Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Municipal Securities Rulemaking Board To Revise the Test Specifications and Study Outline for the Board's Municipal Securities Representative Qualification Examination (Test Series 52)

[Federal Register Volume 64, Number 134 (Wednesday, July 14, 1999)]
[Notices]
[Pages 38061-38062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41604; File No. SR-MSRB-99-6]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board To Revise the Test Specifications and Study Outline 
for the Board's Municipal Securities Representative Qualification 
Examination (Test Series 52)

July 7, 1999.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 23, 1999,\3\ the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items, I, II, and III below, which Items have been prepare by the 
Board. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Board filed the proposed rule change to replace the File 
No. SR-MSRB-99-05, which it withdrew on June 23, 1999. The proposed 
rule change has been filed by the Board as a non-controversial rule 
change under Rule 19b-4(f)(6) under the Act. On May 20, 1999, the 
Board provided the Commission with written notice of its intent to 
file the proposed rule change, which was at least five days prior to 
the filing date, as required by Rule 19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Board is filing the proposed rule change to revise the test 
specifications and study outline for the Board`s Municipal Securities 
Representative Qualification Examination (Test Series 52). The Board 
requests that the Commission delay the effectiveness of the revised 
study outline until August 1, 1999, in order to provide time to modify 
the examination to reflect the changes to the test specifications in 
the study outline and to circulate to the industry information 
concerning the revisions.

II. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    In its filing with the Commission, the Board 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 
texts of these statements may be examined at the places specified in 
Item IV below. The Board 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 Series 52 examination qualifies a candidate as a municipal 
securities representative.\4\ A candidate may also qualify as a 
municipal securities representative by taking the General Securities 
Representative Examination (Test Series 7), which borrows questions 
from the Series 52 examination. Specific subjects and questions have 
been updated from time to time in the Series 52 examination to reflect 
changes in Board rules or applicable federal regulations. An ad hoc 
committee from the Board's Professional Qualifications Advisory 
Committee (``PQAC'') \5\ determined that coverage of certain subject 
areas in the study outline should either be expanded to provide greater 
detail to candidates studying for the Series 52 examination or de-
emphasized to reflect changed practices and products within the 
municipal securities industry. Topics that are no longer relevant were 
deleted and other topics were added or revised to reflect additions to 
or changes in practices,

[[Page 38062]]

products, and Board rules since the outline was last revised. The 
revised outline also provides for the inclusion of new Board rules as 
they are promulgated.
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    \4\ MSRB Rule G-3(a)(i) defines the term ``municipal securities 
representative'' as: a natural person associated with a broker, 
dealer or municipal securities dealer, other than a person whose 
functions are solely clerical or ministerial, whose activities 
include one or more of the following: (A) Underwriting, trading or 
sales of municipal securities; (B) financial advisory or consultant 
services for issuers in connection with the issuance of municipal 
securities; (C) research or investment advice with respect to 
municipal securities; or (D) any other activities which involve 
communication, directly or indirectly, with public investors in 
municipal securities; provided, however, that the activities 
enumerated in subparagraphs (C) and (D) above shall be limited to 
such activities as they relate to the activities enumerated in 
subparagraphs (A) and (B) above.
    \5\ PQAC is composed of the Representative Examination 
Subcommittee and the Principal Examination Subcommittee. The 
subcommittees are composed of individuals with extensive experience 
in the securities industry. The committee members are employed by 
securities firms and bank dealers and come from diverse geographic 
locations.
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    In the revised study outline, existing topics have been expanded to 
include the following terms, products, or concepts:

    •  taxable municipals
    •  multi-modal
    •  tax-exempt commercial paper
    •  forwards (forward delivery)
    •  capital appreciation bonds (zeros)
    •  current refundings
    •  advance refunding
    •  de minimis exemption on OID bonds
    •  Bloomberg, BOND EXPRESS and BONDTRAC
    •  swing coupon
    •  locked market
    •  municipal bond contract
    •  municipal over bond (MOB) spread
    •  growth
    •  speculation
    •  tax law changes
    •  construction fund
    •  enhanced securities
    •  letters of credit
    •  guaranteed investment contract (GIC)
    •  advance refunded
    •  insured
    •  average life (sinking fund)
    •  dollar value of a basis point
    •  convexity
    •  derivatives
    •  value of a plus (1/64)
    •  Consumer Price Index (CPI)
    •  unemployment rate
    •  housing starts
    •  foreign trade deficits
    •  purchasing manager's report
    •  leading/lagging/co-existent indicators
    •  Producer Price Index (PPI)
    •  gross domestic product
    •  international economic activity
    •  compression

    Major topics added since the last published revision of the study 
outline are:

    •  duration (under the heading of mathematical calculations 
and methods)
    •  rule G-37, on political contributions and prohibitions on 
municipal securities business
    •  rule G-38, on consultants
    •  rule G-39, on telemarketing

    Major topics deleted since the last published revision of the study 
outline are: \6\
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    \6\ Phone call between Ronald W. Smith, Senior Legal Associate, 
MSRB, and Sonia Patton, Attorney, Division of Market Regulation, 
Commission, on July 6, 1999.

    •  New/Public Housing Authority (NHA/PHA) bonds
    •  Mortgage backed bonds
    •  Pass-through securities
    •  Flower bonds
    •  Arbitration (rule G-35)

    The test specifications allocate exam questions among the various 
topics. The test specifications have been revised to provide for 
greater emphasis under the topic areas of Economic Activity, Government 
Policy and Factors Affecting Interest Rates and Federal Legal 
Considerations. The examination will remain a three-hour 100 question 
examination administered by NASD Regulation, Inc. using the PROCTOR 
system.
2. Statutory Basis
    The Board believes the proposed rule change is consistent with 
Section 15B(b)(2)(A) \7\ of the Act, which requires the Board to 
propose and adopt rules that ensure that no municipal securities broker 
or dealer effects transactions in municipal securities without meeting 
the standards of training, experience, competence, and other 
qualifications determined by the Board to be necessary or appropriate 
in the public interest or for the protection of investors. Section 
15B(b)(2)(A) of the Act also provides that the Board may appropriately 
classify municipal securities brokers and municipal securities dealers 
and their associated personnel and require persons in any such class to 
pass tests prescribed by the Board.
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    \7\ 15 U.S.C. 78o-4(b)(2)(A).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Board 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.

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

    Written comments were neither solicited nor received.

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

    The proposed rule change will become effective upon filing pursuant 
to Section 19(b)(3)(A) \8\ of the Act, and Rule 19b-4(f)(6) \9\ 
thereunder, in that it: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; (iii) was provided to the 
Commission for its review at least five days prior to the filing date; 
and (iv) does not become operative for thirty (30) days from the date 
of its filing on June 23, 1999. In particular, the Commission believes 
the proposed rule change qualifies as a non-controversial filing 
because the proposed standards do not significantly affect the 
protection of investors or the public interest and do not impose any 
significant burden on competition. At any time within sixty days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
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 inspection and copying in the 
Commission's Public Reference Room. Copies of the filing will also be 
available for inspection and copying at the Board's principal offices. 
All submissions should refer to the File No. SR-MSRB-99-6 and should be 
submitted by August 4, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-17886 Filed 7-13-99; 8:45 am]
BILLING CODE 8010-01-M