Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G-3 To Create an Exemption for Municipal Advisor Representatives From Requalification by Examination and Remove Waiver Provisions and To Amend MSRB Rule G-8 To Establish Related Books and Records Requirements, 49528-49540 [2023-16109]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Notices]
[Pages 49528-49540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16109]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97984; File No. SR-MSRB-2023-05]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G-
3 To Create an Exemption for Municipal Advisor Representatives From 
Requalification by Examination and Remove Waiver Provisions and To 
Amend MSRB Rule G-8 To Establish Related Books and Records Requirements

July 25, 2023.
    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 July 21, 2023, 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

[[Page 49529]]

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 G-3, on professional qualification requirements to (i) remove 
the waiver provisions with respect to municipal advisor representative 
and principal qualification requirements; (ii) establish a new, 
criteria-based exemption to permit certain individuals to requalify as 
a municipal advisor representative \3\ without reexamination; (iii) 
retitle and replace Supplementary Material .02, on extraordinary 
waivers with text specifying the means for electronic delivery of the 
requisite notice to the MSRB regarding satisfaction of the criteria-
based exemption; and (iv) make technical changes to the rule to update 
certain phrases and clauses. The MSRB also proposes to amend MSRB Rule 
G-8, on books and records, to establish accompanying recordkeeping 
requirements (the proposed amendments to Rules G-3 and G-8 collectively 
make up the ``proposed rule change''). The MSRB requests that the 
proposed rule change be approved with a compliance date of no more than 
30 days following the Commission approval date. The proposed rule 
change is specific to the professional qualification obligations of 
municipal advisors, including associated persons thereof, under Rule G-
3, and does not modify any requirements to firms registered solely as 
brokers, dealers and/or municipal securities dealers (collectively, 
``dealers'' and each, individually ``a dealer''), or associated persons 
thereof.
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    \3\ Rule G-3(d)(i)(A) defines the term ``municipal advisor 
representative'' to mean a natural person associated with a 
municipal advisor who engages in municipal advisory activities, on 
the municipal advisor's behalf, other than a person performing only 
clerical, administrative, support or similar functions. Rule G-
3(d)(ii)(A) requires all persons meeting the definition of a 
municipal advisor representative to be qualified in that capacity by 
taking and passing the Municipal Advisor Representative 
Qualification Examination (``Series 50 examination'') prior to being 
qualified as a municipal advisor representative. Under current Rule 
G-3(d)(ii)(B), any person who, after qualifying as a municipal 
advisor representative, ceases to be associated with a municipal 
advisor firm for two or more years shall re-take and pass the Series 
50 examination, unless a waiver is granted from the Board in 
``extraordinary cases'' pursuant to current Rule G-3(h)(ii).
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    The text of the proposed rule change is available on the MSRB's 
website at https://msrb.org/2023-SEC-Filings, 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.\4\ 
Sections 15B(b)(2)(A)(i) \5\ and 15B(b)(2)(A)(iii) \6\ 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.
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    \4\ See 15 U.S.C. 78o-4(b)(2)(A).
    \5\ See 15 U.S.C. 78o-4(b)(2)(A)(i).
    \6\ See 15 U.S.C. 78o-4(b)(2)(A)(iii).
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Description of the Proposed Rule Change
    As part of the MSRB's rule book modernization initiative and in 
light of the industry-wide continuing education (CE) transformation 
initiative for broker-dealers,\7\ the MSRB undertook a review of Rule 
G-3 to identify opportunities to provide individuals associated with 
municipal advisor firms increased regulatory flexibility with respect 
to maintaining their professional qualifications. To that end, the 
proposed rule change would create a one-time, criteria-based exemption, 
under Rule G-3, for former municipal advisor representatives to, 
without reexamination, requalify in that capacity no later than one 
year after their two-year lapse in qualification. Second, the proposed 
rule change would remove language from Rule G-3 that currently permits 
the Board, in extraordinary cases, to waive the reexamination 
requirements for municipal advisor representatives and principals. 
Third, the proposed rule change would make certain clarifying 
amendments to Rule G-3 to address an interpretive question pertaining 
to a lapse in qualification for an individual associated with a dually 
registered firm that is both a dealer and a municipal advisor. Fourth, 
the proposed rule change would retitle and replace the current text of 
Supplementary Material .02 of Rule G-3 with text specifying the means 
for electronic delivery of the requisite notice to the MSRB regarding 
satisfaction of the criteria-based exemption. Additionally, the 
proposed rule change would make technical amendments to Rule G-3 to 
update certain phrases, clauses and referenced provisions to, among 
other things, improve the overall readability of the rule. Finally, the 
proposed rule change would amend Rule G-8 to require municipal advisors 
to make and keep certain books and records relating to the exemption to 
be created under the proposed rule change, as prescribed under Rule G-
3(h)(ii)(I).
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    \7\ As industry and market practices evolved in recent years, 
the MSRB, in coordination with other self-regulatory organizations, 
advanced rulemaking initiatives to modernize applicable professional 
qualification and continuing education program requirements for 
dealers (``CE Transformation''). See e.g., Exchange Act Release No. 
95684 (September 7, 2022), 87 FR 56137 (September 13, 2022) (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) (File No. SR-MSRB-2022-
07).
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    A more detailed description of the proposed rule change follows.
Clarifying Amendments to Rule G-3(d)(ii)(B)
    Currently, pursuant to Rule G-3(d)(ii)(B), on qualification 
requirements for municipal advisor representatives, any person who 
ceases to be associated with a municipal advisor \8\ for two or more 
years after having qualified as a municipal advisor representative, in 
accordance with the rule, must take and pass the Series 50 examination 
prior to being qualified as a municipal advisor representative, unless 
a waiver is granted. Proposed amendments to this provision would 
provide that any person who ceases to be associated with

[[Page 49530]]

``or engaged in municipal advisory activities on behalf of'' a 
municipal advisor for two or more years after having qualified by 
examination as a municipal advisor representative (i.e., experiences a 
``lapse in qualification'') must take and pass the Series 50 
examination unless exempt from such requirement pursuant to Rule G-
3(h)(ii), as amended by the proposed rule change.
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    \8\ For purposes of this filing and Exhibit 5, when the term 
``municipal advisor'' is used it refers only to the firm and not 
associated persons of the firm.
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    The proposed amendments to Rule G-3(d)(ii)(B) add the new language 
``or engaged in municipal advisory activities on behalf of'' which is 
intended to provide clarity on the requirement for an individual 
associated with a firm that is dually registered as a dealer and 
municipal advisor. If an individual associated with such firm ceases to 
be engaged in activity requiring qualification as a municipal advisor 
representative \9\ and instead engages only in municipal securities 
business on behalf of the firm for a period of two or more years, then 
that individual's municipal advisor representative qualification would 
have lapsed, notwithstanding the fact that such person remains 
associated with a firm that is also a registered municipal advisor.\10\ 
The proposed amendments to Rule G-3(d)(ii)(B) would also delete the 
reference to the mention of a waiver (i.e., the clause ``a waiver is 
granted'') to clarify that such persons would need to qualify by 
examination as municipal advisor representatives, unless obtaining the 
one-time criteria-based exemption.
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    \9\ Pursuant to Section 15B(e)(4)(A)(i) and (ii) of the Act (15 
U.S.C. 78o-4(e)(4)(A)(i) and (ii)) and Rules D-13, G-3(d)(i)(A), and 
G-3(d)(ii)(A), municipal advisory activities requiring qualification 
as a municipal advisor representative include providing advice to or 
on behalf of a municipal entity or obligated person with respect to 
municipal financial products or the issuance of municipal 
securities, including advice with respect to the structure, timing, 
terms, and other similar matters concerning such financial products 
or issues; or undertaking a solicitation of a municipal entity or 
obligated person.
    \10\ Under Exchange Act Rule 15Ba1-2, SEC Form MA-I: Information 
Regarding Natural Persons Who Engage in Municipal Advisory 
Activities (``SEC Form MA-I'') is filed with the SEC to indicate 
natural persons who are associated with the municipal advisor and 
engaged in municipal advisory activities on its behalf. See 17 CFR 
240.15Ba1-2. Firms are required to promptly amend Form MA-I, 
pursuant to Exchange Act Rule 15Ba1-5 (17 CFR 240.15Ba1-5), in such 
cases where an individual ceases to engage in municipal advisory 
activities on behalf of a firm.
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    Relatedly, the proposed rule change would provide a technical 
amendment to subparagraph (d)(ii)(B) of Rule G-3 by adding the phrase 
``lapse in qualification'' to define for purposes of the rule when a 
person ceases to be associated with a municipal advisor for two or more 
years at any time after having qualified as a municipal advisor 
representative. The proposed amendments also would replace the phrase 
``a waiver is granted'' with ``exempt'' to make clear that the waiver 
provision for extraordinary cases is being deleted and replaced with a 
criteria-based exemption. The technical amendment to change the word 
``shall'' to ``must'' is intended to add clarity without changing the 
meaning of the term. Lastly, the proposed amendments would replace the 
reference to ``subparagraph'' (h)(ii) with ``paragraph'' (h)(ii) to 
create better uniformity across Rule G-3.
Clarifying Amendments to Rule G-3(e)(ii)(A) and (B)
    Currently, pursuant to Rule G-3(e)(ii)(A), on qualification 
requirements for municipal advisor principals, as a pre-requisite to 
becoming qualified as a municipal advisor principal a person must take 
and pass the Series 50 examination. The proposed amendments to this 
provision would provide that taking and passing the Series 50 
examination is the pre-requisite to becoming qualified as a municipal 
advisor principal ``unless exempt from taking the Municipal Advisor 
Representative Qualification Examination pursuant to paragraph (h)(ii) 
of this rule.'' The proposed amendments to Rule G-3(e)(ii)(A) add the 
new language ``unless exempt from taking the Municipal Advisor 
Representative Qualification Examination pursuant to paragraph (h)(ii) 
of this rule,'' which is intended to allow for individuals previously 
qualified as municipal advisor principals to use the criteria-based 
exemption to obtain requalification with the Series 50 examination and 
provide clarity as to the application to such individuals. 
Notwithstanding the availability of the criteria-based exemption from 
requalification with the Series 50 examination, such municipal advisor 
principals would still need to take and pass the Municipal Advisor 
Principal Qualification Examination (``Series 54 examination'').
    In addition, currently, pursuant to Rule G-3(e)(ii)(B), any person 
who ceases to be associated with a municipal advisor for two or more 
years after having qualified as a municipal advisor principal, in 
accordance with the rule, must take and pass the Series 50 examination 
and the Series 54 examination prior to being qualified as a municipal 
advisor principal, unless a waiver is granted under current 
subparagraph (h)(ii) of this rule. Proposed amendments to this 
provision would provide that any person who ceases to be associated 
with ``or engaged in municipal advisory activities on behalf of'' a 
municipal advisor for two or more years after having qualified by 
examination as a municipal advisor principal must take and pass the 
Series 50 examination unless exempt from such requirement pursuant to 
Rule G-3(h)(ii), as amended by the proposed rule change.
    The proposed amendments to Rule G-3(e)(ii)(B) adds the new language 
``or engaged in municipal advisory activities on behalf of,'' which is 
intended to provide clarity on the requirement for an individual 
associated with a firm that is dually registered as a dealer and 
municipal advisor. For example, if an individual associated with such 
firm ceases to be engaged in activity requiring qualification as a 
municipal advisor principal and instead engages only in municipal 
securities business on behalf of the firm for a period of two or more 
years, then that individual's municipal advisor representative and 
municipal advisor principal qualifications would have lapsed, 
notwithstanding the fact that such person remains associated with a 
firm that is also a registered municipal advisor. The proposed 
amendments to Rule G-3(e)(ii)(B) would also delete the reference to the 
mention of a waiver (i.e., the clause ``a waiver is granted'') to 
clarify that such persons would need to qualify by examination as 
municipal advisor principals.
    Relatedly, proposed amendments to Rule G-3 would contain technical 
amendments to Rules G-3(e)(ii)(A)(1) and G-3(e)(ii)(B). To clarify the 
qualification requirements specific to municipal advisor principals, as 
prescribed under G-3(e)(ii)(A)(1), the proposed rule change would add 
the phrase ``unless exempt from taking the Municipal Advisor 
Representative Qualification Examination pursuant to paragraph (h)(ii) 
of this rule'' to make clear municipal advisor principals have to 
requalify by reexamination unless such individuals have obtained the 
one-time exemption. The proposed rule change would delete the phrase 
``a waiver is granted'' and replace with the clause ``exempt from 
taking the Municipal Advisor Representative Qualification Examination'' 
to make clear that the waiver provision for extraordinary cases is 
being deleted and replaced with an exemption-based criteria for 
municipal advisor principals to use for requalification without 
reexamination for the Series 50 examination. Similarly, as previously 
mentioned, the word ``shall'' would be replaced with ``must'' to 
promote

[[Page 49531]]

clarity; and proposed amendments would replace the reference to 
``subparagraph'' (h)(ii) with ``paragraph'' (h)(ii) to create better 
uniformity across Rule G-3.
Removal of Extraordinary Waiver Provisions Under Rule G-3(h)(ii)
    Proposed amendments to Rule G-3(h)(ii) would remove references, in 
their entirety, to the ability to obtain a waiver in extraordinary 
cases for a former municipal advisor representative or municipal 
advisor principal and would replace such language with a criteria-based 
exemption for former municipal advisor representatives. The MSRB 
believes that this standard set forth within the four corners of the 
rule would provide greater flexibility to municipal advisor firms and 
their associated persons while simultaneously providing greater 
certainty for firms and such individuals who may wish to seek an 
exemption from the obligation to requalify as a municipal advisor 
representative by reexamination. At this time, the MSRB believes that 
the objective nature of the criteria-based exemption is preferable to 
the subjective nature of the waiver provisions in current Rule G-
3(h)(ii). Additionally, the removal of the ability to seek and obtain a 
waiver for municipal advisor principals furthers municipal entity and 
obligated person protection by ensuring, through requalification by 
reexamination, individuals have demonstrated knowledge and skills 
necessary to discharge the responsibilities of a municipal advisor 
principal, including the vested authority for the supervision, 
oversight and management of firms' municipal advisory activities and 
that of its associated persons.\11\
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    \11\ The MSRB has previously stated that the Series 54 
examination is intended to ensure that a person seeking to qualify 
as a municipal advisor principal satisfies a specified level of 
competency and knowledge by measuring a candidate's ability to apply 
the applicable federal securities laws, including MSRB rules to the 
municipal advisory activities of a municipal advisor. See Exchange 
Act Release No. 84341 (October 2, 2018), 83 FR 50708, 50710 (October 
9, 2018) (Notice of Filing of a Proposed Rule Change To Amend MSRB 
Rule G-3, on Professional Qualification Requirements, To Require 
Municipal Advisor Principals To Become Appropriately Qualified by 
Passing the Municipal Advisor Principal Qualification Examination) 
(File No. SR-MSRB-2018-07). In contrast, the MSRB has previously 
noted that the Series 50 examination ensures a minimum level of 
knowledge of the job responsibilities and regulatory requirements by 
passing the general qualification examination. See Exchange Act 
Release No. 73708 (December 1, 2014), 79 FR 72225, 72227 (December 
5, 2014) (Notice of Filing of a Proposed Rule Change Consisting of 
Proposed Amendments to MSRB Rules G-1, on Separately Identifiable 
Department or Division of a Bank; G-2, on Standards of Professional 
Qualification; G-3, on Professional Qualification Requirements; and 
D-13, on Municipal Advisory Activities) (File No. SR-MSRB-2014-08).
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    Relatedly, proposed amendments to Supplementary Material .02, on 
waivers, under Rule G-3 would retitle that paragraph to ``affirmation 
notification'' and delete the entirety of that supplementary material, 
which currently pertains to extraordinary waivers, and would replace it 
with text that specifies how notice regarding use of the criteria-based 
exemption would be required to be submitted to the MSRB.
    The proposed rule change to amend Rule G-3(h)(ii) to establish the 
criteria-based conditions that would be required to be met in order to 
qualify for an exemption are described below.
Proposed Rule Change To Adopt Rule G-3(h)(ii)(A)-(I) To Establish 
Conditions for Obtaining the Criteria-Based Exemption
    The proposed rule change would amend Rule G-3(h)(ii) to prescribe 
that an individual shall be exempt from the requirements of 
subparagraph (d)(ii)(B) if the specified conditions under proposed Rule 
G-3(h)(ii)(A)-(I) are met. Specifically, proposed amendments to adopt 
Rule G-3(h)(ii)(A)-(I) would establish nine specified criteria-based 
conditions that must be met in order for an individual (and the 
municipal advisor firm with which such individual is associated \12\ or 
seeks to be associated) to take advantage of the exemption.
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    \12\ The MSRB notes that an individual who has associated with a 
municipal advisor firm may not engage in any municipal advisory 
activities, as defined under Rule D-13 and described in Section 
15B(e)(4)(A)(i) and (ii) of the Act (15 U.S.C. 78o-4(e)(4)(A)(i) and 
(ii)) and the rules and regulations promulgated thereunder (i.e., 
activities involving the provision of advice to or on behalf of a 
municipal entity or obligated person with respect to municipal 
financial products or the issuance of municipal securities or 
undertaking a solicitation of a municipal entity or obligated 
person), until such time that the individual has satisfied the 
conditions set forth under the rule.
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    The criteria-based conditions that would be required to be met in 
order to qualify for an exemption are described below.
    (1) The individual was previously qualified as a municipal advisor 
representative by taking and passing the Series 50 examination.
    (2) The individual maintained the municipal advisor representative 
qualification for a period of at least three consecutive years while 
associated with and engaging in municipal advisory activities on behalf 
of one or more municipal advisor firm(s).
    (3) Such qualification lapsed pursuant to proposed amended Rule G-
3(d)(ii)(B) and no more than one year has passed since such lapse in 
qualification.
    (4) The individual has not engaged in activities requiring 
qualification as a municipal advisor representative \13\ during the 
individual's lapse in qualification.
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    \13\ See Rule G-3(d)(i)(A).
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    (5) The individual is not subject to any events or proceedings that 
resulted in a regulatory action disclosure report, a civil judicial 
action disclosure report, customer complaint/arbitration/civil 
litigation disclosure report, criminal action disclosure report or 
termination disclosure report on SEC Form MA-I.\14\
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    \14\ The MSRB included these types of disclosures in the 
exemption criteria, as opposed to other types of disclosures 
required by SEC Form MA-I, because these relate most closely to 
violations of municipal advisor-related or investment-related 
regulations, rules, or industry standards of conduct.
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    (6) The individual has not previously obtained the exemption from 
requalification by examination described in the proposed amended Rule 
G-3(h)(ii).\15\
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    \15\ Should an individual's municipal advisor representative 
qualification lapse again after such person obtains the criteria-
based exemption, that individual would be required to requalify by 
taking and passing the Series 50 examination.
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    (7) Prior to engaging in municipal advisory activities on behalf of 
the municipal advisor firm with which the individual is to associate 
(or reassociate), as evidenced by the filing of SEC Form MA-I, the 
municipal advisor firm provided, and the individual completed, CE 
covering, at minimum, the subject areas of: (i) the principles of fair 
dealing; (ii) the applicable regulatory obligations under Rules G-20, 
on gifts and gratuities, G-37, on political contributions and 
prohibitions on municipal securities business and municipal advisory 
business, G-40, on advertising by municipal advisors, and G-8, on books 
and records to be made and maintained; (iii) for non-solicitor 
municipal advisors, the core conduct standards under Rule G-42, 
including the fiduciary duty obligations owed to municipal entity 
clients, or for solicitor municipal advisors, the core obligations of 
Rule G-46; and (iv) any changes to applicable securities laws and 
regulations, including applicable MSRB rules that were adopted since 
the individual was last associated with a municipal advisor.
    (8) Prior to engaging in municipal advisory activities on behalf of 
the municipal advisor firm with which the individual is to associate 
(or reassociate), as evidenced by the filing of an SEC Form MA-I, the 
municipal advisor firm provided, and the individual reviewed the 
compliance

[[Page 49532]]

policies and procedures of the municipal advisor firm.
    (9) Upon satisfaction of the conditions set forth in the paragraphs 
above, the municipal advisor firm filed a completed SEC Form MA-I with 
the SEC with respect to such individual. Within 30 days of the 
acceptance \16\ of a completed SEC Form MA-I identifying such 
individual as engaging in municipal advisory activities on behalf of 
the municipal advisor firm, the municipal advisor firm provided the 
notification (``affirmation notification'') electronically to the MSRB 
that the individual met the criteria in order to be exempt from the 
requalification requirements of Rule G-3(d)(ii)(B) following a lapse in 
qualification.
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    \16\ The SEC does not make the form acceptance date publicly 
available, but this information is made available to the form 
submitter as part of the form filing process.
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    The affirmation notification would be required to be on firm 
letterhead and include the following information:
    1. The municipal advisor firm's MSRB ID number;
    2. The first and last name of the individual seeking to obtain the 
exemption;
    3. The individual's FINRA Central Registration Depository (CRD) 
number if applicable;
    4. The start date of the individual's association (or 
reassociation) with the municipal advisor firm;
    5. An affirmative statement that the municipal advisor has 
undertaken a diligent effort to reasonably conclude that the individual 
met the applicable requirements set forth in proposed amended Rule G-
3(h)(ii);
    6. An affirmative statement attesting that the municipal advisor 
firm provided both the requisite CE and the municipal advisor's 
compliance policies and procedures to the individual for review along 
with the date the individual completed the CE and review of the 
municipal advisor's compliance policies and procedures provided by the 
municipal advisor firm;
    7. The date the municipal advisor firm filed SEC Form MA-I (and the 
date of its acceptance) on behalf of the individual as required under 
subparagraph (h)(ii)(I); and
    8. A signature by the individual seeking to obtain the criteria-
based exemption and a signature by a municipal advisor principal of the 
municipal advisor firm each attesting the accuracy of certain content 
set forth in the affirmation notification. Specifically, the individual 
must sign the affirmation notification attesting that the conditions 
outlined in proposed amended Rule G-3(h)(ii)(A) through (H) were met. 
And, a municipal advisor principal must sign the affirmation 
notification, on behalf of the municipal advisor firm, attesting that, 
based on the exercise of reasonable diligence, the conditions outlined 
in proposed amended Rule G-3(h)(ii)(A) through (I) were met.\17\
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    \17\ The MSRB notes that the respective individual and firm 
signature requirements are intended to differentiate and confirm the 
distinct responsibilities and obligations of the individual seeking 
to obtain the criteria-based exemption and those of the municipal 
advisor firm itself, as evidenced by the signature of a municipal 
advisor principal on behalf of the municipal advisor firm.
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    Additionally, the affirmation notification required to be provided 
to the MSRB within 30 days of the acceptance of a completed SEC Form 
MA-I, pursuant to subparagraph (h)(ii)(I) of this rule would be 
required to be sent to [email protected], in accordance with proposed 
amended Supplementary Material .02 of Rule G-3.
    The conditions are designed to ensure that individuals seeking to 
obtain the exemption (i.e., requalification without reexamination) have 
and maintain the baseline level of knowledge and experience, and have 
exhibited conduct aligned with being a fiduciary, which is in 
furtherance of municipal entity and obligated person protection. The 
MSRB believes that the criteria outlined above balance the goal of 
providing reasonable regulatory flexibility with the demands of the 
fiduciary standard applicable to municipal advisors. For example, the 
requirement that individuals were duly qualified as a municipal advisor 
representative for at least three consecutive years prior to, for 
example, seeking other career opportunities in related capacities 
(i.e., working for a dealer or municipal entity) or stepping away for 
family obligations ensures that a reasonable level of professional 
experience has been established before an individual can obtain the 
exemption. In contrast, this period is not so long as to hinder the 
ability, at a given point, for an individual to, for example, 
temporarily engage in other meaningful roles within the municipal 
securities industry or to step away due to family obligations.
    At the same time, these conditions are designed to enhance an 
individual's familiarity with regulatory and business developments that 
occurred while they were not associated with a municipal advisor firm, 
before reengaging in municipal advisory activities, but are not so 
unduly burdensome as to hinder reassociation. The requirement to 
provide the MSRB with notice of individuals who have obtained the 
exemption (i.e., by submitting the affirmation notification to the 
MSRB) is designed to facilitate transparency and provide an audit trail 
regarding an individual's status as a municipal advisor representative. 
The MSRB will use the affirmation notification, as described in the 
proposed amended Rule G-3(h)(ii)(I), to help identify qualified 
municipal advisor representatives and keep the list of such 
representatives updated on the MSRB's website.\18\ Additionally, the 
conditions pertaining to requisite filings with the SEC also provide an 
audit trail and permit the entities charged with examination and 
enforcement authority to confirm compliance with relevant obligations.
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    \18\ The MSRB publishes a list of registered municipal advisors 
and qualified municipal advisor professionals (available at: https://www.msrb.org/Municipal-Advisors).
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    Relatedly, technical amendments to Rule G-3(h) would retitle the 
header from ``Waiver of Qualification Requirements'' to ``Waiver of and 
Exemption from Qualification Requirements'' to promote clarity. 
Technical amendments to Rule G-3(h)(ii) replace the introductory 
sentence ``The requirements of paragraph (d)(ii)(A) and (e)(ii)(A) may 
be waived by the Board in extraordinary cases for a municipal advisor 
representative or municipal advisor principal'' with the new 
introductory sentence ``An individual shall be exempt from the 
requirements of subparagraph (d)(ii)(B) if all of the following 
conditions are met'' for purposes of setting forth the enumerated 
criteria outlined under the provision.
    Finally, as previously mentioned, the proposed amendments to 
Supplementary Material .02, on waivers, under Rule G-3 would retitle 
the paragraph header from ``Waivers'' to ``Affirmation Notification'' 
and delete the entirety of that supplementary material, which currently 
pertains to extraordinary waivers, and would replace it with text that 
specifies how the firm would submit to the MSRB the affirmation 
notification asserting that the criteria-based exemption has been met.
Timing for Completing the Requisite CE, Review of Compliance Policies 
and Procedures, and Making the Requisite Form Filings
    The MSRB has consistently stated that individuals should take and 
pass the Series 50 examination before completing the necessary form 
filings to become associated persons of municipal

[[Page 49533]]

advisor firms or before registering as municipal advisor firms.\19\ As 
a result, an individual associating with a municipal advisor firm and 
seeking to use the exemption should, in the following order:
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    \19\ See Question 17 of ``FAQs on Municipal Advisor Professional 
Qualification and Examination Requirements'' (available at: https://www.msrb.org/sites/default/files/FAQ-MSRB-Series-50-Exam.pdf).
---------------------------------------------------------------------------

    (i) take and complete the requisite CE (e.g., resources available 
through trade associations or the MSRB, firm-developed materials, or 
off-the-shelf purchased materials);
    (ii) review the municipal advisor firm's compliance policies and 
procedures;
    (iii) have the municipal advisor firm complete SEC Form MA-I in 
accordance with the instructions in the form and file the form 
electronically with the SEC; and
    (iv) submit the requisite affirmation notification to the MSRB 
within 30 days of the acceptance of a completed SEC Form MA-I.
    Whereas, solo-practitioners seeking to use the exemption should in 
the following order:
    (i) take and complete the requisite CE (e.g., resources available 
through trade associations or the MSRB, firm-developed materials, or 
off-the-shelf purchased materials);
    (ii) review the developed compliance policies and procedures of the 
municipal advisor firm;
    (iii) complete SEC Form MA-I in accordance with the instructions in 
the form and file the form electronically with the SEC;
    (iv) complete SEC Form MA: Application For Municipal Advisor 
Registration/Annual Update Of Municipal Advisor Registration/Amendment 
of A Prior Application For Registration (``SEC Form MA'') in accordance 
with the instructions in the form and file the form electronically with 
the SEC; \20\
---------------------------------------------------------------------------

    \20\ Filing Form MA and Form MA-I is mandatory for municipal 
advisor firms that are required to register with the SEC. See 17 CFR 
240.15Ba1-2(a) and (b).
---------------------------------------------------------------------------

    (v) complete MSRB Form A-12, on registration, in accordance with 
the instructions outlined in the MSRB Registration Manual \21\ and file 
the form electronically with the MSRB; \22\ and
---------------------------------------------------------------------------

    \21\ The MSRB Registration Manual is available at https://www.msrb.org/sites/default/files/MSRB-Registration-Manual.pdf.
    \22\ Pursuant to Rule A-12, on registration, a municipal advisor 
must register with the MSRB before engaging in municipal advisory 
activities; prior to their MSRB registration, they must register 
with the SEC and have such registration approved.
---------------------------------------------------------------------------

    (vi) submit the requisite affirmation notification to the MSRB 
within 30 days of the acceptance of a completed SEC Form MA-I.
Proposed Amendments Related to G-8, on Books and Records To Be Made and 
Maintained
    Proposed amendments to Rule G-8, on books and records, would add 
recordkeeping obligations designed to help facilitate and document 
compliance with proposed amendments to Rule G-3. Specifically, the 
proposed rule change would add new paragraph (C) to subsection (h)(vii) 
of Rule G-8 requiring municipal advisor firms to make and maintain the 
following records to evidence compliance with the requirements of Rule 
G-3(h)(ii)(A)-(I):
     A record evidencing that the individual seeking to obtain 
the exemption was previously duly qualified as a municipal advisor 
representative (e.g., copy of the print-out of the individual exam 
results \23\ or exam result certification letter provided by the MSRB);
---------------------------------------------------------------------------

    \23\ See Question 11 of ``FAQs on Municipal Advisor Professional 
Qualification and Examination Requirements'' (available at: https://www.msrb.org/sites/default/files/FAQ-MSRB-Series-50-Exam.pdf) in 
which the MSRB reminds individuals that the test center will provide 
a print-out of individuals' exam results.
---------------------------------------------------------------------------

     Documentation supporting the municipal advisor firm's 
exercise of reasonable diligence in determining that the conditions 
outlined in Rule G-3(h)(ii)(A) through (I) were met in making the 
required affirmation notification in accordance with Rule G-
3(h)(ii)(I)(8) (e.g., copies of relevant SEC form filings reviewed; 
records related to continuing education provided and completed; 
compliance policies and procedures provided and reviewed; and 
attestations or other documentation to support such a determination);
     A copy of the affirmation notification sent to the MSRB as 
required by Rule G-3(h)(ii)(I); and
     A record evidencing that the affirmation notification was 
made in the prescribed manner and within the required period of time as 
described in Rule G-3(h)(ii)(I) (e.g., automatic email delivery 
receipt).
    As aforementioned, the proposed rule change outlining the specific 
recordkeeping requirements supports the municipal advisor principal's 
supervision, review and sign-off that the conditions for the exemption 
have been met, which supports regulatory compliance.
    Relatedly, technical amendments to Rule G-8(h)(vii) would retitle 
the paragraph header from ``Records Concerning Compliance with 
Continuing Education Requirements'' to ``Records Concerning Compliance 
with Professional Qualification Requirements of Rule G-3'' to clarify 
the broader recordkeeping obligations and documentation requirements 
proposed in draft amendments to Rule G-8(h)(vii) that are accompanying 
proposed rule changes to Rule G-3(h)(ii). The other technical changes 
would reposition the word ``and'' and make other minor grammatical 
changes to the items in the series to aid readability.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(A) of the Act,\24\ which authorizes the MSRB to 
prescribe standards of training, experience, competence, and such other 
qualifications as the Board finds necessary or appropriate for the 
protection of municipal entities or obligated persons; and Section 
15B(b)(2)(C) of the Act,\25\ which provides that the MSRB's rules 
shall, among other things, 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, and, in general, to protect municipal entities, obligated 
persons, and the public interest.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78o-4(b)(2)(A).
    \25\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    Under Section 15B(b)(2)(A) of the Act,\26\ the proposed rule change 
is appropriate and in the public interest because more efficient, 
effective and flexible professional qualification requirements for 
municipal advisor representatives will lead to a broader applicant pool 
from which municipal advisor firms may hire. A broader municipal 
advisor representative applicant pool is in the public interest and 
will help protect municipal entities or obligated persons because such 
pool can improve the quality of municipal advisor representative 
candidates and increase diversity in the industry. By expanding the 
potential number of municipal advisor representative candidates, a firm 
may have greater choice in hiring qualified individuals. For example, 
individuals that may disassociate with a municipal advisor firm may 
determine to associate with a dealer in a public finance banker 
capacity or to work for a municipal entity. Such individuals may 
receive valuable and directly applicable experience from a different 
vantage point in the industry that would augment their prior and future 
experience as a municipal advisor

[[Page 49534]]

representative upon reassociating with a municipal advisor firm. This 
difference in perspective and experience could put such municipal 
advisor representative candidates in a position to provide more 
informed advice than they may otherwise have provided.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78o-4(b)(2)(A).
---------------------------------------------------------------------------

    Similarly, a broader applicant pool increases the likelihood of 
greater diversity among municipal advisor representatives who can bring 
new perspectives to their work and the advice that they provide to 
their municipal entity and obligated person clients. Additionally, by 
hiring well-qualified candidates, firms can build bench strength and 
work to leverage institutional knowledge; thereby enhancing the 
informed advice provided to a municipal advisor firm's municipal entity 
and obligated person clients.
    At the same time, the proposed rule change requires the 
satisfaction of conditions that establish safeguards and ensure that 
only qualified candidates may seek to obtain the criteria-based 
exemption from requalification, thereby furthering municipal entity and 
obligated person protection and the public interest. Specifically, the 
stated criteria of at least three years of experience before 
eligibility for the criteria-based exemption and no more than three 
years since ceasing to be associated with a municipal advisor firm is 
in furtherance of municipal entity and obligated person protection 
because these criteria support individuals maintaining their baseline 
level of experience and competence. The MSRB believes that the three-
year thresholds, as opposed to a longer or shorter period, 
appropriately support the ability to establish a necessary and 
meaningful level of proficiency as a municipal advisor representative 
prior to obtaining the exemption. In contrast, while ensuring that such 
regulatory flexibility is available for a limited period of time, on a 
one-time basis, individuals retain the value of that established 
proficiency and can more readily adapt to changes in market practices 
or regulatory requirements upon reengaging in a municipal advisor 
representative capacity.
Prevention of Fraudulent and Manipulative Acts and Practices
    In accordance with Section 15B(b)(2)(C) of the Act,\27\ the 
proposed rule change also would continue to prevent fraudulent and 
manipulative acts and practices by ensuring that municipal advisor 
representatives meet competence, training, experience and qualification 
standards, and such protections would not be diminished by the proposed 
rule change. As noted above, the stated criteria of at least three 
years of experience before eligibility for the exemption and no more 
than three years since ceasing to be associated with a municipal 
advisor firm support individuals in maintaining their baseline level of 
experience and competence. In addition, the proposed rule change would 
require individuals seeking to obtain the exemption to, upon 
associating (or reassociating) with a municipal advisor firm, receive 
relevant and updated core training pertaining to regulatory obligations 
under applicable securities laws and regulations, including MSRB rules, 
which furthers the prevention of manipulative acts and practices. The 
MSRB believes that the three-year thresholds coupled with the more 
robust CE training requirements continue to support the establishment 
of the necessary experience, competence, and training, which in turn 
serves to help prevent fraudulent and manipulative practices and 
protect municipal entities, obligated persons, and the public interest.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

Protection of Municipal Entities, Obligated Persons, and the Public 
Interest
    Consistent with Section 15B(b)(2)(C) of the Act \28\ and the above 
discussion, the proposed rule change would continue to protect 
municipal entities, obligated persons and the public interest because 
municipal advisor representatives would be required to obtain CE 
pertaining to specified topics and regulatory obligations under 
applicable securities laws and regulations, including MSRB rules in 
order to requalify as a municipal advisor professional. Additionally, 
such individuals would not be able to obtain the criteria-based 
exemption if they either engaged in activities requiring qualification 
as a municipal advisor representative during their lapse in 
qualification or they are subject to any events or proceedings that 
resulted in a regulatory action disclosure report, a civil judicial 
action disclosure report, customer complaint/arbitration/civil 
litigation disclosure report, criminal action disclosure report or 
terminations disclosure report on the SEC Form MA-I. These conditions 
help ensure that basic municipal entity and obligated person 
protections remain in place while also providing municipal advisor 
representatives flexibility to pursue other meaningful roles within the 
municipal securities industry or to step away for other reasons; and 
benefits municipal advisor firms by providing the increased ability to 
attract qualified talent.
---------------------------------------------------------------------------

    \28\ Id.
---------------------------------------------------------------------------

    As noted above, a broader municipal advisor representative 
applicant pool is in the public interest and will help protect 
municipal entities and obligated persons because it can improve the 
quality of municipal advisor representative candidates and increase 
diversity in the municipal advisory industry, all of which could 
enhance the quality of advice provided to municipal entity and 
obligated person clients.
    Finally, the MSRB believes that the removal of the ability of a 
municipal advisor representative or principal to apply to the Board 
and, potentially, receive a waiver from the obligation to requalify by 
reexamination would further protect municipal entities and obligated 
persons. As discussed, the proposed rule change would replace such 
ability with the criteria-based exemption. However, it would not extend 
such exemption to municipal advisor principals because the MSRB 
believes principals should be subject to additional regulatory 
requirements given their supervisory, oversight, and management duties, 
and the current criteria-based exemption does not contemplate such 
rigor and heightened regulatory requirements. In practice, the MSRB has 
not received or granted waiver requests for municipal advisor 
principals. Requiring all municipal advisor principals to requalify by 
reexamination following a lapse in qualification ensures municipal 
entity and obligated person protection by necessitating that municipal 
advisor principals satisfy a specified level of competency and 
knowledge of the applicable securities laws and regulations, including 
MSRB rules, in order to perform their duties.\29\
---------------------------------------------------------------------------

    \29\ As discussed in the section below regarding burden on 
competition, current Rule G-3(e)(ii)(C) permits solo-practitioners 
(or individuals associating or re-associating with a firm and 
designated as a principal) who are qualified as municipal advisor 
representatives to function as municipal advisor principals for up 
to 120 days before having to take and pass the Series 54 
examination. In concert with the proposed rule change, these 
provisions would allow such individuals to start their own firm, 
requalify as municipal securities representatives without 
reexamination, and then qualify as municipal advisor principals.
---------------------------------------------------------------------------

Fostering Cooperation and Coordination
    Proposed amendments to Rule G-8, on books and records, would add 
specific recordkeeping obligations designed to help facilitate and 
document compliance with proposed

[[Page 49535]]

amendments to Rule G-3. Specifically, the proposed amendments would add 
a new paragraph (C) to subsection (h)(vii) of Rule G-8 that would 
require municipal advisor firms to make and maintain records to 
evidence their due diligence to ensure compliance with the criteria-
based exemption by individuals seeking to obtain the exemption, and of 
the affirmation notification provided to the MSRB required by proposed 
amendments to Rule G-3(h)(ii)(I). The MSRB believes that the proposed 
rule change is consistent with Section 15B(b)(2)(C) of the Act \30\ 
because the specific documentation obligation and related books and 
records obligations stemming from the proposed amendments to Rule G-
8(h)(vii)(C) would foster cooperation by providing examining 
authorities with the necessary information to assist them in examining 
for and evaluating compliance with the criteria-based exemption. The 
MSRB further believes that the rigor of such review by examining 
authorities for compliance with the prescribed recordkeeping 
obligations would foster municipal entity and obligated person 
protection because municipal advisor firms would take due care to 
ensure compliance with the qualification standards under the criteria-
based exemption and that only such individuals that satisfy such 
exemption are engaging in municipal advisor activities. Lastly, as 
aforementioned, the MSRB believes that the proposed amendments to Rule 
G-8(h)(vii)(C) would help create an audit trail to assist examination 
and enforcement authorities in their examination for compliance with 
the criteria-based exemption, fostering cooperation and coordination 
between regulatory authorities.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

Promote Just and Equitable Principles of Trade
    The technical amendments outlined throughout are consistent with 
the provisions of Section 15B(b)(2)(C) of the Act \31\ in that they 
promote just and equitable principles of trade by ensuring that Rules 
G-3 and G-8 remain accurate, clear and understandable for the municipal 
advisory community.
---------------------------------------------------------------------------

    \31\ Id.
---------------------------------------------------------------------------

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

    Section 15B(b)(2)(C) of the Act \32\ requires that MSRB rules not 
be designed to impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. Furthermore, 
Section 15B(b)(2)(L)(iv) of the Act \33\ requires that rules adopted by 
the MSRB 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 MSRB does not believe that the proposed amendments to Rule G-3 and 
Rule G-8 would impose any unnecessary or inappropriate burden or impact 
on competition, as they would provide additional flexibility and 
certainty to those seeking to associate with municipal advisor firms as 
municipal advisor representatives and to municipal advisor firms, 
thereby, enhancing the hiring of qualified, experienced individuals; 
and they would also support evidencing compliance with the criteria-
based exemption.
---------------------------------------------------------------------------

    \32\ Id.
    \33\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
---------------------------------------------------------------------------

    In determining whether the standards under Section 15B(b)(2)(C) 
\34\ and (b)(2)(L)(iv) \35\ of the Act related to burden on competition 
and burden on small municipal advisors have been satisfied, the MSRB 
was guided by the Board's Policy on the Use of Economic Analysis in 
MSRB Rulemaking.\36\ In accordance with this policy, the MSRB has 
evaluated the potential impacts on competition of the proposed 
amendments to Rule G-3 and Rule G-8. The proposed amendments to Rule G-
3 would create a criteria-based exemption for individuals to requalify 
in a municipal advisor representative capacity without reexamination 
after a lapse in qualification. The proposed rule change would remove 
language from Rule G-3 that currently permits municipal advisor 
professionals to seek a waiver from the MSRB from the requirement to 
requalify by reexamination in extraordinary cases. Additionally, the 
proposed rule change would make accompanying amendments to Rule G-8 to 
establish books and records requirements related to the criteria-based 
exemption. The proposed amendments to Rule G-3 and accompanying 
amendments to Rule G-8 are intended to offer flexibility, provide 
additional certainty, and eliminate the extraordinary nature of the 
waiver process for individuals and municipal advisor firms without 
reducing protection for municipal entity and obligated person clients 
who expect that municipal advisor professionals have satisfied 
professional qualification standards. Specifically, proposed amendments 
to Rule G-3 would afford an individual whose qualification as a 
municipal advisor representative has lapsed the opportunity to forego 
requalification by reexamination if certain, specified conditions are 
met.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78o-4(b)(2)(C).
    \35\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
    \36\ Policy on the Use of Economic Analysis in MSRB Rulemaking 
is available at https://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. In evaluating whether there was a burden on 
competition, the Board was guided by its principles that required 
the Board to consider costs and benefits of a rule change, its 
impact on capital formation and the main reasonable alternative 
regulatory approaches.
---------------------------------------------------------------------------

    Although the proposed amendments to Rule G-3 and Rule G-8 would be 
applied equally to all individuals seeking to associate with municipal 
advisor firms and to all such municipal advisor firms, the MSRB 
acknowledges potential burdens on competition for small or solo-
practitioner municipal advisor firms with respect to the exemption's CE 
requirements and because the exemption does not extend to municipal 
advisor principals. As a result, although all firms would benefit from 
the proposed rule change for municipal advisor representatives, solo-
practitioners and smaller municipal advisor firms may experience a 
smaller benefit than larger municipal advisor firms due to the fact the 
exemption would not extend to those seeking to associate and function 
in a principal-level capacity. However, as discussed in detail below, 
the MSRB believes the proposed amendments to Rule G-3 and Rule G-8 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act \37\ or 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.\38\
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78o-4(b)(2)(C).
    \38\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
---------------------------------------------------------------------------

Benefits, Costs and Effect on Competition
    The main benefit of proposed amendments to Rule G-3 and Rule G-8 
would be to create a criteria-based exemption and related recordkeeping 
requirements. The MSRB considered the economic impact associated with 
the proposed amendments to Rule G-3 relative to the baseline, which is 
the current extraordinary waiver provision and assessed incremental 
changes in the benefits and costs in a proposed future state with a 
criteria-based exemption for municipal advisor representatives.

[[Page 49536]]

    The MSRB believes that the proposed rule change provides multiple 
benefits to the eligible population of individuals seeking to associate 
with municipal advisor firms as municipal advisor representatives, and 
municipal advisor firms without impairing the protections afforded to 
municipal entity and obligated person clients of municipal advisor 
firms. First, by increasing the amount of time in which an individual 
may maintain their qualification as a municipal advisor representative 
without reexamination, the proposed rule change provides flexibility 
for certain individuals to, for example, explore other career 
opportunities in the municipal securities industry or to step away to 
address life events, such as childcare or pursue higher education. As a 
result, the criteria-based exemption provided by the proposed rule 
change may increase demand for individuals seeking to reassociate in a 
municipal advisor representative capacity without having to retake the 
Series 50 examination.
    The proposed rule change would require CE that includes coverage of 
specific subject areas and regulatory topics, which would ensure the 
most useful and up-to-date training is provided to individuals who wish 
to take advantage of the proposed exemption, therefore benefiting 
municipal entity and obligated person clients who may receive municipal 
advisory services from the firms with which such persons are 
associated. Furthermore, the proposed rule change reduces uncertainty 
for individuals seeking to requalify by providing clarity on the 
specific criteria needed to requalify without reexamination; and 
therefore, expedites the period by which such individuals can begin to 
engage in municipal advisory activities. In addition, municipal advisor 
firms would be better positioned to assess a potential hire's 
qualifications by evaluating the conditions specified in the proposed 
rule change. Finally, while Rule G-3 does not currently require a 
minimum number of years of past experience to reassociate with a 
municipal advisor firm within the specified two-year period, the MSRB 
believes establishing eligibility criterion of at least three 
consecutive years of past experience to qualify for the criteria-based 
exemption promotes municipal entity and obligated person protection by 
ensuring individuals have an established baseline level of knowledge 
and experience.
    The MSRB believes there is the potential for one-time upfront costs 
for municipal advisor firms related to revising CE training materials 
and existing compliance policies and procedures to facilitate 
compliance with the proposed amendments to Rule G-3 and Rule G-8. 
However, these associated costs should be minor (see Table 1). 
Additionally, under the criteria individuals and municipal advisor 
firms must meet to obtain the exemption, there may be additional 
ongoing cost components to firms associated with conducting due 
diligence when rehiring a previously qualified municipal advisor 
representative and administering the specified CE required to meet the 
exemption. The MSRB estimates the aforementioned cost components at 
approximately four hours incrementally (see Table 1), given that some 
current costs already exist associated with CE and performing due 
diligence in the baseline state. However, for municipal advisor firms 
that do not hire an individual with a lapsed qualification, there would 
be minimal additional costs incurred. Lastly, individuals who are away 
from the industry for more than three years would be required to take 
and pass the Series 50 examination again under the proposed rule 
change, as the waiver request provisions, available only in 
extraordinary cases, would no longer be available. However, given the 
limited use of the waiver process currently,\39\ the MSRB does not 
believe the elimination of this option would have a significant impact 
on individuals seeking to reassociate in a municipal advisor 
representative capacity.
---------------------------------------------------------------------------

    \39\ To date, the MSRB has received only two waiver requests. 
The two requests were specific only to waiving the Series 50 
examination (i.e., not a Series 54 examination waiver request), with 
one of the waivers being received following the publication of MSRB 
Notice 2022-13. See MSRB Notice 2022-13 (Request for Comment on 
Draft Amendments to Create an Exemption for Municipal Advisor 
Representatives from Requalification by Examination) (``RFC'') 
(December 1, 2022) (available at: https://msrb.org/sites/default/files/2022-11/2022-13.pdf).
    \40\ The hourly rate data was gathered from the 2013 SEC's Final 
Rule on Registration of Municipal Advisors. See Exchange Act Release 
No. 70462 (September 20, 2013), 78 FR 67594, 67609 (November 12, 
2013) (File No. S7-45-10). The data reflects the 2023 hourly rate 
level after adjusting for the annual wage inflation rate of 2% 
between 2013 and 2021. See The Federal Reserve Bank of St. Louis 
Employment Cost Index: Wages and Salaries Private Industry 
(available at: https://fred.stlouisfed.org/series/ECIWAG). The MSRB 
uses a blended hourly rate in each category of costs when a task can 
be performed by different levels of professionals. For example, 
while the revision of compliance policies and procedures can be 
conducted by either an in-house attorney (average hourly rate $521) 
or outside counsel (average hourly rate $550), the MSRB chooses the 
blended hourly rate of $536 for this analysis. Similarly, for 
training, the MSRB uses the average rate for a Chief Compliance 
Officer and a compliance attorney; and for ongoing costs, the MSRB 
uses the hourly rate for a compliance attorney. The number of hours 
for each task is based on the MSRB's internal estimate.
[GRAPHIC] [TIFF OMITTED] TN31JY23.151


[[Page 49537]]


Reasonable Alternative Approaches and Effects on Competition
    One alternative the MSRB considered was to update the qualification 
requirements of Rule G-3(d)(ii)(B) \41\ by changing the existing time 
for when a person ceases to be associated with a municipal advisor firm 
from two to five years, instead of from two to three years as currently 
proposed. Although neither the alternative nor the proposed rule change 
would permit the granting of a waiver regardless of the time period, 
individuals would be given greater flexibility when making decisions to 
temporarily cease their association with municipal advisor firms and 
can have certainty that they can reassociate with a more limited 
compliance burden for themselves and the municipal advisor firms.\42\ 
Moreover, a five-year absence from the municipal advisory business 
could result in a more significant gap in knowledge and experience, and 
an individual who returns after such an absence may not be fully aware 
of the latest regulatory and industry changes. The MSRB believes those 
individuals who cease to engage in municipal advisory activities for 
more than three years may benefit from retaking the Series 50 
examination, which is designed to ensure a baseline level of knowledge 
exists about rules and regulations, and the regulatory framework in 
which such individuals operate, as well as to protect municipal entity 
and obligated person clients who may rely on advice from qualified 
municipal advisor representatives.
---------------------------------------------------------------------------

    \41\ As previously mentioned, Rule G-3(d)(ii)(B) currently 
provides, ``Any person who ceases to be associated with a municipal 
advisor for two or more years at any time after having qualified as 
a municipal advisor representative in accordance with subparagraph 
(d)(ii)(A) shall take and pass the Municipal Advisor Representative 
Qualification Examination prior to being qualified as a municipal 
advisor representative, unless a waiver is granted pursuant to 
subparagraph (h)(ii) of this rule.''
    \42\ As noted above, an individual may obtain the criteria-based 
exemption under the proposed rule change only once.
---------------------------------------------------------------------------

    Another alternative the MSRB considered was, instead of requiring 
CE to include coverage of specific subject areas and topics, an 
individual would complete catch-up CE for the relevant time period such 
person ceased association with a municipal advisor firm in order to 
satisfy the exemption's criteria. The MSRB determined that this 
alternative would be challenging for solo-practitioners looking to 
establish a municipal advisor firm because such individuals would not 
have previous training materials readily available, potentially 
creating a burden on competition between a solo-practitioner and 
individuals seeking to join (or reassociate with) existing firms. The 
MSRB notes that while such solo-practitioners may not have developed CE 
training materials addressing all of the prescribed subject matters; 
such firms would be able to utilize ``off-the-shelf content'' or widely 
available industry educational materials (to the extent such materials 
meet the requirements set forth in the proposed rule change), which 
would be a less burdensome approach than creating new CE materials.\43\ 
Thus, the MSRB has deemed the proposed rule change as superior to 
potential alternative approaches, including for small municipal advisor 
firms or solo-practitioners.
---------------------------------------------------------------------------

    \43\ The MSRB has previously noted that the CE requirements for 
municipal advisors affords municipal advisors the flexibility to 
deliver CE in the most convenient and effective manner possible 
based on the firms' business model. In addition, the MSRB noted 
industry trade associations may be a good source of CE training 
materials, in addition to podcasts, webinars and educational 
materials developed by the MSRB. See Exchange Act Release No. 80327 
(March 29, 2017), 82 FR 16449, 16454 (April 4, 2017) (Notice of 
Filing of a Proposed Rule Change to Rule G-3, on Professional 
Qualification Requirements, and Rule G-8, on Books and Records, To 
Establish Continuing Education Requirements for Municipal Advisors 
and Accompanying Recordkeeping Requirements) (File No. SR-MSRB-2017-
02).
---------------------------------------------------------------------------

    As previously noted, while an individual and a firm seeking to 
associate such an individual in the capacity of a municipal advisor 
principal may receive fewer benefits, still, all municipal advisor 
firms would benefit from the proposed rule change allowing individuals 
to requalify in the capacity of municipal advisor representatives.\44\ 
The MSRB acknowledges that there may be a potential burden on 
competition on solo-practitioners or small municipal advisor firms 
because the criteria-based exemption does not extend to municipal 
advisor principals. Specifically, individuals seeking to act as a 
municipal advisor principal would still have to take and pass the 
Series 54 examination in order to engage in principal-level activities. 
Rule G-3(e)(ii)(C) affords temporary relief to an individual (and the 
municipal advisor firm with which such individual associates) who is 
qualified as a municipal advisor representative, but is functioning in 
the capacity of a municipal advisor principal, for a period of 120 days 
after becoming designated as a municipal advisor principal, to take and 
pass the Series 54 examination. As a result, all such persons, 
including those persons seeking to be solo-practitioners and seeking to 
associate with small (or larger) municipal advisor firms would be able 
to function in the principal-level capacity for a limited period of 
time before having to take and pass the Series 54 examination.
---------------------------------------------------------------------------

    \44\ The MSRB notes, pursuant to Rule G-3(e)(ii), on 
qualification requirements, the Series 50 examination is a pre-
requisite to becoming qualified as a municipal advisor principal.
---------------------------------------------------------------------------

    Municipal advisor principals are subject to additional regulatory 
standards given their supervisory, oversight and management duties and 
the MSRB believes that requiring all municipal advisor principals to 
requalify by reexamination following a lapse in qualification helps to 
ensure municipal entity and obligated person protection. Specifically, 
notwithstanding the fact that small municipal advisor firms may 
experience a smaller benefit than larger firms, the MSRB believes that 
reexamination is necessary for all individuals seeking to function in a 
principal-level capacity. The process of reexamination ensures that the 
specified level of competency and knowledge of the applicable 
securities laws and regulations, including MSRB rules, is sufficiently 
demonstrated. Accordingly, in light of these considerations, the MSRB 
believes the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act \45\ or 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.\46\
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    \45\ 15 U.S.C. 78o-4(b)(2)(C).
    \46\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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    At present, the MSRB cannot evaluate the magnitude of the 
efficiency gains or losses quantitatively, but believes the overall 
benefits accumulated over time for market participants would outweigh 
the minimal upfront and ongoing costs associated with the proposed 
amendments to Rule G-3 and Rule G-8. The proposed amendments to Rule G-
3 would make it easier for individuals seeking to requalify as 
municipal advisor representatives to reassociate with a municipal 
advisor firm and for municipal advisor firms to recruit experienced 
professionals. In addition, the increased number of skilled 
professionals furthers capital formation because municipal entity and 
obligated person clients would have ranging areas of expertise to 
select from when utilizing the services of municipal advisor 
representatives. Finally, the MSRB believes the proposed amendments to 
Rule G-3 and Rule G-8 improve the municipal securities

[[Page 49538]]

market's operational efficiency and promote regulatory certainty by 
providing individuals with a specific exemption process to requalify as 
municipal advisor representatives and to begin engaging in municipal 
advisory activities on behalf of municipal advisor firms.

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

    As previously mentioned, the MSRB sought public comment on draft 
amendments to Rule G-3 in an RFC published on December 1, 2022.\47\ The 
MSRB received three comment letters in response to the RFC.\48\ The 
comments are summarized below by topic and MSRB responses are provided.
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    \47\ See supra note 38.
    \48\ See Letters from Chris Charles, President, Wulff, Hansen & 
Co. (``Wulff Hansen Letter''), dated December 29, 2022; Susan 
Gaffney, Executive Director, National Association of Municipal 
Advisors (``NAMA Letter''), dated January 30, 2023; and Leslie M. 
Norwood, Managing Director and Associate General Counsel, Securities 
Industry and Financial Markets Association (``SIFMA Letter''), dated 
January 30, 2023. All comment letters are available at https://www.msrb.org/sites/default/files/2023-03/All-Comments-to-Notice-2022-13.pdf.
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General Support for the Proposed Rule Change
    All three commenters agreed with the MSRB's assertion that the 
proposed rule change would benefit, more than burden, municipal advisor 
firms and would provide increased regulatory flexibility and certainty 
for municipal advisor representatives and municipal advisor firms. 
Commenters generally agreed with the requirements for obtaining the 
criteria-based exemption, including the three-year-minimum-maximum 
thresholds, as well as the obligation that a municipal advisor firm 
submit a notice to the MSRB affirming an individual's eligibility for 
the exemption by having met the criteria enumerated in the proposed 
rule change.
Continuing Education Criteria
    The draft amendments reflected in the RFC would have required that 
upon associating with a municipal advisor firm, an individual would 
complete CE consistent with the requirements of current Rule G-
3(i)(ii)(B) for the period of time since the individual was last 
associated with a municipal advisor firm (``CE catch-up requirement''), 
as part of the criteria-based exemption. In response, NAMA requested 
clarification on the proposed CE catch-up requirements. NAMA also 
sought clarification as to how such CE catch-up requirement would be 
expected to be delivered. NAMA specifically questioned how a solo-
practitioner starting their own municipal advisor firm could obtain the 
exemption since there would be no prior, firm-administered continuing 
education to deliver to satisfy the CE catch-up requirement.\49\ SIFMA 
also commented that requiring an individual to merely catch up on a 
firm's previously administered continuing education upon re-entry to 
the industry may, in practice, result in repetitive, outdated, or 
confusing information.\50\
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    \49\ NAMA Letter at 3-4.
    \50\ SIFMA Letter at 2.
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    In response, the MSRB revised the proposal to make the exemption's 
CE criteria more practicable and streamlined, so that it is not 
dependent on previously administered CE. As reflected in the proposed 
rule change, CE would be required to include coverage of specified 
subject areas and topics, set forth in the proposal, rather than 
mandating the completion of previously issued CE for the period of time 
since the individual seeking to obtain the criteria-based exemption was 
last associated with a municipal advisor firm.
    The MSRB believes that these revisions provide a more practical 
approach for an individual to comply with the CE requirements in order 
to qualify for the criteria-based exemption, in that it allows 
municipal advisor firms to ensure the most useful and up-to-date CE is 
provided to the individual. At the same time, the revisions would be 
more workable for solo-practitioners, particularly those establishing a 
new firm that's never been registered. Since such firms were not 
previously in existence, they would not have previous CE to provide to 
take advantage of the draft criteria-based exemption. The revisions, 
reflected in the proposed rule change, permit such individuals to take 
advantage of the criteria-based exemption and mitigates the potential 
for a burden on competition that may otherwise exist between solo-
practitioners and those seeking to associate (or reassociate) with an 
established municipal advisor firm. Finally, the revised approach would 
permit municipal advisor firms to tailor the required CE training 
materials to the individual seeking the criteria-based exemption, 
consistent with the enumerated topic areas in the proposed rule change, 
to better ensure the most relevant information is covered.
Mechanics of Exemption Requirements
    The draft amendments reflected in the RFC would have required that, 
prior to the individual engaging in municipal advisory activities on 
behalf of the municipal advisor firm, the firm file a completed SEC 
Form MA-I on behalf of the individual seeking to obtain the exemption 
and provide electronic notification to the MSRB that the individual has 
met the criteria to be exempt from the qualification requirements under 
the rule.
    NAMA commented that further clarification would be beneficial as to 
timing for completing the CE requirements, when SEC Form MA-I is to be 
filed, and when the relevant affirmation notification is due to the 
MSRB.\51\ In addition, NAMA suggested that a compliance resource 
explaining how a solo-practitioner can initially enter or re-enter the 
municipal securities industry before formally completing the requisite 
forms to establish a municipal advisor firm (and to associate such 
individual with the municipal advisor firm) would be beneficial. 
Relatedly, SIFMA requested that the MSRB consider compliance resources 
to assist regulated entities (and their associated persons) in 
understanding the relevant professional qualification and CE 
requirements, particularly for firms dually registered as a dealer and 
municipal advisor.\52\
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    \51\ NAMA Letter at 1.
    \52\ SIFMA Letter at 2.
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    In response, the MSRB revised the proposal (as reflected in the 
proposed rule change) to address the timing and sequence of satisfying 
the exemption's criteria, the filing of SEC Form MA-I (and SEC Form MA, 
as applicable), and the submission of the affirmation notification to 
the MSRB. Additionally, the MSRB anticipates publishing a compliance 
resource in close proximity to the compliance date of the rule in 
response to comments from NAMA and SIFMA, which would highlight the 
regulatory obligations for municipal advisors and dealers with respect 
to professional qualification standards, CE requirements, and related 
registration matters.
Greater Harmonization With FINRA Rules and Related Requirements for 
Broker-Dealers
    SIFMA and NAMA expressed the desire for greater harmonization 
between the criteria set forth in the draft amendments and the 
qualification maintenance provisions available to broker-dealers, 
specifically those under FINRA rules, to reduce regulatory burdens for 
individuals who serve in

[[Page 49539]]

multiple registered capacities.\53\ The standards related to 
qualification maintenance for dealers (and their associated persons) 
were adopted by the MSRB in October 2022.\54\ However, there are 
currently no such prescribed qualification maintenance standards \55\ 
(e.g., required annual CE or requisite hours) for municipal advisor 
representatives equivalent to the prescribed qualification maintenance 
standards for municipal securities professionals of dealers.
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    \53\ SIFMA Letter at 1-2; NAMA Letter at 5.
    \54\ See Exchange Act Release No. 95684 (September 7, 2022), 87 
FR 56137 (September 13, 2022) (File No. SR-MSRB-2022-07).
    \55\ See Rules G-3(a)(ii)(C), G-3(b)(ii)(C), G-3(b)(iv)(B)(3), 
G-3(c)(ii)(C) and G-3(i)(i)(C) for qualification maintenance 
standards applicable to dealers.
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    The proposed rule change seeks to provide municipal advisor 
representatives with greater flexibility than they have today, which 
also will provide some parity with the flexibility afforded to dealers. 
However, the MSRB is mindful of the distinctions between dealers and 
municipal advisors, including the differences in the applicable 
qualification maintenance standards as well as the application of a 
federal fiduciary duty for municipal advisors, but not dealers. After 
careful consideration, the MSRB continues to believe that the proposed 
rule change reflects the appropriate balance of flexibility for 
individuals seeking to requalify without reexamination and for their 
associated municipal advisor firms with the MSRB's municipal entity 
protection mandate, as well as the fiduciary duty owed by municipal 
advisors to their municipal entity clients. The MSRB does not believe 
that further harmonization with the maintenance qualification standard 
for dealers (and their associated persons) is appropriate given the 
distinct nature of municipal advisory activities, including the 
fiduciary duty owed by municipal advisors to municipal entity clients. 
In contrast, while dealers are obligated under Rule G-17 to deal fairly 
with all persons, including municipal entities and obligated persons, 
they generally engage in arm's-length transactions with such clients 
and have financial and other interests that may differ from them; 
therefore, the MSRB believes the three-year mandatory experience 
requirement and three-year maximum out-of-the-industry requirement 
recognize the uniqueness of the regulatory framework. Hence, the MSRB 
determined not to revise the draft proposal to be more consistent with 
qualification maintenance standards available to dealers.
Application of Exemption to Municipal Advisor Principals
    Commenters expressed a belief that the criteria-based exemption 
from requalification by reexamination should be extended to include 
municipal advisor principals.\56\ After careful consideration, the MSRB 
continues to believe that such relief should not be extended to 
municipal advisor principals because the supervisory, oversight and 
management duties of municipal advisor principals make an exemption 
from requalification by reexamination inappropriate. Even if such an 
exemption were contemplated, it would require additional, more 
stringent criteria than those proposed for municipal advisor 
representatives to appropriately reflect the heightened 
responsibilities of a municipal advisor principal. This would result in 
two different standards and thus additional regulatory complexity in 
this area.
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    \56\ NAMA Letter at 4-5; SIFMA Letter at 2; and Wulff Hansen 
Letter at 3.
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    However, as noted above in relation to the impact of the proposal 
on solo-practitioners and small municipal advisor firms, solo-
practitioners (and individuals associating or re-associating with a 
firm and designated as a principal) may avail themselves of the 
provisions under current Rule G-3(e)(ii)(C), which in concert with the 
proposed rule change, make it possible for a solo-practitioner to start 
their own firm, requalify as a municipal advisor representative without 
reexamination and function as a municipal advisor principal for a 
limited period of time (i.e., 120 days) before having to take and pass 
the Series 54 examination. Relatedly, for an individual who was once 
qualified as a municipal advisor principal and who is associating or 
re-associating with a municipal advisor firm and is expected to take on 
a principal-level role at the firm, such individual would be able to 
function in the principal-level capacity for the aforementioned limited 
period of time before having to take and pass the Series 54 
examination.
Other Comments Considered
    Wulff Hansen objected to the criterion that would have prohibited 
an individual seeking the exemption from engaging in municipal advisory 
activities during a lapse in qualification. Wulff Hansen noted that 
such a prohibition does not recognize that the SEC permits certain 
individuals to engage in municipal advisory activities without 
registration because they qualify for an exclusion or exemption from 
registration requirements, for example, the underwriter exclusion, as 
prescribed under Section 15B(e)(4)(C) of the Act (15 U.S.C. 78o-
4(e)(4)(C)).\57\ In response to this comment, the revisions reflected 
in the proposed rule change clarify that an individual must not have 
engaged in activities requiring qualification as a municipal advisor 
representative during the individual's lapse in qualification.
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    \57\ Wulff Hansen Letter at 1.
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    Wulff Hansen also suggested that the MSRB retain the ability to 
grant waivers for individuals in highly exceptional circumstances that 
do not qualify for the criteria-based exemption set forth in the draft 
amendments.\58\ The MSRB believes that retention of such a waiver 
process is unnecessary in light of how few waiver requests the Board 
has received.\59\ Additionally, as discussed above, the MSRB believes 
that municipal advisor principals should be required to take and pass 
the requisite qualification examination in light of the heightened 
responsibilities performed by such persons. Finally, the MSRB believes 
that retention of such a waiver provision would result in less 
objective and predictable requalification standards than those provided 
for in the proposed rule change.
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    \58\ Id. at 2.
    \59\ Supra note 37.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please 
include File Number SR-MSRB-2023-05 on the subject line.

[[Page 49540]]

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-2023-05. 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. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File Number SR-MSRB-2023-05 and should be submitted on 
or before August 21, 2023.

    For the Commission, pursuant to delegated authority.\60\
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    \60\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-16109 Filed 7-28-23; 8:45 am]
BILLING CODE 8011-01-P