82 FR 23394 - Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of a Proposed Rule Change Consisting of Proposed Amendments 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
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 97 (May 22, 2017)
Federal Register Volume 82, Issue 97 (May 22, 2017)
| Page Range | 23394-23398 | |
| FR Document | 2017-10303 |
[Federal Register Volume 82, Number 97 (Monday, May 22, 2017)] [Notices] [Pages 23394-23398] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-10303] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80699; File No. SR-MSRB-2017-02] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of a Proposed Rule Change Consisting of Proposed Amendments 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 May 16, 2017. I. Introduction On March 22, 2017, the Municipal Securities Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities and Exchange Commission (the ``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change consisting of (i) proposed amendments to MSRB Rule G-3, on professional qualification requirements, to establish continuing education requirements for municipal advisors; (ii) proposed amendments to MSRB Rule G-8, on books and records to be made by brokers, dealers and municipal securities dealers (``dealers'') and municipal advisors; and (iii) proposed amendments to Rule G-3 to make minor technical changes to the rule to reflect the renumbering of sections and updates to cross-referenced provisions (collectively the ``proposed rule change''). The proposed rule change was published for comment in the Federal Register on April 4, 2017.\3\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Securities Exchange Act Release No. 80327 (March 29, 2017) (the ``Notice of Filing''), 82 FR 16449 (April 4, 2017). --------------------------------------------------------------------------- The Commission received one comment letter on the proposed rule change.\4\ On May 10, 2017, the MSRB responded to the comments received by the Commission.\5\ --------------------------------------------------------------------------- \4\ See Letter to Secretary, Commission, from Susan Gaffney, Executive Director, National Association of Municipal Advisors, dated April 25, 2017 (the ``NAMA Letter''). \5\ See Letter to Secretary, Commission, from Gail Marshall, Associate General Counsel, MSRB, dated May 10, 2017 (the ``MSRB Response Letter''), available at https://www.sec.gov/comments/sr-msrb-2017-02/msrb201702-1745890-151491.pdf.> --------------------------------------------------------------------------- II. Description of Proposed Rule Change According to the MSRB, the purpose of the proposed rule change is to amend Rule G-3(i) to prescribe continuing education requirements for municipal advisors pursuant to the MSRB's statutory mandate under Section 15B(b) of the Act. As described in the Notice Filing, the goal of continuing educations is to ensure that certain associated persons of municipal advisors stay abreast of issues that may affect their job responsibilities and of product and regulatory developments.\6\ The proposed rule change also would amend Rule G-8 to establish recordkeeping requirements related to the administration of a municipal advisor's continuing education program and make technical changes to Rule G-3 to reflect the renumbering of sections and updates to cross- referenced provisions. --------------------------------------------------------------------------- \6\ See Notice of Filing. --------------------------------------------------------------------------- As further described in the Notice of Filing and the MSRB Response, the development of the proposed rule change drew from the principles and structure of the continuing education regulatory framework currently in place for dealers.\7\ --------------------------------------------------------------------------- \7\ Id. --------------------------------------------------------------------------- Pursuant to the proposed rule change, a municipal advisor would be required to, at least annually, conduct a needs analysis that evaluates and prioritizes their specific training needs, develop a written training plan based on the needs identified in the analysis, and deliver training concerning municipal advisory activities designed to meet those training needs. However, the proposed requirements for municipal advisors would differ from dealers with respect to identifying those individuals that are subject to the training and the content that must be covered as part of the minimum standards for the annual training. Pursuant to proposed Rule G-3(i)(ii), a municipal advisor would be required to implement a continuing education training program for each individual qualified as either a municipal advisor representative or as a municipal advisor principal (collectively, ``covered persons'').\8\ The MSRB states that the [[Page 23395]] establishment of continuing education requirements for municipal advisors would assist in ensuring that all municipal advisor firms provide a minimum-level standard of training that is appropriate in the public interest and for the protection of investors and municipal entities or obligated persons.\9\ --------------------------------------------------------------------------- \8\ Under MSRB Rule G-3(d)(i)(A), ``municipal advisor representative'' means ``a natural person associated with a municipal advisor who engages in municipal advisory activities on the municipal advisor's behalf.'' Under MSRB Rule G-3(e)(i), ``municipal advisor principal'' means ``a natural person associated with a municipal advisor who is qualified as a municipal advisor representative and is directly engaged in the management, direction or supervision of the municipal advisory activities of the municipal advisor and its associated persons.'' \9\ See Notice of Filing. --------------------------------------------------------------------------- Pursuant to proposed Rule G-3(i)(ii)(B)(1), a municipal advisor would be required to, at least annually, conduct a needs analysis that evaluates and prioritizes its training needs, develop a written training plan based on the needs analysis, and deliver training applicable to its municipal advisory activities. Additionally, pursuant to the proposed rule change, in developing a written training plan, a municipal advisor must take into consideration the firm's size, organizational structure, scope of municipal advisory activities, as well as regulatory developments. Proposed Rule G-3(i)(ii)(B)(2) would prescribe the minimum standards for continuing education training by requiring that each municipal advisor's training include, at a minimum, training on the applicable regulatory requirements and the fiduciary duty obligations owed to municipal entity clients. Pursuant to the proposed rule change, the minimum training on the applicable regulatory requirements would require a municipal advisor's continuing education program to include training on the regulatory requirements applicable to the municipal advisory activities in which its covered persons engage. However, training on the fiduciary duty obligation owed to municipal entity clients would be a minimum component of the continuing education training for all covered persons, even those that may not engage in municipal advisory activities on behalf of a municipal entity client. The MSRB states that the fiduciary duty obligation owed to a municipal entity client is a keystone principle of the regulatory framework for municipal advisors and that the MSRB believes every covered person engaged in municipal advisory activities should be familiar with such principle.\10\ A municipal advisor would, under the proposed rule change, nonetheless, still have the flexibility to determine the appropriate scope of training that its covered persons need on the fiduciary duty obligation based on the municipal advisory activities in which that its covered persons engages. --------------------------------------------------------------------------- \10\ Id. --------------------------------------------------------------------------- Recognizing that the nature of municipal advisory activities engaged in by municipal advisors can be diverse; the proposed rule change would provide municipal advisors with the flexibility to determine their firm-specific training needs and the content and scope of the training appropriate for their covered persons. For example, a municipal advisor that only provides advice to municipal entities on swap transactions would, under the proposed rule change, be permitted to design its annual training plan based upon the rules and practices applicable to its limited business model, so long as such training plan included the applicable regulatory requirements applicable to that limited business and a component regarding the fiduciary duty obligation owed to municipal entity clients. Moreover, under the proposed rule change, municipal advisors would be able to determine the method for delivering such training. For example, a municipal advisor could determine that the most effective manner for delivering the training would be to require its covered persons to attend an applicable seminar by subject matter experts and/or to utilize an on- line training resource. The MSRB notes that the minimum requirements for continuing education training, outlined under the proposed rule change, should not be viewed by municipal advisors as the full scope of the subject matter appropriate for municipal advisors' training programs.\11\ The minimum standard for training does not negate the need for each municipal advisor to consider whether, based on its needs analysis, additional training applicable to the municipal advisory activities it conducts is appropriate. --------------------------------------------------------------------------- \11\ Id. --------------------------------------------------------------------------- Proposed Rule G-3(i)(ii)(B)(3) would require a municipal advisor to administer its continuing education program in accordance with the annual evaluation and prioritization of its training needs and the written training plan developed as consistent with its needs analysis. Also, pursuant to this provision, a municipal advisor would be required to maintain records documenting the content of its training programs and a record that each of its covered persons identified completed the applicable training. Pursuant to proposed Rule G-3(i)(ii)(C), a municipal advisor's covered persons (each individual qualified as a municipal advisor representative or municipal advisor principal) would be required to participate in the firm's continuing education training programs. If consistent with its training plan, a municipal advisor could deliver training appropriate for all covered persons. In addition, a municipal advisor could determine that its training needs indicate that it should also deliver particular training for certain covered persons, for example, those covered persons that have been designated with supervisory responsibilities under MSRB Rule G-44, or those covered persons that have been engaged in municipal advisory activities for a short period of time. Pursuant to proposed Rule G-3(i)(ii)(D), on specific training requirements, the appropriate examining authority could require a municipal advisor, individually or as part of a larger group, to provide specific training to its covered persons in such areas the appropriate examining authority deems appropriate.\12\ Such a requirement could stipulate the class of covered persons for which it is applicable, the time period in which the requirement must be satisfied and, where appropriate, the actual training content. --------------------------------------------------------------------------- \12\ For purposes of proposed Rule G-3(i)(ii)(D), ``appropriate examining authority'' would mean ``a registered securities association with respect to a municipal advisor that is a member of such association, or the Commission, or the Commission's designee, with respect to any other municipal advisor.'' --------------------------------------------------------------------------- The MSRB states that, in an effort to reduce regulatory overlap for dealer-municipal advisors,\13\ the proposed rule change would allow a dealer-municipal advisor to deliver continuing education training that would satisfy its training needs for the firm's dealer and municipal advisor activities.\14\ More specifically, pursuant to proposed Rule G- 3(i)(ii)(E), each dealer-municipal advisor will be permitted to develop a single written training plan, if that training plan is consistent with each needs analysis that was conducted of the firm's municipal advisory activities and municipal securities activities. In addition, the proposed rule provision would allow a municipal advisor to conduct training for its covered persons and covered registered persons, which would satisfy the continuing education requirements under Rules G- 3(i)(i)(B) and G-3(i)(ii), if such training is consistent with the firm's written training plan(s) and that training meets the minimum standards for the training programs, as required under the rule. --------------------------------------------------------------------------- \13\ A member of the Financial Industry Regulatory Authority that is a municipal securities dealer and municipal advisor is commonly referred to as a ``dealer-municipal advisor.'' \14\ See Notice of Filing. --------------------------------------------------------------------------- [[Page 23396]] Proposed Amendments to MSRB Rule G-8 The proposed amendments to MSRB Rule G-8 address the books and records that must be made and maintained by a municipal advisor to show compliance with recordkeeping requirements related to the administration of a municipal advisor's continuing education program. The Board adopted the approach of specifying, in some detail, the information to be reflected in various records.\15\ Specifically, the proposed amendments to Rule G-8(h) would require each municipal advisor to make and maintain records regarding the firm's completion of its needs analysis and the development of its corresponding written training plan. Moreover, with respect to each municipal advisor's written training plan, municipal advisors would be required to make and keep records documenting the content of the firm's training programs and a record evidencing completion of the training programs by each covered person.\16\ The MSRB believes that recordkeeping requirements are an important element of compliance and the proposed amendments to Rule G-8 are appropriately tailored to facilitate the examination of a municipal advisor's compliance with the continuing education requirements.\17\ --------------------------------------------------------------------------- \15\ Id. \16\ MSRB Rule G-9(h) generally requires municipal advisors to preserve the books and records described in MSRB Rule G-8(h) for a period of not less than five years for purposes of consistency with SEC Rule 15Ba1-8 of the Act on books and records to be made and maintained by municipal advisors. See Exchange Act Release No. 73415 (October 23, 2014), 79 FR 64423 (October 29, 2014) (SR-MSRB-2014- 06). \17\ Id. --------------------------------------------------------------------------- Technical Amendments The proposed rule change would make minor technical amendments to add paragraph headers, and renumber and update rule cross-references to Rule G-3(i)(i) and Rule G-3(i)(ii). Rule G-3(i)(i) would be revised by adding the paragraph header ``Continuing Education Requirements for Brokers, Dealers, and Municipal Securities Dealers.'' Rule G-3(i)(i)(D) would be revised by adding the paragraph header ``Reassociation'' and renumbered Rule G-3(i)(i)(A)(4). Rule G-3(i)(i)(E) would be relocated to proposed subparagraph Rule G-3(i)(i)(A)(4). Rule G-3(i)(ii) would be re-lettered Rule G-3(i)(i)(B). Due to these changes, other paragraphs under Rule G-3(i) would be renumbered and re-lettered. The MSRB requested in the Notice of Filing that the proposed rule change be approved with an implementation date of January 1, 2018.\18\ To comply with the annual training requirement for calendar year 2018, in accordance with the proposed implementation date, a municipal advisor would need to complete a needs analysis, develop a written training plan and deliver the appropriate training by December 31, 2018. --------------------------------------------------------------------------- \18\ See Notice of Filing. --------------------------------------------------------------------------- III. Summary of Comments Received and MSRB's Responses to Comments As noted previously, the Commission received one comment letter on the proposed rule change, as well as the MSRB Response Letter. The commenter, the National Association of Municipal Advisors (``NAMA''), expressed general support for the establishment of continuing education requirements for municipal advisors, noting that it believes it is imperative for municipal advisors to continue to expand their knowledge and improve their professional skills beyond the Municipal Advisor Representative Qualification Examination (Series 50 exam).\19\ NAMA also suggested that certain aspects of the proposed rule change be amended to include additional clarifications and guidance prior to its implementation.\20\ The MSRB believes the proposed rule change is consistent with its statutory mandate and has responded to the comments, as discussed below.\21\ --------------------------------------------------------------------------- \19\ See NAMA Letter. \20\ Id. \21\ See MSRB Response Letter. --------------------------------------------------------------------------- 1. Additional Guidance on Needs Analysis Requirement and Effective Date NAMA requested that the MSRB develop interpretive guidance to help municipal advisor firms, especially small municipal advisor firms, better understand how to conduct needs analysis and provide examples of the types of trainings that could be employed by municipal advisors to meet the requirements of the proposed rule change.\22\ NAMA also requested that the implementation date of the proposed rule change be delayed until the MSRB has issued the interpretive guidance regarding the need analysis requirement, which NAMA believes is necessary for municipal advisors to adequately understand and comply with the proposed rule change.\23\ --------------------------------------------------------------------------- \22\ See NAMA Letter. \23\ Id. --------------------------------------------------------------------------- The MSRB responded that, as it previously noted in the Notice of Filing, it recognizes that additional guidance on conducting a needs analysis and how to implement a continuing education program may benefit municipal advisor firms.\24\ The MSRB articulated that it intends to provide guidance to municipal advisor firms in understanding their obligations to develop a continuing education program before the proposed rule change is implemented.\25\ According to the MSRB, such guidance will include a sample needs analysis, a sample training plan and a non-exclusive list of delivery mechanisms that a municipal advisor firm could use in delivering and documenting training.\26\ Also, the MSRB stated that such guidance will be designed to assist a municipal advisor firm in tailoring the development and implementation of a continuing education program based on regulatory developments, the size and organizational structure of the firm and the municipal advisory activities the firm engages in.\27\ Such guidance, the MSRB stated, will not promote a one-size-fits-all continuing education program and will not create a safe harbor.\28\ The MSRB responded that it intends to provide implementation guidance in a webinar shortly following approval of the proposed rule change.\29\ In addition, the MSRB stated that it intends to issue additional guidance, including sample documentation, at least 90 days prior to the implementation date.\30\ The MSRB also noted that although it is proposed a January 1, 2018 effective date, municipal advisors would have until December 31, 2018 to complete a needs analysis, develop a written training plan and deliver the appropriate training to comply with the annual training requirements for calendar year 2018.\31\ Accordingly, the MSRB believes that municipal advisor firms will have sufficient time to implement procedures reasonably designed to achieve compliance with the continuing education requirements.\32\ --------------------------------------------------------------------------- \24\ See Notice of Filing. \25\ Id. \26\ Id. \27\ Id. \28\ Id. \29\ Id. \30\ Id. \31\ Id. \32\ Id. --------------------------------------------------------------------------- 2. Additional Guidance on ``Appropriate Enforcement Authority'' NAMA requested that the MSRB provide additional interpretive guidance regarding the scope of the power of the ``appropriate enforcement authority'' to require, pursuant to amended Rule G- 3(i)(ii)(D), training for individuals or a [[Page 23397]] group within a municipal advisor following an examination.\33\ --------------------------------------------------------------------------- \33\ See NAMA Letter. --------------------------------------------------------------------------- The MSRB stated that this provision is designed to provide the appropriate examining authority the discretion to determine, in the course of examining and enforcing compliance with MSRB rules, whether an associated person(s) of a municipal advisor requires additional training.\34\ The MSRB believes the provision is consistent with similar authority provided under MSRB Rule G-3(h)(ii)(D) with respect to the continuing education requirements for dealers.\35\ --------------------------------------------------------------------------- \34\ See MSRB Response Letter. \35\ Id. --------------------------------------------------------------------------- 3. Economic Impact of MSRB Rulemaking NAMA stated that the MSRB should empirically evaluate the economic impact that the proposed rule change would have on sole practitioners and small municipal advisor firms, as well as the potential economic impact the entire municipal advisor regulatory regime has municipal advisors.\36\ In expressing its concerns, NAMA cited to a response it provided to a MSRB request for comment regarding an earlier stage of this rulemaking initiative where it stated the MSRB should recognize the multiple roles a principal in a small municipal advisor firm or a sole-practitioner municipal advisor has to their clients under the rulemaking regime already imposed by the MSRB and that the additional requirements of the proposed rule change for all municipal advisor and especially sole practitioners and smaller firms should be considered along with the already existing regulatory burden imposed by MSRB rules and not create an overwhelming economic or administrative burden on these professionals.\37\ --------------------------------------------------------------------------- \36\ See NAMA Letter. \37\ Id. See also Letter to Ronald W. Smith, MSRB, from Susan Gaffney, Executive Director, National Association of Municipal Advisors, dated November 14, 2016. --------------------------------------------------------------------------- The MSRB stated that it has evaluated and articulated the economic impact associated with the proposed rule change in Notice of Filing in accordance with its Policy on the Use of Economic Analysis in MSRB Rulemaking \38\ and that it believes that the proposed rule change is consistent with the requirements of Section 15B(b)(2)(L)(iv) of the Act \39\ which provides that MSRB rules with respect to municipal advisors may 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.\40\ The MSRB also stated that it plans to assess retrospectively the impact and effectiveness of the municipal advisory framework once it is more fully in place and that the Board has discussed the importance of this future analysis to understanding the benefits and costs of the municipal advisory regulatory regime.\41\ --------------------------------------------------------------------------- \38\ See Policy on the Use of Economic Analysis in MSRB Rulemaking, MSRB, available at: http://msrb.org/rules-and-interpretations/economic-analysis-policy. \39\ 15 U.S.C. 78o-4(b)(2)(L)(iv). \40\ See MSRB Response Letter. See also Notice of Filing. \41\ See MSRB Response Letter. --------------------------------------------------------------------------- 4. Standards of Conduct Applicable to Municipal Advisor Clients NAMA requested that the MSRB adopt a clarifying amendment to proposed Rule G-3(i)(ii)(B)(2)(a) to include ``obligated persons'' to the language of the proposed rule change to accommodate municipal advisors that have obligated person clients and not municipal entity clients. The MSRB believes that NAMA's suggested change would materially change the spirit and intent of the proposed rule change.\42\ The MSRB stated that the fiduciary duty standard is a keystone principal of the regulatory framework for municipal advisors and every municipal advisor needs to address the fiduciary duty obligation in their continuing education program.\43\ According to the MSRB, it recognizes that municipal advisory activities can vary from firm to firm and the proposed rule change therefore affords a municipal advisor sufficient flexibility to determine the extent and scope of the fiduciary duty training that needs to be included in its continuing education program based on the municipal advisory activities in which the firm engages.\44\ --------------------------------------------------------------------------- \42\ Id. \43\ Id. See also Notice of Filing. \44\ See MSRB Response Letter. --------------------------------------------------------------------------- IV. Discussion and Commission Findings The Commission has carefully considered the proposed rule change, the comment letter received, and the MSRB Response Letter. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the MSRB. In particular, the proposed rule change is consistent with Sections 15B(b)(2)(A), 15B(b)(2)(L) and 15B(b)(2)(G) and of the Act.\45\ Section 15B(b)(2)(A) of the Act states that the MSRB's rules shall provide that no municipal securities broker or municipal securities dealer shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any municipal security, and no broker, dealer, municipal securities dealer, or municipal advisor shall provide advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, unless such municipal securities broker or municipal securities dealer meets such standards of operational capability and such municipal securities broker or municipal securities dealer and every natural person associated with such municipal securities broker or municipal securities dealer meets such 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.\46\ The Commission believes the proposed rule change is consistent with Section 15B(b)(2)(A) in that the proposed rule will provide for minimum levels of training for persons engaged in municipal advisor activities, which is in the public interest and for the protection of investors, municipal entities and obligated persons. --------------------------------------------------------------------------- \45\ 15 U.S.C. 78o-4(b)(2)(A), 78o-4(b)(2)(L) and 78o- 4(b)(2)(G). \46\ 15 U.S.C. 78o-4(b)(2)(A). --------------------------------------------------------------------------- Section 15B(b)(2)(L) of the Act \47\ provides that the MSRB's rules shall, with respect to municipal advisors: Prescribe means reasonably designed to prevent acts, practices, and courses of business as are not consistent with a municipal advisor's fiduciary duty to its clients; provide continuing education requirements for municipal advisors; provide professional standards; and 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 Commission believes the proposed rule change is consistent with Section 15B(b)(2)(L) in that the proposed rule will establish continuing education program requirements for municipal advisors. Requiring municipal advisors to establish a formal continuing education program for covered persons will ensure that individuals qualified as either a municipal advisor [[Page 23398]] representative or as a municipal advisor principal are kept informed of issues that affect their job responsibilities and of regulatory developments, which is in furtherance of the protection of investors against fraud and misconduct. The Commission also finds that the proposed rule change is consistent with Section 15B(b)(2)(L)(iv) of the Act in that it will 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. Although the proposed rule change will affect all municipal advisors, including small municipal advisors, the proposed rule change is a necessary and appropriate regulatory burden in order to protect investors, municipal entities and obligated persons. --------------------------------------------------------------------------- \47\ 15 U.S.C. 78o-4(b)(2)(L). --------------------------------------------------------------------------- The Commission also finds that the proposed rule change is consistent with Section 15B(b)(2)(G) of the Act \48\ which provides that the MSRB's rules shall prescribe records to be made and kept by municipal securities brokers, municipal securities dealers, and municipal advisors and the periods for which such records shall be preserved. The proposed rule change will, among other things, assist in ensuring that municipal advisors are complying with the amendments to proposed MSRB Rule G-3 by extending the existing recordkeeping requirements applicable to municipal advisors to include making and maintaining records relating to their continuing education program. Establishing a requirement for municipal advisors to maintain records reflecting their continuing education programs will assist the appropriate examining authority that examines municipal advisors in monitoring and promoting compliance with the proposed rule change. --------------------------------------------------------------------------- \48\ 15 U.S.C. 78o-4(b)(2)(G). --------------------------------------------------------------------------- In approving the proposed rule change, the Commission also has considered the impact of the proposed rule change on efficiency, competition, and capital formation.\49\ The Commission does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change grants municipal advisors flexibility to develop regulatory training based on firm size, organizational structure, and scope of business activities. In addition, the proposed rule change allows for the development of a single training plan that is consistent with each needs analysis conducted by a dealer-municipal advisor. Moreover, dealer-municipal advisors can incorporate identified, firm- specific training needs, with respect to their municipal advisory activities, into their existing training programs, as long as any offered training is consistent with the written training plan(s). Also, the Commission believes requiring municipal advisor's to meet continuing education requirements will promote compliance by municipal advisors with the regulations and laws that protect investors, municipal entities and obligated person by requiring them to keep informed of current issues and regulatory developments that affect their job responsibilities and will reduce the risk that users of municipal advisory services would receive advice that results in harm or negative impact. This improved compliance, in turn, will likely improve the market for municipal advisory services and its efficient operation. Furthermore, the Commission believes that the potential burdens created by the proposed rule change are to be likely outweighed by the benefits. --------------------------------------------------------------------------- \49\ 15 U.S.C. 78c(f). --------------------------------------------------------------------------- For the reasons noted above, the Commission believes that the proposed rule change is consistent with the Act. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\50\ that the proposed rule change (SR-2017-02) be, and hereby is, approved. --------------------------------------------------------------------------- \50\ 15 U.S.C. 78s(b)(2). For the Commission, pursuant to delegated authority.\51\ --------------------------------------------------------------------------- \51\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-10303 Filed 5-19-17; 8:45 am] BILLING CODE 8011-01-P
![23394 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
13. Any transaction fee 14 (including For the Commission, by the Division of responded to the comments received by
break-up or commitment fees but Investment Management, under delegated the Commission.5
excluding broker’s fees contemplated by authority.
Eduardo A. Aleman, II. Description of Proposed Rule Change
section 17(e) or 57(k) of the Act, as
applicable), received in connection with Assistant Secretary. According to the MSRB, the purpose
a Co-Investment Transaction will be [FR Doc. 2017–10355 Filed 5–19–17; 8:45 am] of the proposed rule change is to amend
distributed to the participating BILLING CODE 8011–01–P
Rule G–3(i) to prescribe continuing
Regulated Funds and Affiliated Funds education requirements for municipal
on a pro rata basis based on the amounts advisors pursuant to the MSRB’s
they invested or committed, as the case SECURITIES AND EXCHANGE statutory mandate under Section 15B(b)
COMMISSION of the Act. As described in the Notice
may be, in such Co-Investment
Filing, the goal of continuing educations
Transaction. If any transaction fee is to
is to ensure that certain associated
be held by an Adviser pending [Release No. 34–80699; File No. SR–MSRB–
2017–02] persons of municipal advisors stay
consummation of the transaction, the abreast of issues that may affect their job
fee will be deposited into an account responsibilities and of product and
maintained by such Adviser at a bank or Self-Regulatory Organizations;
Municipal Securities Rulemaking regulatory developments.6 The
banks having the qualifications proposed rule change also would amend
Board; Order Granting Approval of a
prescribed in section 26(a)(1) of the Act, Rule G–8 to establish recordkeeping
Proposed Rule Change Consisting of
and the account will earn a competitive requirements related to the
Proposed Amendments to Rule G–3,
rate of interest that will also be divided administration of a municipal advisor’s
on Professional Qualification
pro rata among the participating continuing education program and make
Requirements, and Rule G–8, on
Regulated Funds and Affiliated Funds technical changes to Rule G–3 to reflect
Books and Records, To Establish
based on the amounts they invest in Continuing Education Requirements the renumbering of sections and updates
such Co-Investment Transaction. None for Municipal Advisors and to cross-referenced provisions.
of the Affiliated Funds, the Advisers, Accompanying Recordkeeping As further described in the Notice of
the other Regulated Funds or any Requirements Filing and the MSRB Response, the
affiliated person of the Regulated Funds development of the proposed rule
or Affiliated Funds will receive May 16, 2017. change drew from the principles and
additional compensation or I. Introduction structure of the continuing education
remuneration of any kind as a result of regulatory framework currently in place
or in connection with a Co-Investment On March 22, 2017, the Municipal for dealers.7
Transaction (other than (a) in the case Securities Rulemaking Board (the Pursuant to the proposed rule change,
of the Regulated Funds and the ‘‘MSRB’’ or ‘‘Board’’) filed with the a municipal advisor would be required
Affiliated Funds, the pro rata Securities and Exchange Commission to, at least annually, conduct a needs
transaction fees described above and (the ‘‘SEC’’ or ‘‘Commission’’), pursuant analysis that evaluates and prioritizes
fees or other compensation described in to Section 19(b)(1) of the Securities their specific training needs, develop a
condition 2(c)(iii)(C); and (b) in the case Exchange Act of 1934 (‘‘Act’’) 1 and Rule written training plan based on the needs
of an Adviser, investment advisory fees 19b–4 thereunder,2 a proposed rule identified in the analysis, and deliver
paid in accordance with the agreement change consisting of (i) proposed training concerning municipal advisory
between the Adviser and the Regulated amendments to MSRB Rule G–3, on activities designed to meet those
Fund or Affiliated Fund. professional qualification requirements, training needs. However, the proposed
to establish continuing education requirements for municipal advisors
14. If the Holders own in the aggregate requirements for municipal advisors; (ii) would differ from dealers with respect
more than 25 percent of the Shares of proposed amendments to MSRB Rule to identifying those individuals that are
a Regulated Fund, then the Holders will G–8, on books and records to be made subject to the training and the content
vote such Shares as directed by an by brokers, dealers and municipal that must be covered as part of the
independent third party when voting on securities dealers (‘‘dealers’’) and minimum standards for the annual
(1) the election of directors; (2) the municipal advisors; and (iii) proposed training.
removal of one or more directors; or (3) amendments to Rule G–3 to make minor Pursuant to proposed Rule G–3(i)(ii),
any other matter under either the Act or technical changes to the rule to reflect a municipal advisor would be required
applicable state law affecting the the renumbering of sections and updates to implement a continuing education
Board’s composition, size or manner of to cross-referenced provisions training program for each individual
election. (collectively the ‘‘proposed rule qualified as either a municipal advisor
15. Each Regulated Fund’s chief change’’). The proposed rule change was representative or as a municipal advisor
compliance officer, as defined in rule published for comment in the Federal principal (collectively, ‘‘covered
38a–1(a)(4), will prepare an annual Register on April 4, 2017.3 persons’’).8 The MSRB states that the
report for its Board each year that The Commission received one
evaluates (and documents the basis of comment letter on the proposed rule 5 See Letter to Secretary, Commission, from Gail
change.4 On May 10, 2017, the MSRB Marshall, Associate General Counsel, MSRB, dated
that evaluation) the Regulated Fund’s May 10, 2017 (the ‘‘MSRB Response Letter’’),
compliance with the terms and available at https://www.sec.gov/comments/sr-msrb-
mstockstill on DSK30JT082PROD with NOTICES
1 15 U.S.C. 78s(b)(1). 2017-02/msrb201702-1745890-151491.pdf.>
conditions of the application and the
2 17 CFR 240.19b–4. 6 See Notice of Filing.
procedures established to achieve such 3 Securities Exchange Act Release No. 80327 7 Id.
compliance. (March 29, 2017) (the ‘‘Notice of Filing’’), 82 FR 8 Under MSRB Rule G–3(d)(i)(A), ‘‘municipal
16449 (April 4, 2017). advisor representative’’ means ‘‘a natural person
14 Applicants are not requesting and the staff is 4 See Letter to Secretary, Commission, from Susan associated with a municipal advisor who engages in
not providing any relief for transaction fees Gaffney, Executive Director, National Association of municipal advisory activities on the municipal
received in connection with any Co-Investment Municipal Advisors, dated April 25, 2017 (the advisor’s behalf.’’ Under MSRB Rule G–3(e)(i),
Transaction. ‘‘NAMA Letter’’). ‘‘municipal advisor principal’’ means ‘‘a natural
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![23398 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
representative or as a municipal advisor single training plan that is consistent thereunder,2 notice is hereby given that
principal are kept informed of issues with each needs analysis conducted by on May 2, 2017, NASDAQ BX, Inc.
that affect their job responsibilities and a dealer-municipal advisor. Moreover, (‘‘BX’’ or ‘‘Exchange’’) filed with the
of regulatory developments, which is in dealer-municipal advisors can Securities and Exchange Commission
furtherance of the protection of incorporate identified, firm-specific (‘‘SEC’’ or ‘‘Commission’’) the proposed
investors against fraud and misconduct. training needs, with respect to their rule change as described in Items I, II,
The Commission also finds that the municipal advisory activities, into their and III below, which Items have been
proposed rule change is consistent with existing training programs, as long as prepared by the Exchange. The
Section 15B(b)(2)(L)(iv) of the Act in any offered training is consistent with Commission is publishing this notice to
that it will not impose a regulatory the written training plan(s). Also, the solicit comments on the proposed rule
burden on small municipal advisors that Commission believes requiring change from interested persons.
is not necessary or appropriate in the municipal advisor’s to meet continuing I. Self-Regulatory Organization’s
public interest and for the protection of education requirements will promote Statement of the Terms of Substance of
investors, municipal entities, and compliance by municipal advisors with the Proposed Rule Change
obligated persons, provided that there is the regulations and laws that protect
robust protection of investors against investors, municipal entities and The Exchange proposes to amend the
fraud. Although the proposed rule obligated person by requiring them to Exchange’s fees at Rule 7004 and
change will affect all municipal keep informed of current issues and Chapter XV, Section 11 to adopt a fee
advisors, including small municipal regulatory developments that affect their schedule to establish the fees for
advisors, the proposed rule change is a job responsibilities and will reduce the Industry Members related to the
necessary and appropriate regulatory risk that users of municipal advisory National Market System Plan Governing
burden in order to protect investors, services would receive advice that the Consolidated Audit Trail (the ‘‘CAT
municipal entities and obligated results in harm or negative impact. This NMS Plan’’ or ‘‘Plan’’).
persons. The text of the proposed rule change
improved compliance, in turn, will
The Commission also finds that the is available on the Exchange’s Web site
likely improve the market for municipal
proposed rule change is consistent with at http://nasdaqbx.cchwallstreet.com/,
advisory services and its efficient
Section 15B(b)(2)(G) of the Act 48 which at the principal office of the Exchange,
operation. Furthermore, the
provides that the MSRB’s rules shall and at the Commission’s Public
Commission believes that the potential
prescribe records to be made and kept Reference Room.
burdens created by the proposed rule
by municipal securities brokers, change are to be likely outweighed by II. Self-Regulatory Organization’s
municipal securities dealers, and the benefits. Statement of the Purpose of, and
municipal advisors and the periods for For the reasons noted above, the Statutory Basis for, the Proposed Rule
which such records shall be preserved. Commission believes that the proposed Change
The proposed rule change will, among rule change is consistent with the Act.
other things, assist in ensuring that In its filing with the Commission, the
municipal advisors are complying with V. Conclusion Exchange included statements
the amendments to proposed MSRB concerning the purpose of and basis for
It is therefore ordered, pursuant to the proposed rule change and discussed
Rule G–3 by extending the existing Section 19(b)(2) of the Act,50 that the
recordkeeping requirements applicable any comments it received on the
proposed rule change (SR–2017–02) be, proposed rule change. The text of these
to municipal advisors to include making and hereby is, approved.
and maintaining records relating to their statements may be examined at the
continuing education program. For the Commission, pursuant to delegated places specified in Item IV below. The
Establishing a requirement for authority.51 Exchange has prepared summaries, set
municipal advisors to maintain records Eduardo A. Aleman, forth in sections A, B, and C below, of
reflecting their continuing education Assistant Secretary. the most significant aspects of such
programs will assist the appropriate [FR Doc. 2017–10303 Filed 5–19–17; 8:45 am] statements.
examining authority that examines BILLING CODE 8011–01–P A. Self-Regulatory Organization’s
municipal advisors in monitoring and Statement of the Purpose of, and the
promoting compliance with the Statutory Basis for, the Proposed Rule
proposed rule change. SECURITIES AND EXCHANGE Change
In approving the proposed rule COMMISSION
change, the Commission also has 1. Purpose
[Release No. 34–80697; File No. SR–BX–
considered the impact of the proposed The purpose of the proposed rule
2017–023]
rule change on efficiency, competition, change is to adopt a fee schedule to
and capital formation.49 The Self-Regulatory Organizations; establish the fees for Industry Members
Commission does not believe that the NASDAQ BX, Inc.; Notice of Filing and related to the CAT NMS Plan.
proposed rule change will impose any Immediate Effectiveness of Proposed Bats BYX Exchange, Inc., Bats BZX
burden on competition not necessary or Rule Change To Amend the Exchange, Inc., Bats EDGA Exchange,
appropriate in furtherance of the Exchange’s Fees at Rule 7004 and Inc., Bats EDGX Exchange, Inc., BOX
purposes of the Act. The proposed rule Chapter XV, Section 11 Options Exchange LLC, C2 Options
change grants municipal advisors Exchange, Incorporated, Chicago Board
flexibility to develop regulatory training May 16, 2017. Options Exchange, Incorporated,
mstockstill on DSK30JT082PROD with NOTICES
based on firm size, organizational Pursuant to Section 19(b)(1) of the Chicago Stock Exchange, Inc., Financial
structure, and scope of business Securities Exchange Act of 1934 (‘‘Act’’ Industry Regulatory Authority, Inc.
activities. In addition, the proposed rule or ‘‘Exchange Act’’),1 and Rule 19b–4 (‘‘FINRA’’), Investors’ Exchange LLC,
change allows for the development of a Miami International Securities
50 15 U.S.C. 78s(b)(2). Exchange, LLC, MIAX PEARL, LLC,
48 15 U.S.C. 78o–4(b)(2)(G). 51 17 CFR 200.30–3(a)(12).
49 15 U.S.C. 78c(f). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4.
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Document Created: 2018-11-08 08:50:05
Document Modified: 2018-11-08 08:50:05
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 82 FR 23394 |
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