[Federal Register Volume 75, Number 222 (Thursday, November 18, 2010)]
[Notices]
[Pages 70760-70763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29078]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63310; File No. SR-MSRB-2010-12]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of Revisions to the 
Study Outline and Selection Specifications for the Municipal Securities 
Representative Qualification Examination (Series 52) Program

November 12, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``the Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 10, 2010, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') a proposed rule change (File No. 
SR-MSRB-2010-12) (``the proposed rule change'') as described in Items 
I, II, and III below, which Items have been prepared by the MSRB. The 
MSRB has designated the proposed rule change as constituting a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the self-
regulatory organization pursuant to Section 19(b)(3)(A)(i) \3\ of the 
Act and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The MSRB proposes to 
implement the revised Series 52 examination program on January 3, 2011. 
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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).

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[[Page 70761]]

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

    The MSRB is filing with the Commission revisions to the study 
outline and selection specifications for the Municipal Securities 
Representative Qualification Examination (Series 52) program.\5\
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    \5\ The MSRB is also proposing corresponding revisions to the 
Series 52 question bank, but based upon instructions from the 
Commission staff, the MSRB is submitting SR-MSRB-2010-12 for 
immediate effectiveness pursuant to Section 19(b)(3)(A)(i) of the 
Act and Rule 19b-4(f)(1) thereunder, and is not filing the question 
bank for Commission review. See letter to Diane G. Klinke, General 
Counsel, MSRB, from Belinda Blaine, Associate Director, Division of 
Market Regulation, SEC, dated July 24, 2000. The question bank is 
available for Commission review.
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    The revised study outline is available on the MSRB's Web site at 
http://www.msrb.org/Rules-and-Interpretations/SEC-Filings/2010-Filings.asp, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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 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
    Section 15B(b)(2)(A) of the Act \6\ authorizes the MSRB to 
prescribe 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. The MSRB has developed examinations that 
are designed to establish that persons associated with brokers, dealers 
and municipal securities dealers that effect transactions in municipal 
securities have attained specified levels of competence and knowledge. 
The MSRB periodically reviews the content of the examinations to 
determine whether revisions are necessary or appropriate in view of 
changes pertaining to the subject matter covered by the examinations.
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    \6\ 15 U.S.C. 78o-4(b)(2)(A).
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    MSRB Rule G-3(a)(i) states that the activities of a municipal 
securities representative include one or more of the following 
activities relating to municipal securities: Underwriting, trading or 
selling municipal securities; rendering financial advisory or 
consultant services to issuers of municipal securities; research or 
investment advice, or communications with customers, about any of the 
activities named heretofore. A municipal securities representative may 
also qualify as such by taking the General Securities Representative 
Examination (Series 7). An individual who takes the Investment Company 
Products/Variable Contracts Examination (Series 6) may qualify as a 
limited representative, but activities are limited to those in 
municipal fund securities.
    A committee of industry members and MSRB staff recently undertook a 
review of the Series 52 examination program. As a result of this 
review, the MSRB is proposing to make revisions to the study outline to 
regroup certain topics to allow more detailed testing of certain 
product knowledge and MSRB rules and eliminate redundancy; delete dated 
references to certain topics in the current outline; provide detail 
about products covered in the examination; and incorporate generic 
terms instead of proprietary names. The revised examination continues 
to cover areas of knowledge required to conduct municipal securities 
activities.
    A summary of the changes to the content outline for the Series 52 
Examination, detailed by major topic headings, is provided below. 
Changes are stated as revisions to the current outline.

Part One: Municipal Securities

     The emphasis given this section has been increased from 
55% to 57% of the examination.

Part One--I: Types of Municipal Securities

Special type bonds

     ``Variable rate securities'' is moved and tested as 
``Variable rate demand obligations'' under ``Short-term 
obligations.''
     ``Taxable municipals'' are tested under a new section 
entitled ``Taxable municipal securities.''

Taxable municipal securities

     ``Build America Bonds (BABs),'' ``Taxable municipal 
bonds'' and ``Other tax credit bonds'' are added.

Short-term obligations

     ``Variable rate demand notes'' are tested as ``Variable 
rate demand obligations.''

Municipal fund securities

     ``Municipal fund securities (Basic characteristics, 
ownership and contribution limits)'' are added.

Part One--II: Characteristics

Basic characteristics

     ``Basis price'' is removed from ``Method of 
quotations.''
     ``Bearer'' and ``Registered as to principal only'' are 
deleted from ``Forms of Ownership.''
     The subtopics ``Interchangeable with bearer'' and 
``Non-interchangeable'' are deleted from ``Fully registered.''
     ``When as and if issued (WI)'' under ``Delivery 
procedures'' is moved to ``Syndicate operational procedures.''
     ``As mutually agreed upon'' becomes a descriptor for 
``Special settlement.''
     ``Forwards (forward delivery)'' is stated as ``Forward 
delivery.''
     ``Zeros'' are added as a subtopic under ``Rates.''
     ``Convertible'' is changed to ``Convertible/stepped 
coupons.''

Tax considerations

     ``Original issue discount'' is tested as ``Original 
issue discount/premium.''
     ``Market discount/premium'' is added.

Factors affecting marketability and liquidity

     ``Quality'' is deleted.
     ``Dollar price'' is changed to ``Dollar/yield price.''
     ``Registered, bearer, or book-entry only form'' is 
deleted.
     ``Credit and liquidity support,'' ``Denominations,'' 
``Type of issuance'' and ``Source of funds'' are added.

Part One--III: The Market for Municipal Securities

Primary market

Methods of primary financing

     ``Limited offering'' is added as a parenthetical after 
``Private placement.''

Information sources

     ``Direct mail from issuers or financial advisors'' is 
stated as ``Issuers or financial advisors.''
     The following topics have been deleted: ``The Bond 
Buyer;'' ``Munifacts;'' ``Dalnet;'' ``Newspaper and publications;'' 
``Bond Buyer New Issue Worksheets;'' ``Moody's Bond Survey;'' 
``Bloomberg;'' and ``Other sources (e.g., Bond Express and 
Bondtrac).''
     The following subtopics are added: ``EMMA;'' ``New 
issue wires;'' and ``Print and electronic news services.''

Underwriting procedures

     The parenthetical descriptor ``eastern account'' is 
deleted from the topic ``Undivided.''
     The parenthetical descriptor ``western account'' is 
deleted from the topic ``Divided.''
     ``Formation of selling groups'' is changed to ``Selling 
groups.''
     ``Bid form'' under topic ``Determination of syndicate 
bid'' is deleted.
     ``Terms and conditions'' and ``Submission of bid'' are 
added under ``Computation of bid.''

[[Page 70762]]

     ``Gross interest cost'' is added as a subtopic under 
``Basis for award.''
     ``Bond years'' is added under ``Computation of bid.''

Syndicate operational procedures

     ``Retail orders'' is added as a subtopic under 
``Priority provisions.''
     ``Establish time of first trade'' is added.
     ``Required disclosures'' is added with subtopics ``(a) 
EMMA;'' ``(i) Primary offerings;'' ``(ii) Material event notices;'' 
``(b) NIIDS;'' ``(c) SHORT;'' and ``(d) Delivery of official 
statement.''

Secondary market

     Heading ``Characteristics'' and subtopic ``Negotiated 
versus auction'' are deleted.
     Subtopic ``Over-the-Counter (OTC)'' is changed to 
``Traded over-the-counter (OTC).''

Information sources

     ``The Bond Buyer,'' ``Munifacts,'' and ``Bloomberg'' 
are deleted; ``Alternative trading systems (ATS),'' ``EMMA,'' and 
``Electronic information services'' are added.

Market participants

     ``Dealers'' is added.

Secondary market procedures

     ``Quote,'' ``Firm bid,'' ``Firm offering,'' and 
``Multiples of'' are deleted from ``Trading terms.''
     ``Offering,'' ``Minimums and multiples,'' and ``Cover 
bid'' are added to ``Trading terms.''

Market indicators

     The heading ``The Bond Buyer'' and subtopics 
``Placement ratio'' and ``Indices'' (and indices listed thereunder) 
are deleted.
     The following topics are added under new heading 
``Published indices:'' ``Bond Buyer indices'' and subtopics 
``Visible supply'' and ``Placement ratio'' thereunder; ``MMD 
curve;'' ``SIFMA index;'' subtopic ``U.S. Treasuries;'' and ``London 
Interbank Offered Rate (LIBOR).''

Other market-level indicators

     The following topics are deleted: ``Secondary market 
activity;'' ``Dollar bond market activity;'' ``Financial futures'' 
and subtopics ``Municipal bond contract'' and ``Municipal over bond 
(MOB) spread'' thereunder.

Customer suitability considerations

Kinds of investment risks

     The following topics are added: ``Legislative risk;'' 
``Price risk;'' ``Selection risk;'' ``Timing risk;'' and ``Liquidity 
risk.''

Part One--IV: Analyzing Municipal Credit

Revenue bonds

Security

     ``Non-discrimination covenant'' under the topic ``Bond 
indenture'' is deleted.
     The word ``fund'' has been deleted in each of the types 
of funds named under ``Flow of funds.''
     The parenthetical ``depreciation'' has been deleted 
from ``Renewal and replacement.''

Sources of credit information

     ``Continuing disclosure information (EMMA)'' has been 
added.

Credit enhancements

     ``Enhanced securities'' and ``Guaranteed investment 
contract (GIC)'' have been deleted.
     ``Insured'' has been changed to ``Insurance.''
     ``Escrow'' has been added.

Part One--V: Mathematical Calculations and Methods

     The order of certain topics under this section has been 
changed to facilitate assignment of questions on the test. Changes 
in content are as indicated below.

Relationship of bond prices to change in:

     ``Call/put features'' has been added.

Accretion of discount

     Parenthetical ``OID'' has been added.

Underwriting computations

     This header has been removed with each topic thereunder 
(``Bond years;'' ``Production;'' ``Spread;'' ``Net interest cost;'' 
and ``True interest cost'') because all are covered under 
``Underwriting procedures.''

Part Two: U.S. Government, Federal Agency and Other Financial 
Instruments

     The emphasis given this section has decreased from 7% 
to 4% of the examination.

Part Two--I: Types

Obligations of the U.S. Treasury

     ``TIPS'' has been added.

Obligations of Federal agencies

     ``Student Loan Marketing Association (SLMA or Sallie 
Mae)'' has been deleted.

Money market instruments

     ``Bankers acceptances'' has been deleted.

Other financial instruments

     Topics detailed under this heading have been removed; 
revised heading is ``Other financial instruments (corporate bonds, 
CMOs, etc.).''

Part Two--II: Characteristics of Various U.S. Government, Federal 
Agency and Other Financial Instruments

Marketability

     ``Ratings'' and ``Economic indicators'' are added.

Delivery

     Detail under this topic (``Book-entry only;'' 
``Bearer;'' and ``Registered'') has been deleted; revised header is 
``Form of Delivery.''

Part Two--III: The Market for U.S. Government, Federal Agency and Other 
Financial Instruments

     The major heading for this section has been revised: 
``The Market for U.S. Government, Federal Agency and Other Financial 
Instruments--Impact and Relationship to Other Fixed Income 
Markets.''
     These topics and all associated subtopics have been 
deleted: ``New Issue Marketing Methods;'' ``Secondary market;'' and 
``Federal Reserve's open-market participation in the market for each 
security, where applicable.''
     The topics ``Index floaters'' and ``Credit spreads'' 
have been added.

Part Four: Federal Legal Considerations

     The emphasis given to this section has increased to 26% 
from 25% of the examination.

Part Four--I: Regulation of Municipal Market Professionals Securities 
Exchange Act of 1934

     The reference to ``National Association of Securities 
Dealers Regulation, Inc. (NASDR)'' under ``Enforcement'' has been 
changed to ``FINRA.''

Part Four--II: Securities Investor Protection Act of 1970

     Heading ``Inapplicable to bank dealers'' has been 
deleted.

Part Four--III: MSRB rules

     Detail under ``Advertising (G-21)'' has been deleted.
     ``Delivery of Official Statements, Advance Refunding 
Documents and Forms G-36 (OS) and G-36 (ARD) to the Board or Its 
Designee (G-36)'' has been deleted.
     ``Anti-money laundering compliance program (G-41)'' has 
been added.

ATTACHMENT A: Contents of a Typical Notice of Bond Sale

     ``Terms and Conditions'' has been added.

ATTACHMENT B: Outline of a Typical Official Statement

     ``Organization and management'' has been revised to 
``Organization'' under ``Description of issuer.''
    The MSRB is proposing similar changes to the Series 52 selection 
specifications and question bank. The increased length of the 
examination permits testing of certain key concepts or rules without 
decreasing representation of related topics under the general topic 
heading. The examination will consist of 115 multiple choice-
questions assigned to the four areas of the examination as shown 
below. The percentages given for each section are rounded to an even 
number.

 
 
 
Municipal Securities                                                 57%
U.S. Government, Federal Agency and Other Financial Instruments       4%
Economic Activity, Government Policy and the Behavior of             13%
 Interest Rates
Federal Legal Considerations                                         26%
 

    Candidates will now be allowed three and one-half hours (instead 
of the current three hours) for each testing session because of the 
increase in the length of the examination from 100 to 115 questions. 
Each question will continue to count one point, and each candidate 
must correctly answer 70 percent of the questions in order to 
receive a passing grade.
2. Statutory Basis
    The MSRB believes that the proposed revisions to the Series 52 
examination program are consistent with the provisions of Section 
15B(b)(2)(A) of the Act, which authorizes the MSRB to prescribe 
standards of training,

[[Page 70763]]

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. 
Section 15B(b)(2)(A) of the Act also provides that the Board may 
appropriately classify municipal securities brokers, municipal 
securities dealers, and municipal advisors, and persons associated with 
municipal securities brokers, municipal securities dealers, and 
municipal advisors and require persons in any such class to pass tests 
prescribed by the Board.
    The MSRB believes that the proposed revisions to the Series 52 
examination program are consistent with the provisions of Section 
15B(b)(2)(A) of the Act in that the revisions will provide more updated 
material covered on the examination as well as ensure that certain key 
concepts or rules are tested on each administration of the examination 
in order to test the competency of individuals seeking to qualify as 
municipal securities representatives with respect to their knowledge 
about MSRB rules and the municipal securities market.

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, as amended.

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 
proposed rule change.

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \7\ and Rule 19b-4(f)(1) \8\ thereunder, in 
that the proposed rule change constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule of the self-regulatory organization. 
The MSRB proposes to implement the revised Series 52 examination 
program on January 3, 2011. At any time within 60 days of the filing of 
the proposed rule change, the Commission summarily may temporarily 
suspend 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.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(i).
    \8\ 17 CFR 240.19b-4(f)(1).
    \9\ 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-2010-12 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MSRB-2010-12. 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 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 Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street, NE., Washington, 
DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of such filing also will be available for inspection and 
copying at the MSRB's offices. 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-2010-12 and should be submitted on or before 
December 9, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-29078 Filed 11-17-10; 8:45 am]
BILLING CODE 8011-01-P