[Federal Register Volume 68, Number 14 (Wednesday, January 22, 2003)]
[Notices]
[Pages 3073-3074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1348]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47189; File No. SR-MSRB-2002-15]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Proposed Rule Change Relating to Rule G-28, 
on Transactions With Employees and Partners of Other Municipal 
Securities Professionals

January 15, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''), and Rule 19b-4 thereunder,\1\ notice is hereby given 
that on December 20, 2002 the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') a proposed rule change (File No. 
SR-MSRB-2002-15). 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.
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    \1\ 15 U.S.C. 78s(b)(1); 17 CFR 240.19b-4.
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I. Self-Regulatory Organizations Statement of the Terms of Substance of 
the Proposed Rule Change

    The MSRB is filing herewith a proposed amendment to Rule G-28, on 
transactions with employees and partners of other municipal securities 
professionals (hereafter referred to as ``the proposed rule change''). 
Below is the text of the proposed rule change. New language is 
italicized; deletions are in brackets.

Rule G-28. Transactions With Employees and Partners of Other Municipal 
Securities Professionals

    (a)-(b) No change.
    (c) Exemption for Municipal Fund Securities. The provisions of this 
rule shall not be applicable to transactions in municipal fund 
securities or to accounts that are limited to transactions in municipal 
fund securities.
    (a) Not applicable.

II. Self-Regulatory Organizations 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 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
    Rule G-28, on transactions with employees and partners of other 
municipal securities professionals, requires a broker, dealer or 
municipal securities dealer (``dealer'') that opens a municipal 
securities account for an employee of another dealer (or a spouse or 
child of such employee) to first provide written notice to such other 
dealer and to subsequently follow any instructions provided by the 
other dealer with respect to transactions for the employee. The 
transacting dealer is also required to provide copies of all 
confirmations to the other dealer. The rule was adopted to prevent an 
employee of a dealer from effecting transactions that are contrary to 
the interests of the dealer or from otherwise acting illegally or 
improperly with respect to transactions in municipal securities.
    As part of its ongoing review of the application of MSRB rules to 
municipal fund securities, it has come to the MSRB's attention that the 
requirements of Rule G-28 may impose a burden on dealers and customers, 
particularly in the context of 529 college savings plan accounts, 
without any significant countervailing benefit. The MSRB is concerned 
that the requirements unnecessarily delay the opening of some accounts 
since dealers are required to provide written notice to a dealer that 
employs a new customer prior to opening an account. However, since it 
does not appear that transactions in municipal fund securities present 
the same potential for adverse impact on an employing dealer as might 
exist with respect to transactions in other types of municipal 
securities, the MSRB does not believe that any benefit is realized from 
imposing the requirements of Rule G-28 on transactions in municipal 
fund securities.
    Thus, the MSRB has determined that it is appropriate to create an 
exemption from Rule G-28 for transactions and accounts involving 
municipal fund securities. The MSRB notes that transactions in 
registered mutual fund shares are currently exempted from similar 
requirements imposed under NASD Rule 3050. In addition, since there is 
no trading market in shares of 529 college savings plans or other types

[[Page 3074]]

of municipal fund securities, the safeguards provided by Rule G-28 are 
not needed in the context of this market.
(2) Basis
    The MSRB has adopted the proposed rule change pursuant to Section 
15B(b)(2)(C) of the Exchange Act, which authorizes the MSRB to adopt 
rules that shall: Be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination 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 MSRB believes that the proposed rule change is consistent with 
the Exchange Act in that it amends an existing MSRB rule to better 
accommodate the unique characteristics of municipal fund securities, 
thereby removing impediments to a free and open market in such 
securities and promoting the protection of investors and the public 
interest.

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

    The MSRB 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 since it would apply equally to all brokers, 
dealers and municipal securities dealers effecting transactions in 
municipal fund securities.

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

    Within 35 days of the publication of this notice in the Federal 
Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date 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 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 
is consistent with the Act. Persons making written submissions should 
file six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of 
the submissions, 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 offices. All submissions should 
refer to File No. SR-MSRB-2002-15 and should be submitted by February 
12, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\2\
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    \2\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-1348 Filed 1-21-03; 8:45 am]
BILLING CODE 8010-01-P