[Federal Register Volume 70, Number 104 (Wednesday, June 1, 2005)]
[Notices]
[Pages 31552-31554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2751]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51737; File No. SR-MSRB-2005-07]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Regarding Amendment to Rule G-8, on Recordkeeping, Relating to 
Delivery of Customer Agreements Containing Predispute Arbitration 
Clauses

May 24, 2005.
    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 April 29, 2005, the Municipal Securities Rulemaking Board (``MSRB'' 
or ``Board''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the MSRB. The 
MSRB has filed the proposal as a ``non-controversial'' rule change 
pursuant to Section 19(b)(3)(A)(iii) of

[[Page 31553]]

the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. However, the MSRB 
has set an effective date of May 1, 2005, to coincide with recent 
amendments to NASD Rule 3110(f), on predispute arbitration agreements 
with customers.\5\ 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ SEC Release No. 34-51526 (April 12, 2005).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing with the Commission a proposed rule change 
consisting of an amendment to Rule G-8, on recordkeeping, to conform to 
NASD's recent amendments to Rule 3110(f). NASD's amendments conform its 
requirements with the Commission's recordkeeping rules by extending the 
time period for delivery of a copy of a customer account agreement 
containing a predispute arbitration clause from the time of signing to 
within 30 days of signing.\6\ The MSRB has set an effective date for 
the amendments of May 1, 2005, to coincide with the effective date of 
the recent amendments to NASD Rule 3110(f), and, consistent with NASD, 
has extended the compliance date to June 1, 2005 for the prior 
amendments to Rule G-8(a)(xi)(M)(1), on required disclosures in 
customer agreements containing predispute arbitration clauses.\7\ The 
text of the proposed rule change is available on the MSRB's Web site 
(http://www.msrb.org), at the MSRB's principal office, and at the 
Commission's Public Reference Room.
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    \6\ NASD's filing (File No. SR-NASD-2005-045) was granted 
accelerated approval in SEC Release No. 34-51526 (April 12, 2005).
    \7\ SEC Release 34-51534 (April 12, 2005).
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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
    On March 21, 2005, the MSRB filed, for immediate effectiveness, a 
proposed rule change consisting of an amendment to Rule G-8 to add 
requirements governing the use of predispute arbitration agreements 
with customers, consistent with NASD requirements as set forth in NASD 
Rule 3110(f).\8\ Shortly thereafter, NASD filed an amendment to Rule 
3110(f) to conform to SEC recordkeeping rules, in particular Exchange 
Act Rule 17a-3(a)(17)(i)(B)(1),\9\ by extending the time period for 
delivery of a copy of a customer account agreement containing a 
predispute arbitration clause from the time of signing to within 30 
days of signing.\10\ The NASD amendments also extend the compliance 
date of its prior amendments to Rule 3110(f)(1), on required 
disclosures, to June 1, 2005.
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    \8\ File No. SR-MSRB-2005-05. The filing also contained a 
technical amendment to Rule A-11, on indemnification, to delete its 
obsolete references to arbitrators. On April 1, 2005, the MSRB 
submitted Amendment No. 1 to the filing to replace, in its entirety, 
the proposed language to Rule G-8 with new language that conformed 
with the language of NASD Rule 3110(f), as amended. See MSRB Notices 
2005-18 (March 21, 2005) and 2005-21 (April 1, 2005). The Commission 
published notice of the filing for immediate effectiveness in 
Release No. 34-51534 (April 12, 2005). The effective date for the 
amendments to Rule G-8 is May 1, 2005.
    \9\ 17 CFR 240.17a-3(a)(17)(b)(1). This SEC rule requires a 
broker-dealer, among other things, to keep a record indicating that 
the broker-dealer has furnished to each customer within 30 days of 
opening the account a copy of the account record, or alternate 
document, containing the customer's name, address, telephone number, 
date of birth, employment status, annual income, net worth, the 
account's investment objectives, and other information.
    \10\ The Commission published notice of the NASD filing and an 
order granting accelerated approval in Release No. 34-51526 (April 
12, 2005).
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    As stated previously, it is the MSRB's intent to make its 
requirements governing the use of predispute arbitration agreements 
with customers consistent with NASD requirements in this area. 
Accordingly, the MSRB is submitting the proposed rule change to amend 
Rule G-8, consistent with NASD Rule 3110(f) as most recently amended. 
As noted in NASD's filing, the purpose of the proposed rule change 
regarding the delivery of customer agreements is to conform the time 
period for delivery of copies of any customer agreement containing a 
predispute arbitration clause to customers with SEC requirements as set 
forth in its recordkeeping rules.\11\ Specifically, the proposed rule 
change would require dealers to comply with such delivery requirements 
within 30 days of signing of the customer agreement.
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    \11\ File No. SR-NASD-2005-045 at 19.
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    Both NASD and MSRB requirements, as previously filed, are effective 
as of May 1, 2005.\12\ As part of its most recent amendments, NASD 
extended to June 1, 2005 the compliance date for its provision 
regarding required disclosures in any customer agreement containing a 
predispute arbitration clause.\13\ Thus, the MSRB has set an effective 
date for the amendments of May 1, 2005, and has extended the compliance 
date for its prior amendments to Rule G-8(a)(xi)(M)(1), on required 
disclosures, to June 1, 2005. Beginning June 1, 2005, all customer 
agreements containing predispute arbitration clauses must include the 
new disclosure required by Rule G-8(a)(xi)(M)(1).\14\ The MSRB is 
requesting that the Commission waive the five-day pre-filing notice 
requirement and the 30-day delayed effective date requirement for 
``non-controversial'' filings submitted pursuant to Section 19(b)(3)(A) 
of the Act and Rule 19b-4(f)(6) thereunder, so that MSRB effective 
dates will coincide with NASD's for the same requirements.
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    \12\ SEC Release No.'s 34-50713 (November 22, 2004) and 34-51534 
(April 12, 2005).
    \13\ SEC Release No. 34-51526 (April 12, 2005).
    \14\ However, any dealer that wishes to use customer agreements 
containing the new disclosure language required by MSRB Rule G-
8(a)(xi)(M)(1) may do so prior to the compliance date of June 1, 
2005.
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) and (D) of the Act,\15\ which provides that MSRB 
rules shall:
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    \15\ 15 U.S.C. 78o-4(b)(2)(C), (D).

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 * * * [and] if the Board deems appropriate, 
provide for the arbitration of claims, disputes, and controversies 
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relating to transactions in municipal securities * * *.

The MSRB believes that the proposed rule change is consistent with 
these provisions in that it would provide for the protection of 
investors and the public interest by ensuring that customers of 
brokers, dealers and municipal securities dealers, including bank 
dealers and municipal-only dealers, receive information regarding 
arbitration and predispute arbitration

[[Page 31554]]

agreements in a timely fashion. The proposed rule change also would 
ensure consistent treatment across the securities markets regarding 
these requirements.

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

    The MSRB does not believe that the proposed rule change will result 
in 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 on the 
proposal.

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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days (or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest) from the date on which it was filed, the proposed rule change 
has become effective pursuant to Section 19(b)(3)(A) of the Act \16\ 
and Rule 19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The MSRB has asked the Commission to 
waive the 30-day operative delay. The Commission hereby grants this 
request. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because such waiver will enable the MSRB to make the effective 
date of the proposed rule change coincide with NASD's for the same 
requirements. The effective date for the amendments will be May 1, 
2005. The MSRB has extended the compliance date for its prior 
amendments to Rule G-8(a)(xi)(M)(1) to June 1, 2005, to coincide with 
NASD's compliance date for the same provisions. The MSRB has also 
requested that the Commission waive the pre-filing notice requirement 
of at least five business days (or such shorter time as designated by 
the Commission).\18\ The Commission hereby grants the MSRB's request to 
waive the pre-filing requirement.\19\
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    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    At any time within 60 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.\20\
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    \20\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-MSRB-2005-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609. All submissions should refer to File Number 
SR-MSRB-2005-07. This file number should be included on the subject 
line if e-mail 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 Web site (http://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 inspection and copying in the Commission's Public 
Reference Room. Copies of such filing also will be available for 
inspection and copying at the principal office of the MSRB. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MSRB-2005-07 and should be 
submitted on or before June 22, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2751 Filed 5-31-05; 8:45 am]
BILLING CODE 8010-01-P