[Federal Register Volume 76, Number 192 (Tuesday, October 4, 2011)]
[Notices]
[Pages 61407-61411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-25478]
[[Page 61407]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65424, File No. SR-MSRB-2011-11]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Granting Approval of Amendments to Rule A-3, on Membership
on the Board
September 28, 2011.
I. Introduction
On August 11, 2011, the Municipal Securities Rulemaking Board
(``MSRB'' or ``Board''), filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Exchange Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change consisting of amendments to Rule
A-3, on membership on the Board, in order to establish a permanent
Board structure of 21 Board members divided into three classes, each
class being comprised of seven members who would serve three year
terms. The proposed rule change was published for comment in the
Federal Register on August 23, 2011.\3\ The Commission received three
comment letters regarding the proposed rule change and the MSRB's
response to these comment letters.\4\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 65158 (August 18,
2011), 76 FR 52724 (the ``Commission's Notice'').
\4\ See letter from Colette J. Irwin-Knott, President, National
Association of Independent Public Finance Advisors (``NAIPFA''),
dated September 12, 2011; letter from Michael Decker, Managing
Director and Co-Head of Municipal Securities, Securities Industry
and Financial Markets Association (``SIFMA''), dated September 13,
2011; letter from Susan Gaffney, Director, Federal Liaison Center,
Government Finance Officers Association (``GFOA''), dated September
16, 2011; and letter from Lawrence P. Sandor, Senior Associate
General Counsel, MSRB, dated September 19, 2011.
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This order approves the proposed rule change.
II. Background and Description of Proposal
The purpose of the proposed rule change is to make changes to MSRB
Rule A-3 as are necessary and appropriate to establish a permanent
Board structure of 21 Board members divided into three classes, each
class being comprised of seven members who would serve three year
terms. The terms would be staggered and, each year, one class would be
nominated and elected to the Board of Directors.
Rule A-3 would include a transitional provision, Rule A-3(h),
applicable for the Board's fiscal years commencing October 1, 2012 and
ending September 30, 2014, which would provide that Board members who
were elected prior to July 2011 and whose terms end on or after
September 30, 2012 may be considered for term extensions not exceeding
two years, in order to facilitate the transition to three staggered
classes of seven Board members per class. The transitional provision
would further provide that Board members would be nominated for term
extensions by a Special Nominating Committee formed pursuant to Rule A-
6, on committees of the Board, and that the Board would then vote on
each proposed term extension. The selection of Board members whose
terms would be extended would be consistent with ensuring that the
Board is in compliance with the composition requirements of revised
Section (a) of Rule A-3 during such extension periods.
In an order approving changes to MSRB Rule A-3 to comply with the
provisions of the Dodd-Frank Wall Street Reform and Consumer Protection
Act \5\ (the ``Dodd-Frank Act'') requiring the Board to have a majority
of independent public members and municipal advisor representation,\6\
the Commission approved a transitional provision of the rule that
increased the Board from 15 to 21 members, 11 of whom would be
independent public members and 10 of whom would be members representing
regulated entities. Of the public members, at least one would be
representative of municipal entities, at least one would be
representative of institutional or retail investors, and at least one
would be a member of the public with knowledge of or experience in the
municipal industry. Of the regulated members, at least one would be
representative of broker-dealers, at least one would be representative
of bank dealers, and at least one, but not less than 30 percent of the
regulated members, would be representative of municipal advisors that
are not associated with broker-dealers or bank dealers.
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\5\ Public Law 111-203, 124 Stat. 1376 (2010).
\6\ See Securities Exchange Act Release No. 63025 (September 30,
2010), 75 FR 61806 (October 6, 2010) (File No. SR-MSRB-2010-08)
(``Transitional Board Approval'').
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The Commission also approved a provision in MSRB Rule A-3 that
defined an independent public member as one with no material business
relationship with an MSRB regulated entity, meaning that, within the
last two years, the individual was not associated with a municipal
securities broker, municipal securities dealer, or municipal advisor,
and that the individual has no relationship with any such entity,
whether compensatory or otherwise, that reasonably could affect the
independent judgment or decision making of the individual. The rule
further provided that the Board, or by delegation, its Nominating and
Governance Committee, could also determine that additional
circumstances involving the individual could constitute a material
business relationship with an MSRB regulated entity.
In finding that the proposed rule change was reasonable and
consistent with the requirements of the Exchange Act, in that it
provided for fair representation of public representatives and MSRB
regulated entities, the Commission noted that the MSRB had committed to
monitor the effectiveness of the structure of the Board to determine to
what extent, if any, proposed changes might be appropriate.
Additionally, in its response to comment letters to the transitional
rule proposal, the MSRB suggested that, at the end of the transitional
period, the MSRB would be in a better position to make long-term
decisions regarding representation, size and related matters. While the
transitional period has not yet concluded, the Board believes it is now
in a position to establish a permanent structure. A more complete
description of the proposal is provided in the Commission's Notice.
III. Discussion of Comments and MSRB's Response
The Commission received three comment letters and a response from
the MSRB to the comment letters.\7\ The comment letters and the MSRB's
responses are discussed in greater detail below.
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\7\ See supra note 4.
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A. Comments Regarding Board Size
SIFMA opposed a permanent Board of 21 members. SIFMA stated that
such a Board is too big, would result in problems filling the
``public'' seats with qualified members, and would impose unnecessary
costs. SIFMA noted that the 21-member Board exceeds the statutory
minimum Board size provided in the Dodd-Frank Act, and believes any
deviation from the Board size referenced in the statute should be for
compelling reasons. SIFMA believes that a Board that includes 11 public
representatives will create challenges in terms of recruiting
candidates for Board seats with sufficient knowledge and expertise in
the municipal securities market so as
[[Page 61408]]
to contribute effectively in the Board's discussions. SIFMA also stated
that the MSRB's resources would be better directed to key initiatives
to improve the functioning of the market than to maintaining a larger
Board with higher costs attributable to travel and related expenses for
Board meetings and other events. SIFMA urged the MSRB to restore the
Board to 15 members in the future.
The MSRB responded that it provided a strong justification for a
21-member Board in its proposed rule change. In the proposal, the MSRB
stated that, given the diversity of municipal entities, broker-dealers,
bank dealers, and municipal advisors, a Board of 21 members provides
more flexibility to provide representation from various sectors of the
markets. The MSRB also stated that, at a 21-member level, the Board
would be similar in size to its counterpart, the Board of Governors of
the Financial Industry Regulatory Authority, and that a Board of 21
members is appropriate and consistent with industry norms. The MSRB
does not agree with SIFMA's comment concerning the difficulty of
filling the ``public'' seats with individuals with sufficient knowledge
and expertise in the municipal securities market. The MSRB stated that
the municipal securities market is replete with individuals who, while
satisfying Rule A-3's definition of ``independent,'' are very
knowledgeable about the workings of the municipal securities market and
have devoted a considerable amount of their time to the improvement of
that market, and that previous MSRB searches for public Board members
have elicited strong responses from such public servants.
The MSRB also stated that the additional costs associated with a
larger Board were not substantial, and estimated the incremental cost
of the larger Board at approximately one percent of its budget. The
Board further stated that it does not consider such additional costs to
be an impediment to the fulfillment of its key initiatives, and that
the larger Board contributes significantly to those initiatives.
The Commission finds that the 21-member Board size is not
inconsistent with the Exchange Act. Section 15B(b)(2)(B)(iii) of the
Exchange Act provides that the rules of the Board may increase the
number of Board members over the default 15-member Board structure set
forth in the Exchange Act,\8\ provided that such number is an odd
number.\9\ Although a 21-member Board would entail higher costs than a
smaller Board, the larger Board would allow greater representation of
the interests of the various sectors of the municipal securities
market, and, as stated by the MSRB, the larger Board size is not
inconsistent with industry norms. The MSRB also believes the 21-member
Board has worked efficiently and effectively during the transition
period.\10\
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\8\ See 15 U.S.C. 78o-4(b)(1) (as amended by the Dodd-Frank
Act).
\9\ See 15 U.S.C. 78o-4(b)(2)(B)(iii) (as amended by the Dodd-
Frank Act).
\10\ See Commission's Notice.
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B. Comments Regarding Board Composition
All three commenters raised concerns about the Board's composition.
NAIPFA agreed with the rule's requirement that there be at least one
municipal advisor representative who is not associated with a broker-
dealer in each elected class of board members, but commented that the
Board's composition of seven broker-dealer and bank dealer members
compared to three municipal advisor members did not constitute ``fair
representation'' of municipal advisors as was called for by the Dodd-
Frank Act.
SIFMA opposed the proposal's mandate that at least 30 percent of
``regulated'' members of the Board be representatives of municipal
advisor firms that are not broker-dealers or bank dealers. SIFMA
indicated that there is no comparable minimum for representatives of
broker-dealers or bank dealers, noted that the 30 percent minimum
representation for municipal advisors exceeds the statutory minimum,
and stated that the MSRB offered no justification for this provision.
GFOA stated that the MSRB should ensure that there is adequate
issuer representation on its Board in light of the MSRB's new mission
to protect municipal entities and obligated persons in addition to
investors. GFOA acknowledged that the Dodd-Frank Act states that the
Board must be comprised of ``at least'' one issuer and ``at least'' one
investor, but recommended that, if the Board remains at 21 members, the
Board should include four issuers, four investors, and three general
public members. GFOA also stated that the issuer positions should be
filled by qualified and long-standing representatives of various-sized
state and local governments so that there would be a balanced
representation of the issuer community. GFOA further stated that these
issuer representatives should generally come from general purpose
governments that issue the most often used types of debt (e.g., general
obligation bonds, revenue bonds, etc.).
GFOA also stated that having adequate independent financial
advisors on the Board is essential and that the number of such
independent financial advisor representatives should be no less than
the number of those representing banks and broker-dealers; GFOA further
recommended allowing only those financial advisors who are unaffiliated
with broker-dealers and banks to serve as the municipal advisor
representatives on the Board.
In addition, GFOA said that, in order for a public Board member to
be considered ``independent'' from a regulated entity, such member
should have had no material business relationship with a regulated
entity for the past five years, rather than the two years provided for
in Rule A-3. GFOA said that this two-year bar is set too low to
guarantee that a public board member has true independence, and that
other criteria may also be needed to ensure that any particular
independent board position be filled by a professional that has
significant experience in the particular community for which he or she
serves on the Board.
The MSRB stated that it has carefully considered the interests of
municipal advisors, broker-dealers, and bank dealers as regulated
entities, the MSRB's obligation to write rules that protect investors
and municipal entities, and the statutory mandate that there be fair
representation on the Board of broker-dealers, bank dealers, municipal
advisors, and the public. The MSRB indicated that while the statute
requires that there be at least one municipal advisor representative on
the Board, it is the view of the Board that no less than 30 percent of
the members representing regulated entities should be municipal
advisors that are not associated with broker-dealers or bank dealers.
The MSRB did not agree with SIFMA's comment that the level of
representation of municipal advisors is disproportionately large,
noting that the development of rules for municipal advisors is not
complete and that it is essential that municipal advisors participate
in the development of rules that affect them. The MSRB also did not
agree with NAIPFA's comment that this level of representation of
municipal advisors is disproportionately small, in relation to the
representation of broker-dealers and bank dealers, stating that because
many broker-dealers and bank dealers engage in municipal advisory
activities, it is inappropriate to assume that the interests of the
municipal advisor Board representatives and the
[[Page 61409]]
broker-dealer and bank dealer Board representatives are adverse.
The MSRB believes that the proposal adequately addresses GFOA's
concerns about the adequacy of issuer representation on the Board and
its proposed independence standards. The MSRB does not believe that
Rule A-3 should be amended to provide for a greater minimum number of
municipal entity representatives than that mandated by the Exchange
Act, and noted that they have a mandate to protect all municipal
entities. The MSRB also noted that the proposed rule language already
addresses GFOA's concern that municipal advisor representatives not be
broker-dealers or bank dealers. Further, the MSRB believes that no
change to the definition of ``independent'' in Rule A-3 is warranted
because the definition is already more stringent than the definition
used by other self-regulatory organizations (``SROs''), and because the
definition strikes the right conservative balance of ensuring
sufficient independence while not permanently restricting knowledgeable
individuals.
The Commission finds that the proposed Board composition is
consistent with the requirements of the Exchange Act, and the rules and
regulations thereunder applicable to the MSRB, including the fair
representation requirements of the Exchange Act. Section 15B(b)(2)(B)
of the Exchange Act requires, among other things, that the rules of the
Board establish fair procedures for the nomination and election of
members of the Board and assure fair representation in such nominations
and elections of public representatives, broker-dealer representatives,
bank representatives, and advisor representatives.\11\ Section
15B(b)(2)(B)(i) of the Exchange Act provides that the number of public
representatives of the Board must at all times exceed the total number
of regulated representatives.\12\
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\11\ See 15 U.S.C. 78o-4(b)(2)(B) (as amended by the Dodd-Frank
Act).
\12\ See 15 U.S.C. 78o-4(b)(2)(B)(i) (as amended by the Dodd-
Frank Act).
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The MSRB proposes that the permanent Board, like the current Board
operating under the transitional rule for the Board's fiscal years
commencing October 1, 2010 and ending September 30, 2012, consist of 11
public representatives and 10 regulated representatives. Of those 10
regulated representatives, the MSRB proposes that at least one, and not
less than 30 percent shall be advisor representatives (i.e., three out
of 10).
As noted in the Transitional Board Approval,\13\ previously, the
Commission has considered whether the proposed governance rules of an
SRO are consistent with the Exchange Act's requirements under Sections
6 and 15A for fair representation of SRO members generally.\14\ For
example, the Commission has approved an SRO's governance rules that
require that the SRO's members as a whole be able to select at least 20
percent of the total number of directors of the exchange's or
association's board.\15\ In addition, the Commission has previously
found SRO rules that provide sub-categories of regulated persons with
the right to select a specified number of directors to be consistent
with the Exchange Act.\16\
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\13\ See supra, note 6.
\14\ Section 6(b)(3) of the Exchange Act provides that: ``An
exchange shall not be registered as a national securities exchange
unless the Commission determines that * * * (3) The rules of the
exchange assure a fair representation of its members in the
selection of its directors and administration of its affairs and
provide that one or more directors shall be representative of
issuers and investors and not be associated with a member of the
exchange, broker, or dealer.'' 15 U.S.C. 78f(b)(3). Section
15A(b)(4) of the Exchange Act contains an identical requirement with
respect to the rules of a national securities association. See 15
U.S.C. 78o-3(b)(4).
\15\ See, e.g., Securities Exchange Act Release No. 58324
(August 7, 2008), 73 FR 46936 (August 12, 2008) (stating that ``the
requirement under BSE By-Laws that at least 20% of the BSE Directors
represent members * * * [is] designed to ensure the fair
representation of BSE members on the BSE Board''); Securities
Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550
(January 23, 2006) (stating that ``the requirement in [Nasdaq's] By-
Laws that twenty percent of the directors be `Member Representative
Directors' * * * provides for the fair representation of members in
the selection of directors * * * consistent with the requirement in
section 6(b)(3) of the Exchange Act''); Securities Exchange Act
Release No. 48946 (December 17, 2003), 68 FR 74678 (December 24,
2003) (stating that the amended Constitution of the New York Stock
Exchange, which gives Exchange members the ability to nominate no
less than 20% of the directors on the Board, satisfies the Section
6(b)(3) fair representation requirement); see also Securities
Exchange Act Release No. 50699 (November 18, 2004), 69 FR 71126
(December 8, 2004) (stating that ``[c]onsistent with the fair
representation requirement, the [Commission's] proposed [SRO]
governance rules would require that the Nominating Committee
administer a fair process that provides members with the opportunity
to select at least 20% of the total number of directors `member
candidates') * * * This `20% standard' for member candidates
comports with previously-approved SRO rule changes that raised the
issue of fair representation'').
\16\ See, e.g., Securities Exchange Act Release No. 56145 (July
26, 2007), 72 FR 42169 (August 1, 2007) (approving the composition
of the FINRA (f/k/a NASD) Board of Governors to include three small
firm Governors, one mid-size firm Governor, and three large-firm
Governors, elected by members of FINRA according to their
classification as a small firm, mid-size firm, or large firm).
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Under the MSRB proposal, of the 10 regulated representatives, at
least one would be a broker-dealer representative, at least one would
be a bank representative, and at least one, and not less than 30
percent of the total regulated representatives (i.e., three out of 10),
would be an advisor representative. Section 15B(b)(2)(B)(i) of the
Exchange Act requires the Board to consist of a majority of public
representatives, leaving a minority of the Board available to achieve
``fair representation'' of the three sub-categories of regulated
representatives.\17\ Accordingly, ``fair representation'' of each of
the sub-categories must necessarily mean something less than the 20
percent standard, in relation to an entire board, previously approved
by the Commission for SRO members generally under Sections 6 and 15A of
the Exchange Act.
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\17\ See 15 U.S.C. 78o-4(b)(2)(B)(i) (as amended by the Dodd-
Frank Act).
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The Commission also notes that Section 15B(b)(1) of the Exchange
Act sets forth minimum representation requirements for bank, broker-
dealer and advisor representatives.\18\ It does not mandate the
specific number of any class of representatives that should serve on
the Board, nor does it set forth maximum Board composition or
representation requirements.\19\ Thus, as with the interpretation of
``fair representation'' with respect to other SROs, the Commission has
flexibility in determining what constitutes ``fair representation'' for
purposes of the Board's composition under Section 15B of the Exchange
Act. Based on the constraints of Section 15B(b)(2)(B)(i) noted above,
and the Commission's consideration of ``fair representation'' in other
contexts, the Commission believes that the MSRB's proposal to ensure
that representatives of municipal advisors (that are not associated
with a broker, dealer or municipal securities dealer), which first
became subject to MSRB rulemaking in the Dodd-Frank Act,\20\ would
constitute at least 30 percent of the directors that may be
representative of the three sub-categories of regulated
representatives, is reasonable, and consistent with Section
15B(b)(2)(B) of the Exchange Act.\21\
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\18\ See 15 U.S.C. 78o-4(b)(1) (as amended by the Dodd-Frank
Act).
\19\ See id.
\20\ See 15 U.S.C. 78o-4(b)(2) (as amended by the Dodd-Frank
Act). In addition, the Dodd-Frank Act amended Section 15B of the
Exchange Act to require municipal advisors to register with the
Commission as of October 1, 2010. See Securities Exchange Act
Release No. 62824 (September 1, 2010), 75 FR 54465 (September 8,
2010) (adopting interim final temporary Rule 15Ba2-6T under the
Exchange Act to require the temporary registration of municipal
advisors on Form MA-T).
\21\ See 15 U.S.C. 78o-4(b)(2)(B) (as amended by the Dodd-Frank
Act).
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[[Page 61410]]
In finding that the transitional Board was reasonable and
consistent with the requirements of the Exchange Act, the Commission
noted that the MSRB had committed to monitor the effectiveness of the
structure of the Board to determine to what extent, if any, proposed
changes in representation might be appropriate.\22\ Based on its
experience during the transitional period, the MSRB has determined that
the current transitional Board composition is working effectively and
efficiently.\23\ Accordingly, the Commission believes that the proposed
Board composition, like the transitional Board composition, complies
with the Exchange Act.\24\ The Commission also agrees that allotting at
least 30 percent of the regulated entity positions to municipal
advisors that are not associated with broker-dealers or bank dealers,
which is higher than the minimum representation of municipal advisors
required by the Dodd-Frank Act,\25\ will assist the Board in its
rulemaking process with respect to municipal advisors, and will help
inform the Board's decisions regarding other municipal advisory
activities while not detracting from the Board's ability to continue
its existing rulemaking duties with respect to broker-dealer and bank
activity in the municipal securities market. The Commission also agrees
with the MSRB that the existing definition of ``independent of any
municipal securities broker, municipal securities dealer or municipal
advisor'' in Rule A-3, which was not changed by the proposed rule
change, strikes a reasonable balance of ensuring sufficient
independence while not permanently restricting knowledgeable
individuals. In approving the independence definition in Rule A-3, the
Commission noted that the two-year cooling off period is a minimum
requirement and would allow the Board, or by delegation, its Nominating
Committee, to determine additional circumstances involving the
individual that would constitute a ``material business relationship''
with a municipal securities broker, municipal securities dealer, or
municipal advisor.\26\
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\22\ See Transitional Board Approval, supra note 6.
\23\ See Commission's Notice.
\24\ See Transitional Board Approval, supra note 6.
\25\ See 15 U.S.C. 78o-4(b)(1) (as amended by the Dodd-Frank
Act).
\26\ See Transitional Board Approval, supra note 6.
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C. Comments Regarding Transparency of Board Processes
NAIPFA and GFOA expressed concerns about the transparency of
various Board processes. NAIPFA requested that the MSRB's Board member
selection and leadership processes become more transparent in order to
ensure that the public interest is being served. The MSRB responded by
noting that the Board recently made the application process for Board
members more transparent by establishing a policy of publishing the
names of all applicants on the Board's website within one week of the
publication of the names of the new Board members. NAIPFA also
expressed concern that the Board members who are to serve on the
Special Nominating Committee to be established as part of the proposed
rule have already been selected, and expressed concerns regarding the
process by which the Special Nominating Committee members were
selected. The MSRB responded to the concerns about the Special
Nominating Committee by stating that the selection complied with MSRB
Rule A-6(a), which permits the Board to establish special committees by
resolution, and noting that the members who were selected for the
Special Nominating Committee for term extensions were the only Board
members who met their criteria of being ``disinterested'' in the
selection process because of their ineligibility for a term extension.
NAIPFA also requested that the MSRB utilize a more transparent
process with regard to future rulemaking by giving member firms more
information about the rules the MSRB addresses at particular Board
meetings and providing the timeline with which the MSRB anticipates
rule releases. NAIPFA suggested that the MSRB post meeting agendas at
least 48 hours in advance of a meeting date, and allow for public
attendance at Board meetings and public participation in Board
conference calls. In addition, NAIPFA requested that the MSRB act to
ensure that statements made by leadership are consistent with the
actions of the Board.
GFOA also stated that there is a need for greater transparency with
Board practices. GFOA suggested that the Board hold their meetings in
public and allow for outside participation. GFOA also suggested that
Board meeting agendas be made available well before the scheduled
meetings, and that the meeting minutes be published within 10 business
days of each meeting.
The MSRB responded that it believes its rulemaking process provides
considerable opportunities for full public involvement and comment on
regulatory initiatives, and that the Board is careful to consider all
feedback regarding potential improvements to its governance processes.
The Board does not believe that there have been inconsistencies between
statements made by MSRB leadership and actions of the Board. The MSRB
stated that its Board meetings are closed to the public in order to
promote free and frank discussion on all topics and to promote an
environment in which impartial judgment may be exercised. However, the
Board indicated that it is exploring other alternatives to promote
transparency, as transparency is an important priority of the Board.
Although the provisions of the proposed rule change do not directly
relate to the transparency of Board processes, the Commission notes
that the Board has indicated that it is exploring alternatives to
promote transparency.
IV. Discussion and Commission Findings
The Commission has carefully considered the proposed rule change,
the comment letters received, and the MSRB's response to the comment
letters and finds that the proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to the MSRB.\27\ In particular, the proposed rule
change is consistent with Section 15B(b)(1) of the Act,\28\ which
requires, among other things, that the Board shall consist of at least
eight public representatives (with at least one investor
representative, at least one issuer representative, and at least one
general public representative) and seven regulated representatives
(with at least one broker-dealer representative, at least one bank
representative, and at least one advisor representative).
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\27\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
\28\ 15 U.S.C. 78o-4(b)(1).
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The proposed rule change is also consistent with Section
15B(b)(2)(B) of the Act,\29\ which provides that the MSRB's rules
shall:
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\29\ 15 U.S.C. 78o-4(b)(2)(B).
Establish fair procedures for the nomination and election of
members of the Board and assure fair representation in such
nominations and elections of public representatives, broker dealer
representatives, bank representatives, and advisor representatives.
Such rules--
(i) Shall provide that the number of public representatives of
the Board shall at all times exceed the total number of regulated
representatives and that the membership shall at all times be as
evenly divided in number as possible between public representatives
and regulated representatives;
[[Page 61411]]
(ii) shall specify the length or lengths of terms members shall
serve;
(iii) may increase the number of members which shall constitute
the whole Board, provided that such number is an odd number; and
(iv) shall establish requirements regarding the independence of
public representatives.
The Commission believes that the proposal provides for fair
representation of public representatives, broker-dealers, bank dealers
and municipal advisors consistent with the Exchange Act, and that
providing a minimum number of non-dealer municipal advisor
representatives--at least 30 percent of the regulated representatives--
is reasonable, and consistent with the Exchange Act. The Commission
notes that the proposal provides that the number of public
representatives on the Board shall exceed the total number of regulated
representatives by one so that the membership shall be as evenly
divided as possible between public representatives and regulated
representatives--11 to 10. The proposal specifies the length of terms
that Board members will serve--three years--which is consistent with
the length of the terms served by Board members prior to the adoption
of the Dodd-Frank Act. The proposal increases the size of the Board
from 15 to 21, consistent with the size of the Board during the
transitional period that commenced on October 1, 2010. Finally, the
proposal maintains the existing requirement regarding the independence
of public representatives.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\30\ that the proposed rule change (SR-MSRB-2011-11) be,
and it hereby is, approved.
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\30\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25478 Filed 10-3-11; 8:45 am]
BILLING CODE 8011-01-P