[Federal Register Volume 60, Number 118 (Tuesday, June 20, 1995)]
[Notices]
[Pages 32186-32187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15040]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35846; File No. SR-MSRB-95-9]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board Relating to Suitability, Transactions and 
Discretionary Accounts

June 14, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), and Rule 19b-4 thereunder, notice is 
hereby given that on June 1, 1995, the Municipal Securities Rulemaking 
Board (``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule change (File 
No. SR-MSRB-95-9). The proposed rule change is described in Items I, 
II, and III below, which Items have been prepared by the Board. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change
    The MSRB is filing amendments to rule G-19 on suitability of 
recommendations and transactions and discretionary accounts. In April 
1994, the Commission approved an amendment designed to strengthen rule 
G-19. The proposed rule change makes technical and clarifying changes 
to rule G-19 concerning discretionary accounts. The Board requests that 
the Commission set the effective date for 30 days after filing.
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 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 
text 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 [[Page 32187]] most significant aspects 
of such statements.

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

    On April 7, 1994, the Commission approved an amendment to rule G-
19, on suitability, designed to strengthen the rule.\1\ As part of that 
amendment, the language of section (c) regarding suitability of 
recommendations was amended to ensure that in making a recommendation 
to customers, dealers must have reasonable grounds, based upon 
information about the security as well as the customer, for believing 
that the recommendation is suitable.

    \1\ See Securities Exchange Act Release No. 33869 (April 7, 
1994) 59 FR 17632.
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    Section (d) of rule G-19 requires dealers effecting transactions 
for discretionary accounts to have prior written authorization and to 
make a suitability determination regarding the transaction, unless the 
transaction is specifically directed by the customer. A review of rule 
G-19 has indicated that a technical amendment to section (d) is 
necessary to correct a cross reference to the new language of section 
(c). The proposed rule change also clarifies the language of section 
(d) to ensure that dealers understand their duty to make a suitability 
determination before executing a transaction for a discretionary 
account unless the transaction is specifically directed by the customer 
without any recommendation having been made.
    The Board believes the proposed rule change is consistent with 
section 15(b)(2)(C) of the Act which provides that the Board's rules:

    Be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, foster 
cooperation with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating 
transactions in municipal securities, to remove impediments to and 
perfect the mechanism of a free and open market in municipal 
securities, and, in general, to protect investors and the public 
interest.

The proposed rule clarifies the responsibility of dealers to make 
suitability determinations before executing transactions for 
discretionary accounts and therefore the Board believes it will protect 
investors and the public interest.

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

    The Board has neither solicited nor received comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change: (1) does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
(3) was provided to the Commission for its review at least five days 
prior to the filing date; and (4) does not become operative for thirty 
days from the date of its filing on June 2, 1995, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
and Rule 19b-4(e)(6) thereunder. In particular, the Commission believes 
the proposal would qualify as a ``non-controversial filing'' because it 
makes technical and clarifying changes to an existing MSRB rule. 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
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 File No. SR-MSRB-95-9 and should be 
submitted by July 11, 1995.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\2\

    \2\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-15040 Filed 6-19-95; 8:45 am]
BILLING CODE 8010-01-M