Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MSRB Rule G-3 Continuing Education Program Requirements To Harmonize With Industry-Wide Transformation, 56137-56145 [2022-19678]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 87, Number 176 (Tuesday, September 13, 2022)]
[Notices]
[Pages 56137-56145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-19678]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95684; File No. SR-MSRB-2022-07]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Amend MSRB Rule G-3 Continuing Education Program Requirements 
To Harmonize With Industry-Wide Transformation

September 7, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on August 30, 2022 the Municipal Securities 
Rulemaking Board (``MSRB'' or ``Board'') filed with the Securities and 
Exchange Commission (``SEC'' or ``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the MSRB. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to 
consisting of amendments to MSRB Rule G-3, on professional 
qualification requirements, to (i) amend the MSRB's continuing 
education (``CE'') program requirements for brokers, dealers, and 
municipal securities dealers (collectively, ``dealers'') to align with 
the Financial Industry Regulatory Authority's (``FINRA'') rule change 
\3\ (``FINRA's CE rule amendment'') in furtherance of implementing the 
recommendations of the Securities Industry/Regulatory Council on 
Continuing Education (``CE Council'') \4\ and (ii) make technical 
amendments to renumber certain rule provisions under MSRB Rule G-3 
(collectively, the ``proposed rule change'').\5\ The proposed rule 
change is specific to dealers' professional qualification obligations 
under MSRB Rule G-3 and this proposed rule change does not modify 
municipal advisors' continuing education obligations under the rule.
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    \3\ On September 21, 2021, the SEC approved FINRA's rule change 
to, among other things, require that the Regulatory Element of CE be 
completed annually rather than every three years and to provide a 
path for individuals to maintain their qualification following the 
termination of a registration by way of CE. See Exchange Act Release 
No. 93097 (September 21, 2021), 86 FR 53358 (September 27, 2021) 
(File No. SR-FINRA-2021-015) (Order Approving a Proposed Rule Change 
to Amend FINRA Rules 1210 (Registration Requirements) and 1240 
(Continuing Education Requirements), (available at https://www.finra.org/sites/default/files/2021-09/sr-finra-2021-015-approval-order.pdf). See also FINRA Regulatory Notice 21-41 
(November 17, 2021) (available at https://www.finra.org/sites/default/files/2021-11/Regulatory-Notice-21-41.pdf).
    \4\ The CE Council is composed of 16 industry members and six 
self-regulatory organization (SRO) members, including the MSRB. 
Industry members generally serve four-year terms and represent a 
cross-section of the industry. In collaboration with the CE Council, 
the day-to-day operations of the CE Program is administered by 
FINRA.
    \5\ The proposed rule change is based on the CE Council's 
September 2019 recommendations to enhance the CE Program. See 
``Recommended Enhancements for the Securities Industry Continuing 
Education Program'' (available at https://cecouncil.org/media/266634/council-recommendations-final-.pdf).
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    The MSRB has designated the proposed rule change as constituting a 
``non-controversial'' rule change under Section 19(b)(3)(A) \6\ of the 
Act and Rule 19b-4(f)(6) \7\ thereunder, which renders the proposal 
effective upon receipt of this filing by the Commission. The operative 
date for the proposed rule change is September 30, 2022.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2022-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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

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

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

1. Purpose
    The MSRB is charged with setting professional qualification 
standards for dealers and municipal advisors. Specifically, Section 
15B(b)(2)(A) of the Act authorizes the MSRB to prescribe standards of 
training, experience, competence, and such other qualifications as the 
Board finds necessary or appropriate in the public interest or for the 
protection of investors and municipal entities or obligated persons.\8\ 
Sections 15B(b)(2)(A)(i) \9\ and 15B(b)(2)(A)(iii) \10\ of the Act also 
provide that the Board may appropriately classify associated persons of 
dealers and municipal advisors and require persons in any such class to 
pass tests prescribed by the Board. Accordingly, over the years, the 
MSRB has adopted professional qualification standards to ensure that 
associated persons of dealers and municipal advisors attain and 
maintain specified levels of competence and knowledge for each 
qualification category. The purpose of the proposed rule change is to 
align certain obligations under MSRB Rule G-3 for dealers with 
Commission approved amendments to FINRA Rules 1210, on registration 
requirements, and 1240, on continuing education requirements in 
furtherance of promoting regulatory consistency with respect to CE 
program requirements. To that end, the MSRB is proposing to (i) 
transition the Regulatory Element component of CE for dealers to an 
annual requirement for each dealer qualification category; (ii) extend 
the Firm Element component of CE for dealers to all registered persons 
of dealers; (iii) permit maintenance of professional qualifications for 
dealers after termination of registration; and (iv) make other 
amendments that are technical in nature. As noted above, the proposed 
rule filing is not proposing to modify continuing education 
obligations, under the rule, for registered municipal advisors.\11\
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    \8\ See 15 U.S.C. 78o-4(b)(2)(A).
    \9\ See 15 U.S.C. 78o-4(b)(2)(A)(i).
    \10\ See 15 U.S.C. 78o-4(b)(2)(A)(iii).
    \11\ Municipal advisor principals and municipal advisor 
representatives are not subject to Regulatory Element continuing 
education requirements that are applicable to dealers under MSRB 
Rule G-3(i)(i) and instead must satisfy separate continuing 
education program requirements as specifically provided under MSRB 
Rule G-3(i)(ii).

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[[Page 56138]]

Background
    In 1993, the Securities Industry Task Force on Continuing Education 
(``task force'') \12\ was created to study and develop recommendations 
regarding CE in the securities industry. The task force issued a report 
calling for a formal, two-part CE program consisting of a (i) 
Regulatory Element requiring securities industry professionals to 
obtain periodic and uniform training in regulatory matters, and (ii) 
Firm Element requiring firms to provide ongoing training to employees 
to ensure they have up to date knowledge of the job function and 
securities product-related subjects.
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    \12\ The task force included representatives from six SROs, 
including the MSRB, and industry representatives.
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    On February 8, 1995, the SEC approved SRO rule changes based on the 
task force's recommendations.\13\ In approving the SRO rule changes, 
the SEC stated that these SROs may require their members, either 
individually or as part of a group, to provide specific training in any 
areas the SROs deem necessary.\14\ The SEC added that as the program 
evolves, the SEC expects SROs to define educational standards for 
products and services where heightened regulatory concerns exist.\15\ 
Since approval of the initial CE rules, SROs have amended their CE 
rules as industry and market practices evolved.
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    \13\ See Exchange Act Release No. 35341 (February 8, 1995), 60 
FR 8426 (February 14, 1995) (File No. SR-MSRB-94-17) (approving MSRB 
Rule G-3(h), on continuing education requirements). The CE Council 
was formed upon the recommendation from the task force and was 
tasked with facilitating the development of uniform continuing 
education requirements for the securities industry.
    \14\ Id.
    \15\ Id.
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    More recently, the CE Council proposed enhancements to the current 
CE program requirements that sought to provide a path, through CE, for 
individuals to step away from the securities industry for a period of 
time and still maintain their qualification(s) following the 
termination of registration. Additionally, the CE Council's suggestions 
focused on the ability of firms to design effective and efficient Firm 
Element training by eliminating redundancy with other industry training 
requirements and providing opportunities for reciprocity with other 
securities or related credentialing programs.\16\ With that, SROs 
commenced a multi-year effort to advance the recommendations of the CE 
Council in the form of an initiative to modernize the CE program 
requirements (``CE program requirements'') for securities industry 
professionals (``CE Transformation''). The modernization of CE program 
requirements is meant to ensure that all registered persons receive 
relevant content with respect to the Regulatory Element and Firm 
Element components of CE, in a timely manner, in pursuance of enhanced 
professionalization of the industry.
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    \16\ On September 6, 2018, the CE Council published 
``Enhancements Under Consideration for the Securities Industry 
Continuing Education Program,'' noting that providing timely, 
effective training to registered persons is of the utmost 
importance, given the increasing complexity of products and services 
offered through the U.S. financial markets, and that training is a 
critical factor in ensuring investor protection and preserving the 
integrity of the U.S. capital markets. See Enhancements Under 
Consideration for the Securities Industry Continuing Education 
Program (available at ce-program-enhancements-final-.pdf 
(cecouncil.org).
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    FINRA's rule change was by and large based on the CE Council's 2019 
recommendations \17\ to enhance the CE program requirements and 
reflects the extensive discussions with the CE Council, peer SROs, and 
stakeholders. FINRA's proposed rule change included, among other 
things, (i) transitioning the Regulatory Element component of CE to an 
annual requirement for each of its registration categories; (ii) 
recognizing other training requirements for the Firm Element component 
of CE; (iii) expanding the Firm Element component of CE to extend to 
all registered persons; and (iv) permitting eligible individuals to 
maintain their professional qualification(s) after the termination of 
employment with a FINRA member firms and consequently their 
registrations, if certain conditions are met.
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    \17\ On September 12, 2019, the CE Council issued the following 
recommendations: (i) transition to an annual Regulatory Element 
requirement; (ii) develop Regulatory Element content relevant and 
tailored to each registration category, using diverse instructional 
formats; (iii) publish Regulatory Element learning topics in advance 
each year; (iv) enhance FINRA system functionality to facilitate 
compliance with the Regulatory Element; (v) recognize other training 
requirements and credentialing programs for purposes of satisfying 
the Firm Element; (vi) improve guidance and resources for firms for 
conducting the Firm Element annual needs analysis and for training 
planning; (vii) develop a content catalog firms may use to select or 
supplement Firm Element content; (viii) consider rule changes that 
would enable individuals who were previously registered to maintain 
the qualification by participating in an annual continuing education 
program. See Recommended Enhancements for the Securities Industry 
Continuing Education Program (available at https://cecouncil.org/media/266634/council-recommendations-final-.pdf).
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    The process leading to FINRA's CE rule amendment began, in part, in 
2018 when FINRA solicited comments on enhancements to CE program 
requirements under consideration by the CE Council.\18\ Subsequently, 
prior to filing the CE rule amendment with the Commission, FINRA 
published Regulatory Notice 20-05, soliciting comments on its proposal 
to amend its registration and CE rules, as described above, to 
facilitate the implementation of the recommendations of the CE Council 
regarding enhancements to the CE program requirements for securities 
industry professionals.\19\
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    \18\ See Regulatory Notice 18-26 (FINRA Requests Comment on 
Enhancements Under Consideration by the Securities Industry/
Regulatory Council on Continuing Education) (September 2018), 
(available at https://www.finra.org/rules-guidance/notices/18-26). 
FINRA received 22 comment letters in response to Regulatory Notice 
18-26 (available at https://www.finra.org/rules-guidance/notices/18-26#comments).
    \19\ See Regulatory Notice 20-05 (FINRA Requests Comment on a 
Proposal to Implement the Recommendations of the CE Council 
Regarding Enhancements to the Continuing Education Program for 
Securities Industry Professionals) (February 2020) (available at 
https://www.finra.org/rules-guidance/notices/20-05). FINRA received 
26 comment letters in response to Regulatory Notice 20-05 (available 
at https://www.finra.org/rules-guidance/notices/20-05#comments).
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    On June 15, 2021, FINRA's CE rule amendment was filed with the SEC 
and was published for comment in the Federal Register on June 24, 2021. 
The SEC received nine comment letters in response to the proposal,\20\ 
which FINRA responded to on August 12, 2021.\21\ The SEC found that the 
proposal was consistent with the requirements of the Exchange Act and 
the rules and regulations thereunder and approved FINRA's CE rule 
amendment.\22\

[[Page 56139]]

Thereafter, FINRA announced in Regulatory Notice 21-41 that its rule 
amendment with respect to permitting eligible individuals to maintain 
their professional qualification(s) after the termination of their 
registrations, by way of the accompanying implementation of the 
Maintaining Qualifications Program (``MQP''), and that the termination 
of the Financial Services Affiliate Waiver Program (``FSAWP'') to new 
participants would both become effective on March 15, 2022. FINRA's CE 
rule amendment to transition the Regulatory Element component of CE to 
an annual requirement for each of FINRA's registration categories, and 
all other changes, will become effective on January 1, 2023.\23\
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    \20\ See Letters from Anonymous (``Anonymous Letter''), dated 
July 1, 2021; Brian A. Egwele (``Egwele Letter''), dated July 2, 
2021; Frederick T. Greene, Executive Vice President, Portfolio 
Manager, Woodforest Wealth Strategies (``Woodforest Letter''), dated 
July 12, 2021; James Rabenstine, Vice President, NFS Chief 
Compliance Officer, Nationwide Office of the Chief Legal Officer 
(``Nationwide Letter''), dated July 13, 2021; Kevin Zambrowicz, 
Managing Director and Associate General Counsel, and Bernard V. 
Canepa, Vice President and Assistant General Counsel, Securities 
Industry and Financial Markets Association (``SIFMA Letter''), dated 
July 14, 2021; Carrie L. Chelko, Chief Compliance Officer, Fidelity 
Brokerage Services LLC, and Janet Dyer, Chief Compliance Officer, 
National Financial Services LLC, John McGinty, Chief Compliance 
Officer, Fidelity Distributors Company LLC and Digital Brokerage 
Services LLC (``Fidelity Letter''), dated July 14, 2021; Lisa 
Hopkins, President, North American Securities Administrators 
Association, Inc. (``NASAA Letter''), dated July 14, 2021; Howard 
Spindel, Senior Managing Director, and Peggy E. Chait, Managing 
Director, Integrated Solutions (``Integrated Solutions Letter''), 
dated July 14, 2021; John S. Watts, Senior Vice President and Chief 
Counsel, PFS Investments Inc., (``PFS Letter'') dated July 15, 2021 
(available at https://www.sec.gov/comments/sr-finra-2021-015/srfinra2021015.htm).
    \21\ See Letter from Afshin Atabaki, Special Advisor and 
Associate General Counsel, Financial Industry Regulatory Authority. 
(``FINRA Letter''), dated August 12, 2021.
    \22\ Specifically, the Commission found that the proposed rule 
change was consistent with Section 15A(b)(6) of the Exchange Act, 15 
U.S.C. 78o-3(b)(6), which requires, among other things, that FINRA 
rules be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and, 
in general, to protect investors and the public interest, and 
Section 15(A)(g)(3) of the Exchange Act, 15 U.S.C. 78o-3(g)(3), 
which authorizes FINRA to prescribe standards of training, 
experience, and competence for persons associated with FINRA 
members.
    \23\ See FINRA Regulatory Notice 21-41 (FINRA Amends Rules 1210 
and 1240 to Enhance the Continuing Education Program for Securities 
Industry Professionals) (November 2021) (available at https://www.finra.org/rules-guidance/notices/21-41).
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    The MSRB's proposed rule change reflects the MSRB's intention to 
generally align the MSRB's CE program requirements with FINRA's CE rule 
amendment to facilitate the implementation of recommendations by the CE 
Council and for purposes of promoting regulatory consistency and 
fostering cooperation between regulators.\24\ Provided below is a 
detailed description of the proposed amendments to MSRB Rule G-3(i), on 
CE requirements.
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    \24\ On September 6, 2018, the MSRB issued MSRB Notice 2018-21 
(CE Council Requests Comment on Continuing Education Program 
Considerations) (September 2018) (available at https://www.msrb.org/-/media/Files/Regulatory-Notices/RFCs/2018-21.ashx??n=1), with a 
comment period deadline of November 5, 2018. The MSRB received one 
comment letter in response to MSRB Notice 2018-21. See Letter from 
Robert J. McCarthy, Director of Regulatory Policy, Wells Fargo 
Advisors (``Wells Letter''), dated November 5, 2018 (available at 
https://msrb.org/RFC/2018-21/WFA.pdf).
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Description of the Proposed Amendments to MSRB Rule G-3 To Facilitate 
the Implementation of Recommendations by the CE Council and To Promote 
Regulatory Consistency With FINRA's Rule Change

I. Transition the Regulatory Element Component of CE to an Annual 
Requirement

A. Requirements

    MSRB Rule G-3(i)(i) prescribes requirements regarding CE of certain 
registered persons subsequent to their initial qualification and 
registration with a registered securities association with respect to a 
person associated with a member of such association, or the appropriate 
regulatory agency as defined in Section 3(a)(34) of the Act with 
respect to a person associated with any other dealer (``the appropriate 
enforcement authority'').
    Currently, MSRB Rule G-3(i)(i)(A)(1) provides that no dealer shall 
permit any registered person to continue to, and no registered person 
shall continue to, perform duties as a registered person, unless such 
person has complied with the required provisions under subparagraph 
(i)(i)(A). More specifically, each registered person must complete the 
Regulatory Element component of CE on the occurrence of their second 
registration anniversary date and every three years thereafter or as 
otherwise prescribed by the Board. Additionally, on each occasion, the 
Regulatory Element component of CE must be completed within 120 days 
after the person's registration anniversary date.\25\ The content of 
the Regulatory Element component of CE shall be determined by the Board 
for each registration category of persons subject to the rule.
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    \25\ A person's initial registration date, also known as the 
``base date,'' shall establish the cycle of anniversary dates for 
purposes of this subparagraph (i)(i)(A).
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    Under amended FINRA Rule 1240(a), registered persons will be 
required to complete the Regulatory Element component of CE annually 
\26\ by December 31 of each calendar year of every year in which the 
person remains registered rather than every three years. Specifically, 
as approved, FINRA Rule 1240(a) requires registered persons to complete 
the Regulatory Element component of CE for each representative or 
principal registration category that such person holds. As approved, 
firms will have the flexibility to require their registered persons to 
complete the Regulatory Element component of CE sooner than December 
31, allowing firms to coordinate the timing of the Regulatory Element 
component of CE with other training requirements, including the Firm 
Element component of CE.\27\
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    \26\ Generally, the amount of content required to be completed 
on an annual basis will be comparable to the continuing education 
content currently completed every three years, subject to the number 
of registrations held. For example, persons who hold multiple 
registrations may be required to complete more continuing education 
content because such persons would be required to complete content 
specific to each registration held.
    \27\ For example, a firm could require its registered persons to 
complete both their Regulatory Element and Firm Element component of 
continuing education by October 1 of each calendar year.
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    FINRA Rule 1240(a) also establishes that persons who would be 
registering as a representative or principal for the first time on or 
after the implementation date of FINRA's CE rule amendment would be 
required to complete their initial Regulatory Element for that 
registration category in the next calendar year following their 
registration. In addition, subject to specified conditions, individuals 
re-registering as a representative or principal on or after the 
implementation date of FINRA's CE rule amendment would also be required 
to complete their initial Regulatory Element for that registration 
category in the next calendar year following their re-registration.
    In order to align with FINRA, the MSRB is proposing changes to MSRB 
Rule G-3(i)(i)(A)(1) that would similarly require associated persons of 
a dealer to complete the Regulatory Element component of CE annually by 
December 31 of each calendar year.\28\ Municipal securities 
representatives and municipal securities principals would be required 
to complete Regulatory Element content appropriate to each 
qualification held in order to satisfy CE program requirements. 
Additionally, the MSRB notes it supports the flexibility provided to 
firms in determining the date by which the Regulatory Element component 
of CE must be completed by (i.e., at any time during the calendar year, 
so long as it is completed by December 31 each year) and also believes 
creating flexibility allows for better efficiency across the CE program 
requirements. The proposed rule change would also set forth the time 
frame by which the Regulatory Element component of CE must be 
completed, after the implementation date of January 1, 2023, based on 
whether such persons would be registering for the first time or re-
registering after the implementation date.
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    \28\ As aforementioned, the requirement to complete the 
Regulatory Element on an annual basis would become effective on 
January 1, 2023.
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B. Failure To Complete

    Currently, MSRB Rule G-3(i)(i)(A)(2), on failure to complete, 
prescribes, unless otherwise determined by the Board, that any 
registered persons who have not completed the Regulatory Element 
component of CE within the required time frames will have their 
registrations deemed inactive until such time as the requirements of 
the program

[[Page 56140]]

have been satisfied.\29\ The rule also provides that a registration 
that is inactive for a period of two years will be administratively 
terminated; and subsequently, that the qualification requirements must 
be satisfied prior to a person's registration being reactivated.\30\
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    \29\ And, more specifically, the current requirements states, 
any person whose registration has been deemed inactive is required 
to cease all activities as a registered person and is prohibited 
from performing any duties and functioning in any capacity requiring 
registration. Further, such persons may not receive any compensation 
for transactions in municipal securities, however such person may 
receive trails, residual commissions or like compensation resulting 
from such transactions completed before the person's inactive 
status, unless the dealer with which the person is associated has a 
policy prohibiting such trails, residual commissions or like 
compensation.
    \30\ The appropriate enforcement authority may, upon application 
and a showing of good cause, allow for additional time for a 
registered person to satisfy the program requirements.
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    FINRA Rule 1240(a)(2) also provides that individuals who fail to 
complete their Regulatory Element component of CE within the prescribed 
time frame would be designated as CE inactive. Further, FINRA Rule 
1240(a)(2) preserves the ability for FINRA to extend the time frame by 
which a registered person must complete the Regulatory Element 
component of CE for good cause; however, the rule change establishes 
the requirement for firms to make such request for an extension of time 
by way of a written application with supporting documentation.\31\
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    \31\ See FINRA Rule 1240(c)(3).
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    The Commission also approved amendments to FINRA Rule 1240(a)(2) to 
specify that: (i) persons who are designated as CE inactive would be 
required to complete all of their pending and upcoming annual 
Regulatory Element component of CE, including any annual Regulatory 
Element that becomes due during such persons' CE inactive period, for 
purposes of returning to an active status; \32\ and (ii) a registration 
that is inactive for a period of two years, and thus administratively 
terminated, is calculated from the date persons become CE inactive and 
continues to run regardless of whether such persons terminate their 
registrations.\33\
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    \32\ See FINRA Rule 1240(a)(2).
    \33\ Id.
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    The proposed rule change to amend MSRB Rule G-3(i)(i)(A)(2) would 
adopt a similar provision to that of FINRA, requiring dealers to make a 
request for an extension of time in writing and provide supporting 
documentation. The MSRB believes the proposed rule change would further 
regulatory consistency and foster the appropriate enforcement 
authority's determination on whether to grant additional time to 
complete the Regulatory Element component of CE.

C. Disciplinary Actions

    Currently, MSRB Rule G-3(i)(i)(A)(3), on disciplinary actions, 
provides that, unless otherwise determined by the appropriate 
enforcement authority, a registered person will be required to retake 
the Regulatory Element and satisfy all of its requirements in instances 
where a person becomes subject to a stated disciplinary action.\34\ The 
retaking of the Regulatory Element must begin within 120 days of a 
person becoming subject to a statutory disqualification or the 
completion of an implemented sanction or disciplinary action becomes 
final.
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    \34\ The specified disciplinary actions, under MSRB Rule G-
3(i)(i)(A)(3), include instances in which persons: (a) become 
subject to any statutory disqualification as defined in Section 
3(a)(39) of the Act; (b) become subject to suspension or to the 
imposition of a fine of $5,000 or more for violation of any 
provision of any securities law or regulation, or any agreement with 
or rule or standard of conduct of any securities governmental 
agency, securities self-regulatory organization, the appropriate 
enforcement authority or as imposed by any such regulatory or self-
regulatory organization in connection with a disciplinary 
proceeding; or (c) is ordered as a sanction in a disciplinary action 
to retake the Regulatory Element by any securities governmental 
agency, the appropriate enforcement authority or securities self-
regulatory organization.
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    FINRA Rule 1240(a)(3) provides that the requirements apply to a 
covered person, other than a covered person designated as eligible for 
a waiver under the FSAWP. Moreover, this provision provides that 
persons who become subject to a significant disciplinary action may be 
required to complete assigned CE content, including retaking the 
Regulatory Element component of CE.\35\
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    \35\ See FINRA Rule 1240(a)(3).
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    The MSRB is proposing to amend MSRB Rule G-3(i)(i)(A)(3) to 
expressly exempt Financial Services Industry Affiliate-eligible persons 
(i.e., those individuals eligible for a waiver, pursuant to 
Supplementary Material .04 of MSRB Rule G-3, from the requirements of 
this provision).

D. Reassociation

    Currently, MSRB Rule G-3(i)(i)(A)(4), on reassociation, states that 
any registered person who has terminated association with a dealer and 
who becomes reassociated in a registered capacity with a dealer, within 
two years, shall participate in the Regulatory Element at the required 
intervals \36\ that apply based on such person's initial registration 
anniversary date rather than the date of reassociation in a registered 
capacity. Also, the rule requires former registered persons who become 
reassociated with a dealer in a registered capacity after a two-year 
period to satisfy CE program requirements in their entirety based on 
the most recent registration date.
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    \36\ As aforementioned, the required intervals, pursuant to MSRB 
Rule G-3(i)(i)(A)(1) are the second registration anniversary and 
every three years, thereafter.
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    FINRA Rule 1240(a)(4) provides that persons who have not completed 
the Regulatory Element component of CE for a registration category by 
December 31 of each calendar year prior to re-registering, would not be 
approved for registration for that category until the appropriate 
qualification requirement is satisfied.\37\
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    \37\ Under approved amendments to FINRA Rule 1240(a)(4), a 
person seeking registration who has not completed any Regulatory 
Element content would be required to either (i) complete the 
Regulatory Element component of continuing education; (ii) pass an 
examination for the applicable registration category; or (iii) 
obtain an unconditional examination waiver for the applicable 
registration category, as applicable. See FINRA Rule 1240(a)(4).
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    The MSRB's proposed rule change would amend MSRB Rule G-
3(i)(i)(A)(4) to specify the CE requirements that must be satisfied in 
order for individuals to have their re-registration approved by the 
appropriate enforcement authority. More specifically, the proposed rule 
change would require persons who are re-registering with the 
appropriate examining authority to complete the Regulatory Element 
component of CE for the registration category annually by December 31 
of each calendar year. The MSRB's proposed rule change would also make 
technical amendments, similar to approved changes to FINRA rules, to 
add the phrase ``or registering'' to MSRB Rule G-3(i)(i)(A)(5) to 
provide that the Regulatory Element requirements apply to individuals 
who are registered or in the process of registering as a representative 
or principal. MSRB proposed a second technical amendment to MSRB Rule 
G-3(i)(i)(A)(6) to delete the phrase ``continuing education'' that 
appears before the term ``Regulatory Element.''

II. Enhancements to the Firm Element Component of CE To Foster 
Efficiencies

    Currently, MSRB Rule G-3(i)(i)(B), on Firm Element, requires that 
dealers maintain a CE program for their covered registered persons \38\ 
to enhance such

[[Page 56141]]

persons' securities knowledge, skill and professionalism.\39\ The Firm 
Element is a firm-administered training program that requires dealers 
to annually conduct a needs analysis to evaluate and prioritize their 
training needs. A needs analysis generally reflects a firm's assessment 
of its unique training needs based on various factors, for example, the 
firm size, organizational structure, business activities the firm and 
its associated persons engage in, the level of industry experience the 
firm's associated persons have and any changes to applicable rules or 
regulations.\40\ Upon completion of a needs analysis, a dealer is 
required to develop a written training plan, consistent with its 
analysis of the training priorities identified. Additionally, dealers 
must maintain records documenting the completion of the needs analysis, 
the content of the training programs and completion of the training by 
each of the firm's covered registered persons, in accordance with the 
written training plan.\41\
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    \38\ Under MSRB Rule G-3(i)(i)(B)(2)(1), ``covered registered 
persons'' is defined to mean any person(s) registered with a dealer 
and qualified as a representative or principal in accordance with 
MSRB Rule G-3 or as a general securities principal and who regularly 
engages in or supervises municipal securities activities. Currently, 
covered registered persons include only those registered persons who 
have direct contact with customers in the conduct of a dealer's 
securities sales, trading and investment banking activities, along 
with their immediate supervisors. Dealers must determine as part of 
their evaluation of training needs analysis which registered persons 
are regularly engaged in such municipal securities activities and 
therefore are required to participate in annual training.
    \39\ See Exchange Act Release No. 72705 (July 29, 2014), 79 FR 
45529 (August 5, 2014) (File No. SR-MSRB-2014-05) (available at 
https://www.msrb.org/~/media/Files/SEC-Filings/2014/MSRB-2014-05-
Federal-Register-
Approval.ashx?la=en&hash=5D9AC0B57D72F677B503E7FA7ACA3DE3).
    \40\ See MSRB Rule G-3(i)(i)(B)(2)(a).
    \41\ See MSRB Rule G-9(b)(viii)(C).
---------------------------------------------------------------------------

    The MSRB has supported a principles-based approach to compliance 
with the Firm Element requirement and afforded dealers considerable 
flexibility in developing the scope and content for their Firm Element, 
subject to the enumerated minimum content requirements. A dealer's Firm 
Element, as prescribed in MSRB Rule G-3(i)(i)(B)(2)(b), on minimum 
standards for training programs, must address, with respect to 
municipal securities products, services and strategies offered by the 
dealer, at a minimum:
    (i) General investment features and associated risk factors;
    (ii) Suitability and sales practice considerations; and
    (iii) Applicable regulatory requirements.
    MSRB Rule G-3(i)(i)(B)(4) also provides that the appropriate 
enforcement authority may require a dealer, individually or as part of 
a larger group, to provide specific training to its covered persons in 
such areas that the enforcement authority deems appropriate.

A. Persons Subject to Firm Element

    As mentioned above, MSRB Rule G-3(i)(i)(B), on Firm Element, 
requires that dealers maintain a CE program for their covered 
registered persons. Pursuant to MSRB Rule G-3(i)(i)(B)(1), ``covered 
registered persons'' includes any person registered and qualified as a 
representative or principal with a dealer in accordance with MSRB Rule 
G-3 or as a general securities principal and who regularly engages in 
or supervises municipal securities activities.
    Prior to its rule change, FINRA applied Firm Element requirements 
to ``covered registered persons,'' who were defined to include any 
registered person who had direct contact with a customer in the conduct 
of their securities sales, trading and investment banking activities; 
operations persons, research analysts and immediate supervisors of such 
persons.\42\ FINRA deleted the reference to ``covered'' in its present 
definition of registered persons, expanding the definition to be 
inclusive of all registered persons, including any person permissively 
registered as a representative or principal pursuant to FINRA Rule 
1210.02, on permissive registrations.\43\ FINRA extended the definition 
to help ensure that firms enhance the securities knowledge, skill and 
professionalism of all registered persons. In addition, the expanded 
definition is intended to ensure that firms provide all registered 
persons with appropriate learning materials.\44\ FINRA's extension of 
the definition to all registered persons also means that individuals 
who maintain solely a permissive registration under FINRA Rule 1210.02 
are also subject to Firm Element, thus aligning FINRA's Firm Element 
requirement with other broadly-based training requirements such as 
anti-money laundering (``AML'') and compliance meetings.\45\
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    \42\ See FINRA Rule 1240(b)(1), as effective prior to January 1, 
2023.
    \43\ See FINRA Rule 1240(b)(1). See also prior FINRA Rule 
1240(a)(5) definition of ``Covered Person.'' Permissive 
registrations as representatives or principals under Rule 1210.02 
(Permissive Registrations) may be granted upon application or to 
maintain the registration of individuals who are associated persons 
of a FINRA member firm or individuals engaged in the investment 
banking or securities business of a foreign securities affiliate or 
subsidiary of a FINRA member. Individuals holding such permissive 
registrations are subject to all FINRA rules relevant to their 
activities.
    \44\ See Exchange Act Release No. 92183 (June 15, 2021), 86 FR 
33427, 33430 (June 24, 2021) (File No. SR-FINRA-2021-015) (Proposed 
Rule Change To Amend FINRA Rules 1210 (Registration Requirements) 
and 1240 (Continuing Education Requirements) (available at: https://www.govinfo.gov/content/pkg/FR-2021-06-24/pdf/2021-13286.pdf).
    \45\ Id. FINRA stated in its filing that it would provide firms 
with flexibility, consistent with their needs analysis, in 
determining what types of training, including industry conferences, 
may be applied to Firm Element. FINRA expects that firms will 
provide Firm Element training that is more specific and relevant to 
the day-to-day activities of registered persons, including their 
roles, activities or responsibilities, as well as ethics and 
professional responsibility.
---------------------------------------------------------------------------

    The MSRB is proposing to likewise extend Firm Element training 
requirements to all registered persons; thereby deleting the specific 
requirement for dealers to conduct annual municipal securities training 
for registered representatives who regularly engage in, and municipal 
securities principals who regularly supervise, municipal securities 
activities. Accordingly, the proposed rule change would amend MSRB Rule 
G-3(i)(i)(B)(1) to delete the term ``covered'' from the phrase 
``covered registered persons'' and update all applicable cross 
references under MSRB Rule G-3(i)(i)(B).
    As the MSRB has previously stated, from the inception of the rule, 
the MSRB has intended for dealers to consider the scope of their 
municipal securities activities and regulatory developments in 
preparing their annual written training plan. Dealers are reminded that 
in developing a written training plan, each dealer must take into 
consideration the firm's size, organizational structure, scope of 
business activities, as well as regulatory developments and the 
performance of covered registered persons in the Regulatory Element.
    This broader and expanded definition aligns with FINRA's amended 
definition of ``registered persons'' under FINRA Rule 1240(b)(1), on 
persons subject to the Firm Element. Also consistent with FINRA, the 
MSRB's proposed rule change would result in inclusion of individuals 
who maintain solely a permissive registration, consistent with MSRB 
Rule G-3 Supplementary Material .03 (Permissive Qualification), in Firm 
Element training requirements. The MSRB believes that expansion of the 
definition to include all registered persons, including individuals 
subject to permissive registrations, in Firm Element training will 
serve to ensure that all registered persons receive relevant and 
comprehensive Firm Element training, increasing their knowledge and 
understanding of applicable rules in furtherance of investor 
protection.

[[Page 56142]]

B. Recognition of Other Outside Training and Credentialing Programs To 
Satisfy Firm Element

    The MSRB does not currently have a rule that expressly provides for 
the use of other training and credentialing programs to satisfy the 
Firm Element requirements.
    FINRA's amended rules regarding the Firm Element are meant to 
better align Firm Element requirements with other required training. 
More specifically, as also noted above, FINRA's amendments to Rule 
1240(b)(1), on persons subject to Firm Element, extends the Firm 
Element requirements to all registered persons, including persons who 
maintain solely a permissive registration consistent with FINRA Rule 
1210.02, on permissive registrations, thereby further aligning the Firm 
Element requirement with other broadly-based training requirements.\46\ 
Furthermore, FINRA's approved amendments modify its minimum training 
criteria under Rule 1240(b)(2)(B) to, by and large, require that Firm 
Element training must cover topics related to the role, activities or 
responsibilities of the registered person, as well as ethics and 
professional responsibility. Hence, FINRA is no longer prescribing 
specific subject matters that must be addressed as part of the minimum 
standards for Firm Element content.\47\ Additionally, FINRA Rule 
1240(b)(2)(D), on participation in other required trainings, expressly 
permits firms to consider training relating to the AML compliance 
program and the annual compliance meeting towards satisfying a person's 
annual Firm Element requirement.
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    \46\ Consistent with MSRB requirements, FINRA's current Firm 
Element requirements only apply to ``covered registered persons'' 
and not all registered persons, until January 1, 2023, when the new 
Rule 1240(b)(1) definition of ``registered persons'' becomes 
effective.
    \47\ FINRA's rule, prior to being amended, required, at a 
minimum, in addition to ethics and professional responsibility that 
firms' CE programs covered the following: general investment 
features and associated risk factors; suitability and sales practice 
considerations; and regulatory requirements related to securities 
products, services and strategies.
---------------------------------------------------------------------------

    The MSRB's proposed rule change would amend MSRB Rule G-
3(i)(i)(B)(2)(b), on minimum standards for training programs, to 
require dealers' training programs to, at a minimum, cover training 
topics related to the role, activities or responsibilities of the 
registered person, and professional responsibility, and would delete 
reference to other specific subject matters specified in the rule. The 
proposed rule change, consistent with amended FINRA requirements, would 
also insert subparagraph (d) under MSRB Rule G-3(i)(i)(B)(2), thereby 
allowing dealers to count their AML compliance program training \48\ 
towards satisfying registered persons' Firm Element requirement; and 
would permit the annual compliance meeting, to the extent appropriate, 
to satisfy Firm Element requirements for those persons associated with 
a member of a registered securities association.
---------------------------------------------------------------------------

    \48\ Title III of the USA PATRIOT Act, also known as the 
International Money Laundering Abatement and Anti-Terrorist 
Financing Act of 2001 (``AML Act'') imposes certain obligations on 
financial institutions and the dealer community. Section 352 of the 
AML Act requires financial institutions to establish certain minimum 
anti-money laundering standards and to develop and implement a 
written anti-money laundering compliance program by April 24, 2002. 
See 31 U.S.C. 5318(h) (amended by section 352 of the AML Act).
---------------------------------------------------------------------------

III. Facilitate Maintaining Qualifications Through Continuing Education 
for Previously Registered Persons

A. Permit Previously Registered Persons To Maintain Qualification 
Through Continuing Education

    FINRA's CE rule amendment added FINRA Rule 1240(c) and 
Supplementary Material .01 and .02 to Rule 1240 to provide eligible 
individuals who terminate any representative or principal registrations 
with the option to maintain their qualification for such terminated 
registrations by completing the required content in the proposed 
continuing education program.\49\ The proposed continuing education 
program content, for such persons who have terminated their 
registration(s), would consist of a combination of Regulatory Element 
and Firm Element content selected by FINRA and the CE Council.
---------------------------------------------------------------------------

    \49\ As approved, the rule changes include a look-back provision 
that would, subject to specified conditions, allow persons who have 
been registered as a representative or principal within two years 
immediately prior to the implementation date, January 1, 2023, of 
the proposed rule change to maintain their qualification by 
completing the required CE program requirements. Additionally, as 
addressed later within this filing, persons who have been FSAWP 
participants immediately prior to the implementation date of the 
proposed rule change would have the option to enter the proposed 
continuing education program.
---------------------------------------------------------------------------

    FINRA's amended rule does not affect the two-year qualification 
period--meaning eligible persons who would prefer not to participate in 
the proposed continuing education program for those with terminated 
registration(s) would continue to be subject to the current two-year 
qualification period. Rather, the amended rule would provide such 
persons an alternative means of keeping up with regulatory developments 
and securities knowledge following the termination of their 
registration(s). FINRA's rule changes generally align with other 
professions in which persons are allowed to maintain their 
qualifications through continuing education during a period of absence 
from their careers, such as accountants and attorneys. FINRA 
anticipates making enhancements to its systems to notify individuals of 
their eligibility to participate in the proposed continuing education 
program and also notify them of their annual continuing education 
requirement if entered into the program.\50\
---------------------------------------------------------------------------

    \50\ See supra note 44.
---------------------------------------------------------------------------

    In order to maintain qualifications after terminating 
registration(s), FINRA Rule 1240(c)(1)-(6) requires the following 
conditions to be satisfied:
     persons must be registered in the terminated registration 
category for at least one year immediately prior to the termination of 
their registration; \51\
---------------------------------------------------------------------------

    \51\ In addition to the one-year requirement, persons cannot be 
the subject of a statutory disqualification, as defined in Section 
3(a)(39) of the Exchange Act, during the person's registration 
period. See FINRA Rule 1240(c)(1).
---------------------------------------------------------------------------

     persons can elect to enter the proposed continuing 
education program upon terminating their registration or within two 
years from such termination of registration; \52\
---------------------------------------------------------------------------

    \52\ Persons who elect to participate at the later date, and not 
upon terminating their registration(s), would be required to 
complete any continuing education that becomes due between the time 
of their Form U5 (Uniform Termination Notice for Securities Industry 
Registration) submission and the date that they commence their 
participation. See FINRA Rule 1240(c)(2).
---------------------------------------------------------------------------

     persons would be required to complete annually by December 
31 all prescribed continuing education, but may seek an extension of 
time for good cause; \53\
---------------------------------------------------------------------------

    \53\ See FINRA Rule 1240(c)(3).
---------------------------------------------------------------------------

     persons would have a maximum of five years in which to re-
register with a FINRA member firm and would be required to satisfy all 
other requirements relating to the registration process; \54\
---------------------------------------------------------------------------

    \54\ Pursuant to FINRA Rule 1240(c), persons that avail 
themselves of the proposed continuing education program in order to 
maintain their qualifications after terminating their 
registration(s), can re-gain eligibility to participate in the 
program, so long as such persons re-register with a firm for a 
period of at least one year, provided they satisfy the other 
participation conditions and limitations. See FINRA Rule 1240(c)(3).
---------------------------------------------------------------------------

     persons who have been CE inactive for two consecutive 
years, or who become CE inactive for two consecutive years during their 
participation, would not be eligible to participate or continue; \55\ 
and
---------------------------------------------------------------------------

    \55\ See FINRA Rule 1240(c)(4) and (5).
---------------------------------------------------------------------------

     persons who are subject to a statutory disqualification, 
or who become subject to a statutory disqualification following the

[[Page 56143]]

termination of their registration or during their participation in the 
continuing education program would not be eligible to participate or 
continue.\56\
---------------------------------------------------------------------------

    \56\ See FINRA Rule 1240(c)(6).
---------------------------------------------------------------------------

    Finally, FINRA's rule change made conforming amendments to Rule 
1210, on registration requirements.
    As aforementioned, under current MSRB rules a person whose 
registration(s) as a representative or principal has been terminated 
for two or more years does not have a path to maintain qualifications 
and must requalify by taking and passing the applicable examination(s) 
or by obtaining a waiver of such requirements. More specifically, the 
MSRB does not have a mechanism in place for persons to maintain their 
qualification(s) after the expiration of two years since the date of 
termination of any registration(s). The proposed rule change would 
adopt MSRB Rule G-3(i)(i)(C) to provide a mechanism for persons who 
have terminated their registration(s) to maintain their qualifications 
\57\ by participating in the continuing education program administered 
by FINRA, subject to the specified conditions having been met.\58\
---------------------------------------------------------------------------

    \57\ As previously mentioned, the proposed rule change is 
specific to dealers' professional qualification obligations under 
MSRB Rule G-3 and the MSRB is not proposing to modify municipal 
advisors' obligations under the Rule.
    \58\ More specifically, the proposed rule change would provide 
those persons who have terminated their registration(s) would be 
permitted to maintain their qualification(s) beyond the current two-
year timeframe for up to five years by satisfying annual CE 
requirements, if such a person: (i) was registered in the terminated 
registration category for at least one year immediately prior to the 
termination of his/her registration; (ii) elects to enter the 
proposed continuing education program upon terminating their 
registration or within two years from such termination of 
registration; (iii) completes the prescribed continuing education 
annually by December 31st; (iv) re-registers with a FINRA member 
firm and would be required to satisfy all other requirements 
relating to the registration process; and (v) is not subject to a 
statutory disqualification or becomes subject to a statutory 
disqualification. Proposed MSRB Rule G-3(i)(i)(C) and the prescribed 
eligibility requirements shall apply to any registered persons 
associated with a member of a registered securities association at 
the time of their termination from registration. For example, an 
associated person of a member of a registered securities association 
can associate with a bank dealer firm for the prescribed five-year 
period and still maintain qualification by way of the new CE 
Program.
---------------------------------------------------------------------------

    The ability for persons to maintain qualification(s) after 
terminating their registration(s) with a firm is consistent with other 
professions (e.g., law and accounting) and promotes the desired outcome 
of preserving market knowledge and expertise by providing knowledgeable 
professionals with the opportunity to re-enter the industry with 
greater ease after stepping away for a period of time to address other 
life issues. Retention of industry professionals who know and 
understand securities laws, regulations and MSRB rules will protect 
investors and serve the market. In addition, the proposed rule contains 
rigorous continuing education standards that ensure that these persons 
maintain up-to-date knowledge about securities laws, regulations and 
MSRB rules, among other things, promoting investor protection and the 
public interest.

IV. Facilitate Eligibility of Persons Enrolled in the Financial 
Services Industry Affiliate Program To Transition to Proposed 
Continuing Education Program

    Supplementary Material .01 of FINRA Rule 1240, states that a person 
participating in the Financial Services Affiliate Waiver Program under 
Rule 1210.09 immediately preceding the effective date of the proposed 
rule change shall be eligible to participate in the continuing 
education program under Rule 1240(c), on continuing education program, 
for persons maintaining their qualification after the termination of a 
registration, subject to certain conditions being met under paragraphs 
(c)(3), (c)(5) and (c)(6).\59\ If such persons elect to participate in 
the continuing education program, FINRA will adjust the time remaining 
to participate by deducting from that period the amount of time that 
has lapsed between the date that such persons terminated their 
registration categories and the March 15, 2022 effective date of the 
rule.
---------------------------------------------------------------------------

    \59\ Persons eligible for participation shall make their 
election to participate in the maintaining qualification CE Program 
by the March 15, 2022, effective date. Generally, the conditions 
that must be satisfied include: the person completes annually by 
December 31 of the calendar year; the person does not become subject 
to a continuing education deficiency with respect to his or her 
Regulatory Element, for two consecutive years; and the person does 
not become subject to a statutory disqualification following the 
termination of his or her registration category or while 
participating in the CE program.
---------------------------------------------------------------------------

    Supplementary Material .04 of MSRB Rule G-3, similarly, contains an 
exception to the present requalification by examination by granting a 
waiver from the examination requirement for individuals who work for a 
financial services industry affiliate of a dealer. Under current 
Supplementary Material .04, such individuals can be designated as 
FSAWP-eligible, if the eligibility requirements are met, which include: 
(1) a requirement that such persons be registered as a representative 
or principal for a total of five years within the most recent 10-year 
period; (2) the waiver request is made within seven years of such 
persons' initial designation; (3) persons continuously worked for a 
financial services affiliate of a dealer since terminating association 
with a dealer; (4) persons who completed the Regulatory Element portion 
of CE consistent with Rule requirements based on such persons' most 
recent registration status and on the same Regulatory Element cycle, if 
they remained registered; and (5) such persons have no pending or 
adverse regulatory matters or termination and have not otherwise been 
subject to a statutory disqualification while working for a financial 
services industry affiliate(s) of a dealer.
    Supplementary Material .04 of MSRB Rule G-3, would state that FINRA 
is not accepting any new persons to enter its waiver program due to the 
establishment of the new continuing education program, which allows 
persons who have terminated their registration(s) to maintain their 
qualifications, subject to meeting specified conditions, by completing 
the requisite annual continuing education requirements.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
the provisions of Section 15B(b)(2)(A) of the Act,\60\ which authorizes 
the MSRB to prescribe standards of training, experience, competence, 
and such other qualifications as the Board finds necessary or 
appropriate in the public interest or for the protection of investors 
and municipal entities or obligated persons; and Section 15B(b)(2)(C) 
of the Act,\61\ which provides among other things, 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 among regulators, [. . .] in general, to 
protect investors, municipal entities, obligated persons, and the 
public interest [. . .].
---------------------------------------------------------------------------

    \60\ 15 U.S.C. 78o-4(b)(2)(A).
    \61\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    Under Section 15B(b)(2)(A) of the Act,\62\ the proposed rule change 
is necessary, appropriate and in the public interest because it 
enhances investor protection through enhanced training standards for 
municipal securities professionals, and also includes more efficient, 
effective and flexible continuing education requirements for municipal 
market professionals that will lead to better retention of 
knowledgeable municipal securities

[[Page 56144]]

market professionals, enhancing and promoting investor protection and 
the public interest.
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78o-4(b)(2)(A).
---------------------------------------------------------------------------

    In accordance with Section 15B(b)(2)(C) of the Act,\63\ the 
proposed rule change would continue to prevent fraudulent and 
manipulative acts by ensuring that municipal securities market 
professionals meet operational competence, training, experience and 
qualification standards, and such protections would not be diminished 
by the proposed rule change. The proposed rule change would help 
promote just and equitable principles of trade, and protect investors, 
municipal entities, obligated persons and the public interest because 
municipal securities professionals receiving Regulatory Element content 
and just-in-time training on a more frequent basis will enhance 
understanding of federal securities laws and regulations, and MSRB 
rules. The proposed rule change would require that all registered 
persons, rather than just covered registered persons, receive the Firm 
Element component of CE; thereby ensuring that all individuals receive 
core training pertaining to their firm's practices, changes in 
municipal market practices, and other regulatory developments, which 
furthers the prevention of manipulative acts and practices and 
protection of investors, municipal entities, and the public interest.
---------------------------------------------------------------------------

    \63\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    In the same vein, by the proposed rule change expressly stating 
that other outside required regulatory training and credentialing 
programs can be used to satisfy the Firm Element component of CE, 
municipal market professionals may receive more current, flexible, 
comprehensive and effective training, enhancing the overall skill and 
professionalism of municipal securities professionals, which advances 
investor protection.
    Additionally, the proposed rule change would also remove burdens on 
re-entry for certain previously registered municipal securities 
professionals who terminated their registrations for more than two 
years by enabling them to maintain their qualifications(s) by 
participating in a rigorous, annual CE program, much like professionals 
in other fields such as law and accounting. Specifically, the proposed 
rule change would provide that such municipal securities professionals 
stay abreast of rules and regulatory developments, promoting industry 
retention of a deeper and broader pool of knowledgeable municipal 
securities professionals, in support of the public interest.
    Lastly, aligning the proposed rule change with FINRA's amended CE 
requirements fosters cooperation between regulators and allows for 
regulatory consistency, which promotes investor protection and the 
public interest.

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

    Section 15B(b)(2)(C) of the Act requires that MSRB rules be 
designed not to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\64\ The MSRB 
notes that its policy on economic analysis limits its applications 
regarding rules for which the Board seeks immediate effectiveness.\65\ 
The proposed rule change reflects the MSRB's belief that its CE 
requirements should be generally harmonized with FINRA's rule change 
for purposes of regulatory consistency and efficiency; thereby reducing 
potential dealer confusion, and that such changes do not attach 
additional burdens on dealers. Moreover, the MSRB contends that the 
proposed rule change would enhance municipal securities professionals' 
knowledge and learning opportunities by ensuring that all registered 
persons receive timely and relevant training, which would, in turn, 
enhance compliance and investor protection. Further, the MSRB believes 
that the proposed rule change would aid skilled industry professionals 
in returning to the industry by reducing unnecessary impediments to 
maintaining qualification(s). Finally, the proposed rule change would 
be applied equally to all registered dealers. Therefore, the MSRB 
believes, by aligning the CE requirements with those of FINRA, the 
proposed rule change would not impose a burden on competition. 
Accordingly, the MSRB does not believe 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.
---------------------------------------------------------------------------

    \64\ Id.
    \65\ The Board's ``Policy on the Use of Economic Analysis in 
MSRB Rulemaking'' (``policy''), available at: https://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx, maintains 
that proposed rule changes filed for immediate effectiveness under 
Section 19(b)(3)(A) of the Exchange Act are not subject to the 
policy. With such filings, the MSRB usually focuses its economic 
analysis exclusively on the burden of competition to regulated 
entities. However, the MSRB may include further analysis based upon 
facts and circumstances if it believes that such analysis may inform 
the rulemaking process.
---------------------------------------------------------------------------

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

    The MSRB solicited comments on the CE Council's recommended 
enhancements on September 6, 2018, with the comment deadline of 
November 5, 2018.\66\ As noted above, one comment letter was received 
from Wells Fargo Advisors (``WFA'').\67\ WFA generally supported the CE 
Council's goals and recommendations, but recommended changes, discussed 
below.
---------------------------------------------------------------------------

    \66\ See supra note 24.
    \67\ Id.
---------------------------------------------------------------------------

    WFA recommended maintaining the current Regulatory Element training 
format and timing requirements for currently registered persons, 
expressing concern that moving to an annual requirement that focuses on 
rule changes would degrade the learning experience and also subject the 
firm to added work and expense. WFA next recommended allowing firms to 
customize Regulatory Element training based on registered persons' 
specific registrations and job functions.
    As noted earlier, the MSRB believes that moving the Regulatory 
Element to an annual requirement would provide municipal securities 
professionals with more frequent, timely training that would enhance 
their understanding of federal securities laws, regulations and MSRB 
rules, enhancing their knowledge and compliance in furtherance of 
investor protection.

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) of the Act \68\ and Rule 19b-
4(f)(6) \69\ thereunder. 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.
---------------------------------------------------------------------------

    \68\ 15 U.S.C. 78s(b)(3)(A).
    \69\ 17 CFR 240.19b-4(f)(6).

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[[Page 56145]]

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 [email protected]. Please 
include File Number SR-MSRB-2022-07 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-2022-07. 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 only one method. The Commission will post all comments on 
the Commission's internet website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MSRB-2022-07 and should be submitted on 
or before October 4, 2022.

    For the Commission, pursuant to delegated authority.\70\
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    \70\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-19678 Filed 9-12-22; 8:45 am]
BILLING CODE 8011-01-P