices and communications; 19 the
development of educational webinars
and the organization of, and
participation in, outreach events; 20 and
the launch of an expanded on-demand
education program, MuniEdPro®, which
was designed, in part, to serve the
education needs of regulated entities.
Looking forward to Fiscal Year 2018,
the MSRB expects to continue its many
activities relating to municipal advisors,
including its significant education,
outreach and compliance initiatives.
The MSRB will also be developing a
new municipal advisor principal-level
professional qualification
examination—the Series 54—for
anticipated availability as a pilot in
2019.21
In an August 2015 fee filing
associated with the Board’s holistic
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18 See
Rule G–2, Standards of Professional
Qualification; and Rule G–3, Professional
Qualification Requirements available at https://
msrb.org/Rules-and-Interpretations/MSRBRules.aspx.
19 For example, the MSRB supports regulatory
compliance by municipal advisors by providing
resources about MSRB requirements, as well as
more general educational material. Municipal
advisors may access these resources and others,
including the Municipal Advisor Review, the
MSRB’s quarterly newsletter for municipal advisors
at https://www.msrb.org/Regulated-Entities/
Resources.aspx. In addition, the MSRB has
published several regulatory notices for municipal
advisors to help keep market participants informed
of regulatory changes and to provide guidance on
the application of existing rules. See e.g., MSRB
Notice 2017–08, Application of MSRB Rules to
Solicitor Municipal Advisors (May 4, 2017); MSRB
Notice 2017–13, MSRB Provides Guidance on
Duties of Non-Solicitor Municipal Advisors in
Conduit Financing Scenarios (July 13, 2017).
20 For example, the MSRB provides free
education and training webinars on municipal
market topics, regulatory and compliance issues,
and the use of MSRB market transparency systems.
Municipal advisors may register for new webinars
and access on-demand webinars, including some
webinars that provide CPE credit at https://
www.msrb.org/Regulated-Entities/Webinars.aspx.
21 Once the Series 54 exam is permanently
available, municipal advisor principals will be
required to take the Series 54 exam in addition to
the Series 50 exam. See FAQs on Municipal
Advisor Professional Qualification and Examination
Requirements, at n. 1 available at https://
www.msrb.org/msrb1/pdfs/FAQ-MSRB-Series-50Exam.pdf.
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16:59 Oct 13, 2017
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review of fees,22 the MSRB explained
that, at that time, it was not modifying
the $300 municipal advisor per
professional fee to provide municipal
advisors with additional time for the
municipal advisor regulations and
business models to more fully develop.
However, the MSRB explained that the
targeted revenue to be generated from
the municipal advisor professional fee
of approximately $2 million at that time,
or approximately 5% of total MSRB
revenues, was not yet being met and the
per professional fee would need to be
increased in the future. The proposed
rule change is the next step towards
moving closer to that revenue target.23
2. Statutory Basis
The MSRB believes that the proposed
rule change is consistent with Section
15B(b)(2)(J) of the Act 24 which states
that the MSRB’s rules shall:
provide that each municipal securities
broker, municipal securities dealer, and
municipal advisor shall pay to the Board
such reasonable fees and charges as may be
necessary or appropriate to defray the costs
and expenses of operating and administering
the Board. Such rules shall specify the
amount of such fees and charges, which may
include charges for failure to submit to the
Board, or to any information system operated
by the Board, within the prescribed
timeframes, any items of information or
documents required to be submitted under
any rule issued by the Board.
The MSRB believes that its rules, as
amended by the proposed rule change,
provide for reasonable dues, fees, and
other charges among regulated entities.
The MSRB believes that the proposed
rule change is necessary and
appropriate to fund the operation and
administration of the Board and satisfies
the requirements of Section
15B(b)(2)(J).25 The MSRB believes the
proposed rule change is necessary
because it will help defray the costs of
the Board’s significant rulemaking,
market transparency, educational and
market outreach initiatives, market
leadership, professional qualifications
22 See Release No. 34–75751 (August 24, 2015),
80 FR 52352, 52355 (August 28, 2015) (File No. SR–
MSRB–2015–08) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change Consisting
of Amendments to MSRB Rule A–12, on
Registration, and MSRB Rule A–13, on
Underwriting and Transaction Assessments for
Brokers, Dealers and Municipal Securities Dealers).
23 The MSRB expects that the municipal advisor
professional fee, at the dollar amount set forth in
the proposed rule change, would generate
approximately 4% of the MSRB’s Fiscal Year 2018
revenue. The MSRB will release and make publicly
available its budget for Fiscal Year 2018 in October
2017. See MSRB Monthly Update (September 2017)
available at https://content.govdelivery.com/
accounts/VAORGMSRB/bulletins/1b497b6.
24 15 U.S.C. 78o–4(b)(2)(J).
25 Id.
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examination development and other
activities relating to municipal advisors.
As discussed above, the MSRB has
engaged in significant rulemaking to put
into place a regulatory framework for
municipal advisors and has engaged in
considerable activities to assist
municipal advisors in understanding
their obligations and comply with the
applicable rules. In addition, because
the MSRB does not have any
examination or enforcement authority,
the MSRB has enhanced its
coordination with the regulatory
authorities charged with the authority to
examine for compliance with and
enforce MSRB rules. The MSRB
frequently provides rule interpretations,
training related to the market and MSRB
rules, and access to municipal market
information in support of the municipal
advisor examination and enforcement
activities of these regulatory authorities.
The MSRB expects to continue its many
activities relating to municipal advisors,
with a focus on education, outreach and
compliance. In addition, as noted above,
the MSRB will be working to develop
the Series 54 professional qualification
exam. The proposed rule change will
assist in defraying some of the costs
associated with these activities and will
help ensure the MSRB is funding these
regulatory activities in a financially
responsible way.
The MSRB believes the proposed rule
change is appropriate because it moves
towards a more equitable balance of fees
among regulated entities and hence a
fairer allocation of the expenses of the
regulatory activities, systems
development, and operational activities
undertaken by the MSRB. However,
even with the fee increase in the
proposed rule change, the proposed fees
would only defray a small portion of the
MSRB’s overall costs of operating and
administering the MSRB—generating
approximately 4% of Fiscal Year 2018
revenue.26
MSRB operations are funded
primarily by assessments and fees on
regulated entities. In fact, 80% of the
Fiscal Year 2018 budgeted revenue is
based on market activity (that is,
municipal securities trading and
underwriting volume). Due to the
accumulated historical variances
between actual and budgeted revenue,
the MSRB has excess reserves. This is
largely due to the MSRB’s appropriately
conservative approach to budgeting
revenues that are primarily marketbased and inherently volatile. While the
MSRB’s current reserve levels exceed
targets, the MSRB budget for Fiscal Year
2018 has a deficit, as do the pro forma
26 See
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budgets for Fiscal Years 2019 through
2020. The MSRB anticipates that in the
future, based on assumptions reviewed
and agreed upon by the MSRB, excess
reserves will be eroded by Fiscal Year
2020 (even with the increased
municipal advisor professional fee and
new underwriting fee on underwriters
of 529 college savings plans). Further,
the MSRB’s budget for Fiscal Year 2018
anticipates that the MSRB will
strategically spend some of its reserves.
Finally, the MSRB believes, as a matter
of principle, that it is inherently unfair
to allow certain regulated entities to pay
a disproportionate share of the cost of
operating the MSRB. The MSRB
therefore regularly evaluates fees and
adjusts them, as needed, to ensure that
all regulated entities that benefit from
functioning in a fair, efficient and
transparent market pay their fair share.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Section 15B(b)(2)(C) of the Act 27
requires that MSRB rules not be
designed to impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. In addition, Section
15B(b)(2)(L)(iv) of the Act 28 provides
that MSRB rules ‘‘not impose a
regulatory burden on small municipal
advisors that is not necessary or
appropriate in the public interest and
for the protection of investors,
municipal entities, and obligated
persons, provided that there is robust
protection of investors against fraud.’’
The Board’s policy on the use of
economic analysis in rulemaking 29
limits its application regarding those
rules for which the Board seeks
immediate effectiveness. However, an
internal analysis is still conducted to
gauge the economic impact, with an
emphasis on the burden on competition
involving regulated entities. Guided by
these aspects of the policy, the Board
has reviewed the proposed rule change.
27 15
U.S.C. 78o–4(b)(2)(C).
U.S.C. 78o–4(b)(2)(L)(iv).
29 The scope of the Board’s policy on the use of
economic analysis in rulemaking provides that:
[t]his Policy addresses rulemaking activities of the
MSRB that culminate, or are expected to culminate,
in a filing of a proposed rule change with the SEC
under Section 19(b) of the Exchange Act, other than
a proposed rule change that the MSRB reasonably
believes would qualify for immediate effectiveness
under Section 19(b)(3)(A) of the Exchange Act if
filed as such or as otherwise provided under the
exception process of this Policy.
Policy on the Use of Economic Analysis in MSRB
Rulemaking, available at https://msrb.org/Rules-andInterpretations/Economic-Analysis-Policy.aspx. For
those rule changes for which the MSRB seeks
immediate effectiveness, the MSRB usually focuses
its examination exclusively on the burden on
competition of regulated entities.
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The Board believes the proposed rule
change is necessary and appropriate to
ensure that MSRB registrants that are
municipal advisors equitably contribute
to defraying the costs and expenses of
operating and administering the MSRB.
The MSRB has considered the economic
impact of the proposed rule change. The
MSRB does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act since it will
apply equally to all municipal advisors
based on the number of persons
qualified as municipal advisor
representatives associated with the
municipal advisor and the number of
Forms MA–I filed by each firm.
The MSRB believes the current fee
structure is fair and equitable among
municipal advisors of differing size. The
existing per firm annual fee ($1,000)
helps cover the fixed costs of regulating
any firm, regardless of size; while the
existing annual professional fee
assessment results in smaller municipal
advisors paying less than larger
municipal advisors. The proposed fee
increase will further expand the current
spread paid between large versus small
firms. The MSRB notes that other selfregulatory organizations and
independent oversight and rulemaking
boards, such as the Financial Industry
Regulatory Authority (‘‘FINRA’’), the
Public Company Accounting Oversight
Board (‘‘PCAOB’’), National Futures
Association (‘‘NFA’’) and the Financial
Accounting Standards Board (‘‘FASB’’),
all have some annual fee assessment
structure that is based on the size of
firms under regulation.30
The MSRB believes that the fee
increase will not impose an unnecessary
or inappropriate regulatory burden on
small municipal advisors. The total
amount of the assessment payable by
each municipal advisor will be
dependent on the number qualified
associated persons for whom Forms
MA–I are filed by the municipal
advisor 31 and, therefore, will result in
30 For
example, FINRA’s annual registration fee
and new member application fee assessments for
broker-dealers are based on the number of branch
offices and the number of registered persons, the
PCAOB’s annual fee assessment is based on the
number of issuer audit clients and the number of
personnel within each public accounting firm,
NFA’s annual member dues for swap dealers and
Forex dealers are based on the tier size of member
firms, and FASB’s accounting support fees are
allocated based on the average market capitalization
of each issuer.
31 The MSRB understands that the Form MA–I on
file should be withdrawn for any person who fails
to qualify as a municipal advisor representative in
accordance with Rule G–3. See Registration of
Municipal Advisors Frequently Asked Questions at
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48139
lower relative assessments for smaller
firms. Being based on the number of
persons engaging in municipal advisory
activities on behalf of a firm, the total
fee will bear a reasonable relationship to
the level of regulated municipal
advisory activities that are undertaken
by each firm.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Board did not solicit comment on
the proposed change. Therefore, there
are no comments on the proposed rule
change received from members,
participants or others.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change
has become effective pursuant to
Section 19(b)(3)(A) of the Act 32 and
paragraph (f) of Rule 19b–4
thereunder.33 At any time within 60
days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MSRB–2017–07 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–2017–07. 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
Question 16.1, available at https://www.sec.gov/
info/municipal/mun-advisors-faqs.shtml.
32 15 U.S.C. 78s(b)(3)(A).
33 17 CFR 240.19b–4(f).
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Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the MSRB. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–MSRB–
2017–07 and should be submitted on or
before November 6, 2017.
notice to solicit comments on the
proposed rule change from interested
persons.
For the Commission, pursuant to delegated
authority.34
Eduardo A. Aleman,
Assistant Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2017–22262 Filed 10–13–17; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81844; File No. SR–
PEARL–2017–34]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Fee Schedule
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October 10, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 29, 2017, MIAX PEARL, LLC
(‘‘MIAX PEARL’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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16:59 Oct 13, 2017
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The Exchange is filing a proposal to
amend the MIAX PEARL Fee Schedule
(the ‘‘Fee Schedule’’).
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’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
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1. Purpose
BILLING CODE 8011–01–P
34 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Add/Remove Tiered Rebates/Fees set
forth in Section 1(a) of the Fee Schedule
to increase the ‘‘Taker’’ fee in all Tiers
assessable to all orders submitted by a
Member for the account of a Priority
Customer.3 The Exchange also proposes
to make a number of non-substantive
changes to its routing fee table set forth
Section 1(b) of the Fee Schedule to
reflect recent corporate name changes to
some of the options exchanges listed in
the table.
Taker Fee Changes
The Exchange currently assesses
tiered transaction rebates and fees to all
market participants which are based
upon the total monthly volume
executed by the Member 4 on MIAX
3 ‘‘Priority Customer’’ means a person or entity
that (i) is not a broker or dealer in securities, and
(ii) does not place more than 390 orders in listed
options per day on average during a calendar month
for its own beneficial accounts(s). See Exchange
Rule 100, including Interpretations and Policies .01.
4 ‘‘Member’’ means an individual or organization
that is registered with the Exchange pursuant to
Chapter II of the Exchange Rules for purposes of
trading on the Exchange as an ‘‘Electronic Exchange
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Fmt 4703
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PEARL in the relevant, respective origin
type (not including Excluded
Contracts) 5 expressed as a percentage of
TCV.6 In addition, the per contract
transaction rebates and fees are applied
retroactively to all eligible volume for
that origin type once the respective
threshold tier (‘‘Tier’’) has been reached
by the Member. The Exchange
aggregates the volume of Members and
their Affiliates.7 Members that place
resting liquidity, i.e., orders resting on
the book of the MIAX PEARL System,8
are paid the specified ‘‘maker’’ rebate
(each a ‘‘Maker’’), and Members that
execute against resting liquidity are
Member’’ or ‘‘Market Maker.’’ Members are deemed
‘‘members’’ under the Exchange Act. See the
Definitions Section of the Fee Schedule and
Exchange Rule 100.
5 ‘‘Excluded Contracts’’ means any contracts
routed to an away market for execution. See the
Definitions Section of the Fee Schedule.
6 ‘‘TCV’’ means total consolidated volume
calculated as the total national volume in those
classes listed on MIAX PEARL for the month for
which the fees apply, excluding consolidated
volume executed during the period time [sic] in
which the Exchange experiences an ‘‘Exchange
System Disruption’’ (solely in the option classes of
the affected Matching Engine (as defined below)).
The term Exchange System Disruption, which is
defined in the Definitions section of the Fee
Schedule, means an outage of a Matching Engine or
collective Matching Engines for a period of two
consecutive hours or more, during trading hours.
The term Matching Engine, which is also defined
in the Definitions section of the Fee Schedule, is a
part of the MIAX PEARL electronic system that
processes options orders and trades on a symbolby-symbol basis. Some Matching Engines will
process option classes with multiple root symbols,
and other Matching Engines may be dedicated to
one single option root symbol (for example, options
on SPY may be processed by one single Matching
Engine that is dedicated only to SPY). A particular
root symbol may only be assigned to a single
designated Matching Engine. A particular root
symbol may not be assigned to multiple Matching
Engines. The Exchange believes that it is reasonable
and appropriate to select two consecutive hours as
the amount of time necessary to constitute an
Exchange System Disruption, as two hours equates
to approximately 1.4% of available trading time per
month. The Exchange notes that the term
‘‘Exchange System Disruption’’ and its meaning
have no applicability outside of the Fee Schedule,
as it is used solely for purposes of calculating
volume for the threshold tiers in the Fee Schedule.
See the Definitions Section of the Fee Schedule.
7 ‘‘Affiliate’’ means (i) an affiliate of a Member of
at least 75% common ownership between the firms
as reflected on each firm’s Form BD, Schedule A,
or (ii) the Appointed Market Maker of an Appointed
EEM (or, conversely, the Appointed EEM of an
Appointed Market Maker). An ‘‘Appointed Market
Maker’’ is a MIAX PEARL Market Maker (who does
not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has
been appointed by an EEM and an ‘‘Appointed
EEM’’ is an EEM (who does not otherwise have a
corporate affiliation based upon common
ownership with a MIAX PEARL Market Maker) that
has been appointed by a MIAX PEARL Market
Maker, pursuant to the process described in the Fee
Schedule. See the Definitions Section of the Fee
Schedule.
8 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
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]]>Agencies
[Federal Register Volume 82, Number 198 (Monday, October 16, 2017)]
[Notices]
[Pages 48135-48140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22262]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81841; File No. SR-MSRB-2017-07]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change to MSRB Rule A-11, on Assessments for Municipal Advisor
Professionals, To Amend the Annual Municipal Advisor Professional Fee
October 10, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on September 29, 2017 the Municipal
Securities Rulemaking Board (``MSRB'' or ``Board'') filed with the
Securities and Exchange Commission (``Commission'' or ``SEC'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the MSRB. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB filed with the Commission a proposed rule change to amend
MSRB Rule A-11, on assessments for municipal advisor professionals, to
increase the annual municipal advisor professional fee from $300 to
$500 and make other technical changes (the ``proposed rule change'').
The MSRB has designated the proposed rule change for immediate
effectiveness. The MSRB will send the first invoice at the new fee
level to firms in April 2018 for payment by April 30, 2018.
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
[[Page 48136]]
in Item IV below. The MSRB has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to increase the existing
annual municipal advisor professional fee assessment to help defray the
costs and expenses of operating and administering the MSRB,
particularly the MSRB's regulatory and related activities in connection
with municipal advisors. In the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (``Dodd-Frank Act''),\3\ Congress
charged the Commission and the MSRB with the regulation of municipal
advisors and specifically granted the MSRB authority to charge
municipal advisors reasonable fees to defray the costs of the operation
of the MSRB.\4\ In its exercise of authority granted by Congress, the
MSRB has since developed a comprehensive regulatory framework for
municipal advisors.\5\ To help defray the costs of this and related
activities, in 2014, the MSRB adopted Rule A-11, on assessments for
municipal advisor professionals.
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\3\ Public Law No. 111-203, 124 Stat. 1376 (2010).
\4\ See 15 U.S.C. 78o-4(b)(2)(J).
\5\ In furtherance of this framework, the MSRB developed a
professional qualification exam, adopted new rules for municipal
advisors and extended existing rules to municipal advisors that
previously applied only to brokers, dealers and municipal securities
dealers (collectively, ``dealers.'') These include, but are not
limited to: Rule G-44 regarding the supervisory and compliance
obligations of municipal advisors, see Release No. 34-73415 (October
23, 2014), 79 FR 64423 (October 29, 2014) (File No. SR-MSRB-2014-06)
(SEC order approving Rule G-44); Rule G-42 regarding the duties of
non-solicitor municipal advisors, see Release No. 34-76753 (December
23, 2015), 80 FR 81614 (December 30, 2015) (File No. SR-MSRB-2015-
03) (SEC order approving Rule G-42); amendments to Rule G-20, on
gifts, gratuities and non-cash compensation, to extend provisions of
the rule to municipal advisors, see Release No. 34-76381 (November
6, 2015), 80 FR 70271 (November 13, 2015) (File No. SR-MSRB-2015-09)
(SEC order approving amendments to Rule G-20); amendments to Rule G-
37, on political contributions and prohibitions on municipal
securities business, to extend its provisions to municipal advisors,
see Release No. 34-76763 (December 23, 2015), 80 FR 81710 (December
30, 2015) (File No. SR-MSRB-2015-14) (Notice of filing of proposed
amendments to Rule G-37); and amendments to Rule G-3 to establish
registration and professional qualification requirements for
municipal advisors, see Release No. 34-74384 (February 26, 2015), 80
FR 11706 (March 4, 2015) (File No. SR-MSRB-2014-08) (SEC order
approving registration and professional qualification requirements
for municipal advisor representatives and municipal advisor
principals).
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Pursuant to Rule A-11, each municipal advisor firm that is
registered with the Commission is required to pay to the Board a
recurring annual fee equal to $300 for each Form MA-I filed with the
Commission by such municipal advisor as of January 31 of each year.
Rule A-11 also provides for late fees on assessments that are not paid
in full, and includes a transitional provision that, at the time of
Rule A-11's adoption, was necessary to take into account the timing of
the phased-in compliance period for the SEC's permanent municipal
advisor registration process.
The proposed rule change would amend Rule A-11(a) to provide that
each municipal advisor that is registered with the Commission shall pay
to the Board a recurring annual fee, equal to $500 for each person
associated with the municipal advisor who is qualified as a municipal
advisor representative in accordance with Rule G-3 and for whom the
municipal advisor has on file with the Commission a Form MA-I as of
January 31 of each year (``covered persons'').\6\ Amended Rule A-11(a)
would increase the amount of the current assessment from $300 to $500
and delete a now-outdated reference to the fiscal year for which the
annual municipal advisor professional fee first became due. In
addition, a minor amendment to section (a) would help streamline the
rule by deleting the unnecessary clause ``and shall be payable'' from
the final sentence in that section. Lastly, amendments to Rule A-11(a)
would provide that the assessment payable would be determined based on
the number of Form MA-Is on file with the Commission (as it is
currently determined) and based on the number of associated persons
qualified as a municipal advisor representative in accordance with Rule
G-3. A person is qualified as a municipal advisor representative in
accordance with Rule G-3(d) when such person has taken and passed the
Municipal Advisor Representative Qualification Examination (the
``Series 50 exam'').\7\
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\6\ While the MSRB has designated the proposed rule change for
immediate effectiveness, by its terms, the assessment at the $500
per covered person rate would be based on covered persons as of
January 31 of each year. As noted above, the MSRB will send the
first invoice at the new fee level (measured as of January 31, 2018)
to firms in April 2018 for payment by April 30, 2018.
\7\ As of September 12, 2017, only an associated person of a
municipal advisor firm who has passed the Series 50 exam may engage
in municipal advisory activities on behalf of the municipal advisor
firm. Additionally, municipal advisor principals must likewise
qualify as a municipal advisor representative by passing the Series
50 exam. See MSRB Notice 2017-09, MSRB Reminds Municipal Advisors
that the Series 50 Exam Deadline is September 12, 2017 (May 8,
2017). Because all municipal advisor principals must also qualify as
a municipal advisor representative, the $500 assessment would
equally apply to municipal advisor principals.
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An amendment to Rule A-11(b) would provide that a municipal advisor
that fails to timely pay in full ``the total'' annual municipal advisor
professional fee due under section (a) shall pay a monthly late fee
equal to $25 for such failure, while another amendment would delete the
reference to the monthly fee being payable ``for each $300 assessment
not paid in full.'' Together, these amendments to section (b) are
intended to make clear that a separate $25 monthly late fee would not
be due for each covered person for which the $300 fee was not timely
paid. Rather, a municipal advisor firm would be required to pay only
one $25 monthly late fee (regardless of the number of its covered
persons for which the per professional fee was not timely paid) if it
fails timely to pay in full the total fee due under section (a).\8\
Finally, the proposed rule change would delete Rule A-11(c) because
that provision pertains to a transitional municipal advisor
professional fee that no longer has application. A related minor
technical amendment to Rule A-11(b) would delete a reference to Rule A-
11(c).
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\8\ This late fee would be in addition to a late fee on the
total overdue balance based on the Prime Rate.
---------------------------------------------------------------------------
The MSRB believes that the proposed fee increase reflected in the
proposed amendments to Rule A-11(a) is reasonable as well as necessary
and appropriate to help defray the costs of operating and administering
the MSRB. It is also a step towards achieving the MSRB's strategic goal
of promoting long-term financial stability by assessing fair and
equitable fees, and diversifying funding sources. The MSRB believes the
proposed rule change will help the organization provide for assessments
that are increasingly more fairly and equitably apportioned among all
registrants. The MSRB notes that, consistent with the Board's long-
standing prohibition on charging or otherwise passing through to
issuers the fees required under Rule A-13,\9\ municipal advisors
similarly would be prohibited from charging or otherwise passing
through the fees required under Rule A-11 to issuers.
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\9\ See Release No. 34-81264 (July 31, 2017), 82 FR 36472, n. 18
(August 4, 2017) (File No. SR-MSRB-2017-05) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change to Assess an
Underwriting Fee on Dealers That Are Underwriters of Primary
Offerings of Plans).
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[[Page 48137]]
The Board's Holistic Review of MSRB Fees
The MSRB assesses dealers and municipal advisors (collectively,
``regulated entities'') various fees designed to defray the costs of
its operations and administration, including rulemaking, market
transparency, and educational and market outreach initiatives that
fulfill its Congressional mandate to, among other things, protect
investors, state and local governments and other municipal entities,
obligated persons and the public interest and promote a fair and
efficient municipal securities market.\10\ Section 15B(b)(2)(J) of the
Act \11\ provides, in pertinent part, that each regulated entity shall
pay to the Board such reasonable fees and charges as may be necessary
or appropriate to defray the costs of operating and administering the
Board, and that the MSRB shall have rules specifying the amount of such
fees. The current fees so specified by MSRB rules are:
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\10\ See Section 15B(b)(2) of the Act (15 U.S.C. 78o-4(b)(2))
(in relevant part, requiring the Board to propose and adopt rules
for 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).
\11\ 15 U.S.C. 78o-4(b)(2)(J).
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1. Municipal Advisor Professional Fee (Rule A-11)
$300 annually per Form MA-I on file with the SEC by the municipal
advisor;
2. Late Fee (Rules A-11 and A-12)
$25 monthly late fee and a late fee on the overdue balance
(computed according to the prime rate) until paid on balances not paid
within 30 days of the invoice date by the dealer or municipal advisor;
3. Initial Registration Fee (Rule A-12)
$1,000 one-time registration fee to be paid by each dealer to
register with the MSRB before engaging in municipal securities
activities and by each municipal advisor to register with the MSRB
before engaging in municipal advisory activities;
4. Annual Registration Fee (Rule A-12)
$1,000 annual fee to be paid by each dealer and municipal advisor
registered with the MSRB;
5. Underwriting Fee (Rule A-13)
$.0275 per $1,000 of the par value paid by a dealer, on all
municipal securities purchased from an issuer by or through such
dealer, whether acting as principal or agent as part of a primary
offering, except in limited circumstances; and in the case of an
underwriter (as defined in Rule G-45) of a primary offering of certain
municipal fund securities, $.005 per $1,000 of the total aggregate
assets for the reporting period; \12\
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\12\ Beginning in May 2018, the Board will invoice underwriters
of a primary offering of certain municipal fund securities for the
assessments due. See Release No. 34-81264 (July 31, 2017), 82 FR
36472 (August 4, 2017) (File No. SR-MSRB-2017-05) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change to Assess an
Underwriting Fee on Dealers That Are Underwriters of Primary
Offerings of Plans).
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6. Transaction Fee (Rule A-13)
.001% ($.01 per $1,000) of the total par value to be paid by a
dealer, except in limited circumstances, for inter-dealer sales and
customer sales reported to the MSRB pursuant to Rule G-14(b), on
transaction reporting requirements;
7. Technology Fee (Rule A-13)
$1.00 paid by a dealer per transaction for each inter-dealer sale
and for each sale to customers reported to the MSRB pursuant to Rule G-
14(b); and
8. Professional Qualification Examination Fee (Rule A-16)
$150 test development fee assessed per candidate for each MSRB
professional qualification examination.\13\
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\13\ In addition, the MSRB charges data subscription and service
fees for subscribers, including regulated entities, seeking direct
electronic delivery of municipal trade data and disclosure documents
associated with municipal bond issues. However, this information is
available without direct electronic delivery on the EMMA Web site
without charge.
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Initiated in 2015, the Board's holistic review of fees that the
Board assesses on regulated entities continues. The Board evaluates
those fees with the goal of better aligning revenue sources with
operating expenses and all capital needs. The Board strives to
diversify funding sources among regulated entities and other entities
that fund MSRB activities in a manner that ensures long-term
sustainability, while continuing to strike an equitable balance among
regulated entities and a fair allocation of the expenses of the
regulatory activities, systems development and operational activities
undertaken by the MSRB. In determining the fair allocation of the cost
of MSRB regulation to regulated entities, the Board considers, among
other things: Registration to engage in municipal securities or
municipal advisory activities; the level of dealer market activity; and
the number of associated persons engaged in municipal advisory
activities on behalf of a municipal advisor. Recognizing that in any
given year there could be more or less activity by a particular class
of regulated entities, the Board, as it has historically, seeks to
maintain a fee structure that results in a balanced and reasonable
contribution over time from all regulated entities to defray costs and
expenses of operating and administering the MSRB.
As part of the Board's ongoing review and examination of fees, the
Board reviewed the amount of the $300 per professional fee charged
under Rule A-11. This fee was originally established in 2014 as a
reasonable initial starting amount to help defray the costs and
expenses of operating and administering the MSRB, particularly the
MSRB's regulatory and related activities in connection with municipal
advisors.\14\
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\14\ See Release No. 34-72019 (April 25, 2014), 79 FR 24798,
24798 (May 1, 2014) (File No. SR-MSRB-2014-03) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change Consisting of New
Rule A-11, on Assessments for Municipal Advisor Professionals); see
also MSRB Notice 2014-09, MSRB to Implement New MSRB Rule A-11
Establishing Fees for Municipal Advisor Professionals (April 17,
2014).
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These regulatory activities include the development and
implementation of a comprehensive regulatory framework for municipal
advisors, including: The extension to municipal advisors of rules that
previously only applied to dealers on the subject of fair dealing and
specified forms of conflicts of interest; \15\ the adoption of new
rules for municipal advisors that establish the core standards of
conduct for non-solicitor municipal advisors and that establish
supervisory and compliance obligations for municipal advisor firms;
\16\ the creation of new municipal advisor recordkeeping requirements
and municipal advisory client education and protection provisions; \17\
and the development and implementation of professional standards for
municipal advisors to help ensure that all
[[Page 48138]]
municipal advisors are competent and qualified.\18\ As part of the
implementation of this latter category of rules, the MSRB also
established the Series 50 exam, a baseline test of a municipal
advisor's competency and knowledge of applicable rules.
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\15\ See Rule G-17, Conduct of Municipal Securities and
Municipal Advisory Activities; Rule G-20, Gifts Gratuities, Non-Cash
Compensation and Expenses of Issuance; and Rule G-37, Political
Contributions and Prohibitions on Municipal Securities Business and
Municipal Advisory Business available at https://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx.
\16\ See Rule G-42, Duties of Non-Solicitor Municipal Advisors;
Rule G-44, Supervisory and Compliance Obligations of Municipal
Advisors available at https://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx.
\17\ See Rule G-8, Books and Records to be Made by Brokers,
Dealers, and Municipal Securities Dealers and Municipal Advisors;
and Rule G-10, Investor and Municipal Advisory Client Education and
Protection available at https://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx. Effective October 13, 2017, current Rule G-10,
Delivery of Investor Brochure, will be replaced in its entirety by
new Rule G-10.
\18\ See Rule G-2, Standards of Professional Qualification; and
Rule G-3, Professional Qualification Requirements available at
https://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx.
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To assist municipal advisors in understanding and complying with
this new regulatory framework, the MSRB has undertaken considerable
education, outreach and compliance activities. These include, but are
not limited to: The creation of educational documents, resources and
compliance-oriented notices and communications; \19\ the development of
educational webinars and the organization of, and participation in,
outreach events; \20\ and the launch of an expanded on-demand education
program, MuniEdPro[supreg], which was designed, in part, to serve the
education needs of regulated entities.
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\19\ For example, the MSRB supports regulatory compliance by
municipal advisors by providing resources about MSRB requirements,
as well as more general educational material. Municipal advisors may
access these resources and others, including the Municipal Advisor
Review, the MSRB's quarterly newsletter for municipal advisors at
https://www.msrb.org/Regulated-Entities/Resources.aspx. In addition,
the MSRB has published several regulatory notices for municipal
advisors to help keep market participants informed of regulatory
changes and to provide guidance on the application of existing
rules. See e.g., MSRB Notice 2017-08, Application of MSRB Rules to
Solicitor Municipal Advisors (May 4, 2017); MSRB Notice 2017-13,
MSRB Provides Guidance on Duties of Non-Solicitor Municipal Advisors
in Conduit Financing Scenarios (July 13, 2017).
\20\ For example, the MSRB provides free education and training
webinars on municipal market topics, regulatory and compliance
issues, and the use of MSRB market transparency systems. Municipal
advisors may register for new webinars and access on-demand
webinars, including some webinars that provide CPE credit at https://www.msrb.org/Regulated-Entities/Webinars.aspx.
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Looking forward to Fiscal Year 2018, the MSRB expects to continue
its many activities relating to municipal advisors, including its
significant education, outreach and compliance initiatives. The MSRB
will also be developing a new municipal advisor principal-level
professional qualification examination--the Series 54--for anticipated
availability as a pilot in 2019.\21\
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\21\ Once the Series 54 exam is permanently available, municipal
advisor principals will be required to take the Series 54 exam in
addition to the Series 50 exam. See FAQs on Municipal Advisor
Professional Qualification and Examination Requirements, at n. 1
available at https://www.msrb.org/msrb1/pdfs/FAQ-MSRB-Series-50-Exam.pdf.
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In an August 2015 fee filing associated with the Board's holistic
review of fees,\22\ the MSRB explained that, at that time, it was not
modifying the $300 municipal advisor per professional fee to provide
municipal advisors with additional time for the municipal advisor
regulations and business models to more fully develop. However, the
MSRB explained that the targeted revenue to be generated from the
municipal advisor professional fee of approximately $2 million at that
time, or approximately 5% of total MSRB revenues, was not yet being met
and the per professional fee would need to be increased in the future.
The proposed rule change is the next step towards moving closer to that
revenue target.\23\
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\22\ See Release No. 34-75751 (August 24, 2015), 80 FR 52352,
52355 (August 28, 2015) (File No. SR-MSRB-2015-08) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change Consisting of
Amendments to MSRB Rule A-12, on Registration, and MSRB Rule A-13,
on Underwriting and Transaction Assessments for Brokers, Dealers and
Municipal Securities Dealers).
\23\ The MSRB expects that the municipal advisor professional
fee, at the dollar amount set forth in the proposed rule change,
would generate approximately 4% of the MSRB's Fiscal Year 2018
revenue. The MSRB will release and make publicly available its
budget for Fiscal Year 2018 in October 2017. See MSRB Monthly Update
(September 2017) available at https://content.govdelivery.com/accounts/VAORGMSRB/bulletins/1b497b6.
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2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(J) of the Act \24\ which states that the MSRB's rules
shall:
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\24\ 15 U.S.C. 78o-4(b)(2)(J).
provide that each municipal securities broker, municipal securities
dealer, and municipal advisor shall pay to the Board such reasonable
fees and charges as may be necessary or appropriate to defray the
costs and expenses of operating and administering the Board. Such
rules shall specify the amount of such fees and charges, which may
include charges for failure to submit to the Board, or to any
information system operated by the Board, within the prescribed
timeframes, any items of information or documents required to be
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submitted under any rule issued by the Board.
The MSRB believes that its rules, as amended by the proposed rule
change, provide for reasonable dues, fees, and other charges among
regulated entities. The MSRB believes that the proposed rule change is
necessary and appropriate to fund the operation and administration of
the Board and satisfies the requirements of Section 15B(b)(2)(J).\25\
The MSRB believes the proposed rule change is necessary because it will
help defray the costs of the Board's significant rulemaking, market
transparency, educational and market outreach initiatives, market
leadership, professional qualifications examination development and
other activities relating to municipal advisors. As discussed above,
the MSRB has engaged in significant rulemaking to put into place a
regulatory framework for municipal advisors and has engaged in
considerable activities to assist municipal advisors in understanding
their obligations and comply with the applicable rules. In addition,
because the MSRB does not have any examination or enforcement
authority, the MSRB has enhanced its coordination with the regulatory
authorities charged with the authority to examine for compliance with
and enforce MSRB rules. The MSRB frequently provides rule
interpretations, training related to the market and MSRB rules, and
access to municipal market information in support of the municipal
advisor examination and enforcement activities of these regulatory
authorities. The MSRB expects to continue its many activities relating
to municipal advisors, with a focus on education, outreach and
compliance. In addition, as noted above, the MSRB will be working to
develop the Series 54 professional qualification exam. The proposed
rule change will assist in defraying some of the costs associated with
these activities and will help ensure the MSRB is funding these
regulatory activities in a financially responsible way.
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\25\ Id.
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The MSRB believes the proposed rule change is appropriate because
it moves towards a more equitable balance of fees among regulated
entities and hence a fairer allocation of the expenses of the
regulatory activities, systems development, and operational activities
undertaken by the MSRB. However, even with the fee increase in the
proposed rule change, the proposed fees would only defray a small
portion of the MSRB's overall costs of operating and administering the
MSRB--generating approximately 4% of Fiscal Year 2018 revenue.\26\
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\26\ See n. 23 and accompanying text.
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MSRB operations are funded primarily by assessments and fees on
regulated entities. In fact, 80% of the Fiscal Year 2018 budgeted
revenue is based on market activity (that is, municipal securities
trading and underwriting volume). Due to the accumulated historical
variances between actual and budgeted revenue, the MSRB has excess
reserves. This is largely due to the MSRB's appropriately conservative
approach to budgeting revenues that are primarily market-based and
inherently volatile. While the MSRB's current reserve levels exceed
targets, the MSRB budget for Fiscal Year 2018 has a deficit, as do the
pro forma
[[Page 48139]]
budgets for Fiscal Years 2019 through 2020. The MSRB anticipates that
in the future, based on assumptions reviewed and agreed upon by the
MSRB, excess reserves will be eroded by Fiscal Year 2020 (even with the
increased municipal advisor professional fee and new underwriting fee
on underwriters of 529 college savings plans). Further, the MSRB's
budget for Fiscal Year 2018 anticipates that the MSRB will
strategically spend some of its reserves. Finally, the MSRB believes,
as a matter of principle, that it is inherently unfair to allow certain
regulated entities to pay a disproportionate share of the cost of
operating the MSRB. The MSRB therefore regularly evaluates fees and
adjusts them, as needed, to ensure that all regulated entities that
benefit from functioning in a fair, efficient and transparent market
pay their fair share.
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Act \27\ requires that MSRB rules not
be designed to impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. In addition,
Section 15B(b)(2)(L)(iv) of the Act \28\ provides that MSRB rules ``not
impose a regulatory burden on small municipal advisors that is not
necessary or appropriate in the public interest and for the protection
of investors, municipal entities, and obligated persons, provided that
there is robust protection of investors against fraud.''
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\27\ 15 U.S.C. 78o-4(b)(2)(C).
\28\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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The Board's policy on the use of economic analysis in rulemaking
\29\ limits its application regarding those rules for which the Board
seeks immediate effectiveness. However, an internal analysis is still
conducted to gauge the economic impact, with an emphasis on the burden
on competition involving regulated entities. Guided by these aspects of
the policy, the Board has reviewed the proposed rule change. The Board
believes the proposed rule change is necessary and appropriate to
ensure that MSRB registrants that are municipal advisors equitably
contribute to defraying the costs and expenses of operating and
administering the MSRB. The MSRB has considered the economic impact of
the proposed rule change. The MSRB does not believe that the proposed
rule change will result in any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act
since it will apply equally to all municipal advisors based on the
number of persons qualified as municipal advisor representatives
associated with the municipal advisor and the number of Forms MA-I
filed by each firm.
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\29\ The scope of the Board's policy on the use of economic
analysis in rulemaking provides that: [t]his Policy addresses
rulemaking activities of the MSRB that culminate, or are expected to
culminate, in a filing of a proposed rule change with the SEC under
Section 19(b) of the Exchange Act, other than a proposed rule change
that the MSRB reasonably believes would qualify for immediate
effectiveness under Section 19(b)(3)(A) of the Exchange Act if filed
as such or as otherwise provided under the exception process of this
Policy.
Policy on the Use of Economic Analysis in MSRB Rulemaking,
available at https://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. For those rule changes for which the MSRB
seeks immediate effectiveness, the MSRB usually focuses its
examination exclusively on the burden on competition of regulated
entities.
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The MSRB believes the current fee structure is fair and equitable
among municipal advisors of differing size. The existing per firm
annual fee ($1,000) helps cover the fixed costs of regulating any firm,
regardless of size; while the existing annual professional fee
assessment results in smaller municipal advisors paying less than
larger municipal advisors. The proposed fee increase will further
expand the current spread paid between large versus small firms. The
MSRB notes that other self-regulatory organizations and independent
oversight and rulemaking boards, such as the Financial Industry
Regulatory Authority (``FINRA''), the Public Company Accounting
Oversight Board (``PCAOB''), National Futures Association (``NFA'') and
the Financial Accounting Standards Board (``FASB''), all have some
annual fee assessment structure that is based on the size of firms
under regulation.\30\
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\30\ For example, FINRA's annual registration fee and new member
application fee assessments for broker-dealers are based on the
number of branch offices and the number of registered persons, the
PCAOB's annual fee assessment is based on the number of issuer audit
clients and the number of personnel within each public accounting
firm, NFA's annual member dues for swap dealers and Forex dealers
are based on the tier size of member firms, and FASB's accounting
support fees are allocated based on the average market
capitalization of each issuer.
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The MSRB believes that the fee increase will not impose an
unnecessary or inappropriate regulatory burden on small municipal
advisors. The total amount of the assessment payable by each municipal
advisor will be dependent on the number qualified associated persons
for whom Forms MA-I are filed by the municipal advisor \31\ and,
therefore, will result in lower relative assessments for smaller firms.
Being based on the number of persons engaging in municipal advisory
activities on behalf of a firm, the total fee will bear a reasonable
relationship to the level of regulated municipal advisory activities
that are undertaken by each firm.
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\31\ The MSRB understands that the Form MA-I on file should be
withdrawn for any person who fails to qualify as a municipal advisor
representative in accordance with Rule G-3. See Registration of
Municipal Advisors Frequently Asked Questions at Question 16.1,
available at https://www.sec.gov/info/municipal/mun-advisors-faqs.shtml.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Board did not solicit comment on the proposed change.
Therefore, there are no comments on the proposed rule change received
from members, participants or others.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \32\ and paragraph (f) of Rule 19b-4
thereunder.\33\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\32\ 15 U.S.C. 78s(b)(3)(A).
\33\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-MSRB-2017-07 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-2017-07. 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
[[Page 48140]]
only one method. The Commission will post all comments on the
Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the MSRB. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MSRB-2017-07 and should be submitted on
or before November 6, 2017.
For the Commission, pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22262 Filed 10-13-17; 8:45 am]
BILLING CODE 8011-01-P
