[Federal Register Volume 80, Number 88 (Thursday, May 7, 2015)]
[Notices]
[Pages 26310-26313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10946]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74858; File No. SR-MSRB-2015-04]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change Consisting of the Specifications for the Selection of
Examination Questions and Content Outline for the Municipal Advisor
Representative Qualification Examination
May 1, 2015.
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 April 22, 2015, the Municipal Securities Rulemaking Board (the
``MSRB'' or ``Board'') filed with the Securities and Exchange
Commission (the ``SEC'' or ``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the MSRB. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB filed with the Commission the specifications for the
selection of examination questions (``selection specifications'') and
content outline for the Municipal Advisor Representative Qualification
Examination (``Series 50 examination'') (the ``proposed rule
change'').\3\ The MSRB is not proposing in this filing any textual
changes to its rules.
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\3\ The MSRB is also proposing the question bank for the Series
50, but based upon instructions from the Commission staff, the MSRB
is submitting SR-MSRB-2015-04 for immediate effectiveness pursuant
to Section 19(b)(3)(A)(i) of the Act and Rule 19b-4(f)(6)
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, attached as Exhibit 3b. The question bank
is available for Commission review. The selection specifications for
the Series 50 examination, Exhibit 3c, have been omitted and filed
separately with the Commission for confidential treatment pursuant
to Rule 24b-2 of the Securities Exchange Act.
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The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2015-Filings.aspx, 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 MSRB has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
[[Page 26311]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 15B of the Act requires the MSRB to establish professional
standards for municipal advisors.\4\ The Act further requires
associated persons of municipal advisors to pass such examinations as
the Board may establish to demonstrate that such individuals meet the
standards as the Board finds necessary or appropriate in the public
interest or for the protection of investors and municipal entities or
obligated persons.\5\ A professional qualification examination is
intended to determine whether an individual meets the MSRB's basic
qualification standards for a particular registration category. The
examination measures a candidate's knowledge of the business
activities, as well as the regulatory requirements, including MSRB
rules, SEC rules, rule interpretations and other federal law,
applicable to a particular registration category.
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\4\ 15 U.S.C. 78o-4(b)(2)(L)(iii).
\5\ See Section 15B(b)(2)(A)(iii) of the Act, 15 U.S.C. 78o-
4(b)(2)(A)(iii).
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On February 26, 2015, the Commission approved amendments to MSRB
Rule G-3, which established the qualification examination requirements
for municipal advisor representative and municipal advisor principal
candidates.\6\ Individuals who engage in municipal advisory activities
must qualify as municipal advisor representatives and individuals who
engage in the management, direction or supervision of the municipal
advisory activities of municipal advisors and their associated persons
must qualify as municipal advisor principals. To qualify as either a
municipal advisor representative or municipal advisor principal, an
individual must pass the Series 50 examination. The examination
requirement in MSRB Rule G-3(d) is intended, among other things, to
increase municipal advisor representative and municipal advisor
principal candidates' awareness and knowledge that they are operating
in a regulated environment designed to protect municipal entities,
obligated persons and the integrity of the municipal market.
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\6\ See Exchange Act Release No. 74384 (Feb. 26, 2015), 80 FR
11706 (Mar. 4, 2015), File No. SR-MSRB-2014-08.
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The MSRB developed the Series 50 examination content outline in
accordance with The Standards for Educational and Psychological Testing
(``APA Standard''),\7\ including the engagement of a psychometrician
and a committee of industry subject matter experts. The Series 50
examination content outline has been developed to provide reasonable
assurance that municipal advisor representative candidates understand
their professional responsibilities, including key regulatory
requirements and duties and obligations. The examination will test
applicants on their general knowledge of the municipal advisory
industry and the associated municipal advisor regulatory framework.\8\
To develop the examination to fulfill these purposes, the MSRB in July
of 2014 completed a job analysis of municipal advisors based on a web-
based survey that was sent to all MSRB-registered municipal
advisors.\9\ The MSRB received 565 responses to the survey from
individuals who engage in a variety of municipal advisory activities
for different-sized firms in different areas of the country. The survey
results provided the MSRB with certain data on municipal advisors, such
as the duties, tasks, and responsibilities performed by individuals who
engage in various municipal advisory activities and the level of
knowledge an individual should possess to be sufficiently qualified to
perform municipal advisory activities. The job analysis, coupled with
focus panels, provided the empirical basis for the representation of
topic areas on the Series 50 examination.
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\7\ See American Educational Research Association, American
Psychological Association, & National Council on Measurement in
Education, The Standards for Educational and Psychological Testing
(2d ed. 2014).
\8\ See Series 50 examination content outline attached hereto as
Exhibit 3a.
\9\ A job analysis is an assessment of the essential skills and
functions that are required to complete a particular job.
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The Series 50 examination will consist of 100 multiple-choice
questions. Candidates are allowed 180 minutes to complete the
examination.\10\ Consistent with other financial regulatory
qualification examinations, candidates may receive (at the option of
their firm) an informational breakdown of their performance on each
section of the examination and their pass/fail status at the completion
of the testing session. As provided for in MSRB Rule G-3(g) and
consistent with other MSRB examinations, candidates that fail to pass
the Series 50 examination are permitted to take the examination again
after a period of 30 days has elapsed from the date of the prior
examination. Any person, however, who fails to pass the Series 50
examination three or more times in succession is prohibited from taking
the Series 50 examination again until six months has elapsed from the
date the candidate last failed the examination.
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\10\ Prior to beginning the examination, candidates will receive
a tutorial on how to complete the computerized examination.
Candidates will be given 30 minutes to complete the tutorial in
addition to the 180 minutes allowed to complete the examination.
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The Series 50 examination content outline has been developed to
assist municipal advisor representative candidates in preparing for the
Series 50 examination and will be available on the MSRB's Web site. The
Series 50 examination content outline describes the following five
topical sections comprising the examination: (1) Understanding SEC and
MSRB Rules Regarding Municipal Advisors (12 questions); (2)
Understanding Municipal Finance (35 questions); (3) Performing Issuer's
Credit Analysis and Due Diligence (12 questions); (4) Structuring,
Pricing and Executing Municipal Debt Products (31 questions); and (5)
Understanding Requirements Related to the Issuance of Municipal Debt
(10 questions).
The reference materials section of the Series 50 examination
content outline is intended to provide candidates with a list of
resources, which when used in conjunction with the Series 50
examination content outline, can assist candidates in preparing for the
Series 50 examination. The reference materials were recommended by
municipal advisors as having been helpful resources in carrying out the
job functions of a municipal advisor. The reference materials are not
intended to be all-inclusive, nor are the reference materials intended
to specifically represent content that may be covered on the
examination.
Prior to announcing the effective date of the Series 50
examination, the MSRB will conduct a pilot for the Series 50
examination. The Series 50 pilot examination will assist the MSRB in
validating the bank of examination questions and establishing the
passing score. The Series 50 pilot examination will consist of 120-125
questions. Candidates will have 240 minutes to complete the Series 50
pilot examination.\11\ The Series 50 pilot examination will be
available for a limited time this fall and open to all municipal
advisor representative and municipal advisor principal candidates.
Those candidates who take and pass the
[[Page 26312]]
Series 50 pilot examination will have the municipal advisor
representative qualification and will not be required to take the
permanent Series 50 examination.\12\ The MSRB will notify candidates
who take the Series 50 pilot examination of their results approximately
three months after taking the examination. The MSRB will announce the
dates and the registration process for the Series 50 pilot examination
in a notice published on the MSRB's Web site no later than three months
from the date of this filing and with at least thirty days advance
notice.\13\ The MSRB will announce an effective date for the permanent
Series 50 examination in a notice published on the MSRB's Web site no
later than one year from the date of this filing and with at least 60
days advance notice.\14\
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\11\ Prior to beginning the pilot examination, candidates will
receive a tutorial on how to complete the computerized examination.
Candidates will be given 30 minutes to complete the tutorial in
addition to the 240 minutes allowed to complete the examination.
\12\ An individual who fails to pass the Series 50 pilot
examination will, consistent with MSRB Rule G-3(g), still be allowed
three attempts to pass the permanent Series 50 examination before
having to wait a period of 6 months to take the permanent Series 50
examination again.
\13\ For the most up-to-date information on the Series 50 pilot
examination visit the Municipal Advisor Professional Qualifications
page on the MSRB's Web site.
\14\ To provide for an orderly transition to the new examination
requirement for municipal advisor representatives and municipal
advisor principals, the MSRB will allow municipal advisor
professionals one year from the announced effective date of the
Series 50 examination to pass the examination. This one-year grace
period is intended to provide municipal advisor representatives and
municipal advisor principals with sufficient time to study for and
take the examination without causing undue business disruption.
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The selection specifications for the Series 50 examination, which
the MSRB has submitted under separate cover with a request for
confidential treatment to the Commission's Secretary pursuant to Rule
24b-2 under the Act,\15\ describe additional confidential information
regarding the Series 50 examination.
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\15\ 17 CFR 240.24b-2.
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2. Statutory Basis
Section 15B(b)(2)(A) of the Act authorizes the MSRB to prescribe
standards of training, experience, competence, and such other
qualifications for associated persons of municipal advisors as the
Board finds necessary or appropriate in the public interest or for the
protection of investors and municipal entities or obligated
persons.\16\ Section 15B(b)(2)(A)(i)-(iii) of the Act also provides
that the Board may appropriately classify municipal advisors and
persons associated with municipal advisors and require persons in any
such class to pass tests prescribed by the Board.\17\
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\16\ 15 U.S.C. 78o-4(b)(2)(A).
\17\ 15 U.S.C. 78o-4(b)(2)(A)(i)-(iii).
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The MSRB believes that the Series 50 examination content outline
for the Series 50 examination is consistent with the provisions of
Section 15B(b)(2)(A) of the Act in that the Series 50 examination
content outline is designed to ensure that individuals are sufficiently
qualified to perform municipal advisory activities.
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Act \18\ requires that MSRB rules not
be designed to impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. In addition,
Section 15B(b)(2)(L)(iv) of the Act provides that MSRB rules may ``not
impose a regulatory burden on small municipal advisors that is not
necessary or appropriate in the public interest and for the protection
of investors, municipal entities, and obligated persons, provided that
there is robust protection of investors against fraud.'' \19\
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\18\ 15 U.S.C. 78o-4(b)(2)(C).
\19\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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In considering these standards, the MSRB was guided by the Board's
Policy on the Use of Economic Analysis.
The MSRB does not believe that the Series 50 examination content
outline will impose any burdens that are not necessary or appropriate
in furtherance of the purposes of the Act.
Need for Rule
The Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 (``Dodd-Frank Act'') amended Section 15B of the Exchange Act to
provide for the regulation by the SEC and the MSRB of municipal
advisors and to grant the MSRB certain authority to protect municipal
entities and obligated persons.\20\ The Dodd-Frank Act's legislative
history indicates Congress was concerned that ``[d]uring the
[financial] crisis, a number of municipalities suffered losses from
complex derivatives products that were marketed by unregulated
financial intermediaries.'' \21\
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\20\ Public Law 111-203, 124 Stat. 1376 (2010).
\21\ S. Rep. No. 111-176, at 38 (2010).
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Baseline
The economic baseline for the Series 50 examination content outline
includes the Dodd-Frank Act which established the federal regulatory
framework for municipal advisors, required the MSRB to establish
standards of training, experience, competence and other qualifications
for municipal advisors and their associated persons, and required
associated persons of municipal advisors to pass examinations to
demonstrate that they meet the standards the Board finds necessary or
appropriate in the public interest or for the protection of investors,
and municipal entities or obligated persons.\22\ The baseline also
includes MSRB Rule G-3(d), which established the municipal advisor
representative qualification examination requirement for municipal
advisor representative candidates.\23\
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\22\ See Section 15B(b)(2)(A) of the Act, 15 U.S.C. 78o-
4(b)(2)(A).
\23\ See supra note 6.
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Alternatives
The MSRB developed the Series 50 examination content outline in
accordance with The Standards for Educational and Psychological Testing
(``APA Standard''),\24\ including the engagement of a psychometrician
and a committee of industry subject matter experts, as is consistent
with the development of other financial industry qualification
examinations. This process resulted in the identification and
consideration of a range of alternatives. Decisions about which
alternatives to select for the final Series 50 examination content
outline were made consistent with the APA Standard.
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\24\ See supra note 7.
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Economic Impact
Relative to the economic baseline, which includes the requirement
that municipal advisors demonstrate by passing an examination that they
meet standards deemed necessary or appropriate in the public interest
or for the protection of investors, municipal entities and obligated
persons, the MSRB believes that the economic impact of the Series 50
examination content outline is de minimis and no greater than what is
necessary or appropriate in furtherance of the purposes of the Act.\25\
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\25\ As noted above, many of the costs and burdens, including
impacts on competition, associated with the Series 50 examination
content outline are accounted for in the baseline which is made up,
in part, by the Dodd-Frank Act. In 2013, the SEC concluded that the
municipal advisory services market was competitive and not highly
concentrated under a similar baseline. See Registration of Municipal
Advisors, Exchange Act Release No. 70462 (Sept. 20, 2013), 78 FR
67608 at n.1723 (Nov. 12, 2013).
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While any examination intended to identify those individuals who
meet a particular standard of competence may represent a barrier to
entry, the MSRB believes that the standard that successful completion
of the examination will demonstrate is necessary to protect investors
and
[[Page 26313]]
municipal entities or obligated persons and will help ensure that those
offering municipal advisory service do so on a level playing field. As
such, the MSRB believes that the Series 50 examination content outline
poses no burden on competition that is not necessary or appropriate in
furtherance of the Act and may enhance the competiveness of the market.
Based on the well-established and nationally-accepted process used
by the MSRB to develop the Series 50 examination content outline, the
MSRB has no reason to believe that the Series 50 examination content
outline will pose any greater burden on individuals associated with
smaller firms than those associated with larger firms or that the
burden could be materially reduced while still achieving the purposes
of the Act. While it is possible that small municipal advisors may have
access to fewer resources to prepare for this examination, the MSRB
does not believe this will affect the competitiveness of the market.
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
Pursuant to Section 19(b)(3)(A) \26\ of the Act and Rule 19b-
4(f)(6) \27\ thereunder, the MSRB has designated the proposed rule
change as one that effects a change that: (i) Does not significantly
affect the protection of investors or the public interest; (ii) does
not impose any significant burden on competition; and (iii) by its
terms, does not become operative for 30 days after the date of the
filing, or such shorter time as the Commission may designate.
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\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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 until 30 days after the date of filing.\28\
However, Rule 19b-4(f)(6)(iii) \29\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest.\30\ The MSRB has requested that the
Commission designate the proposed rule change operative upon
filing,\31\ as specified in Rule 19b-4(f)(6)(iii),\32\ which would make
the proposed rule change operative on April 22, 2015. The MSRB has
stated that an earlier operative date would provide municipal advisor
professionals with an earlier opportunity to begin preparation for the
qualification requirement.\33\
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\28\ Id.
\29\ 17 CFR 240.19b-4(f)(6)(iii).
\30\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its
intent to file a proposed rule change, along with a brief
description and text of such proposed rule change, at least five
business days prior to the date of filing, or such shorter time as
designated by the Commission. The MSRB satisfied this requirement on
April 14, 2015.
\31\ See SR-MSRB-2015-04.
\32\ 17 CFR 240.19b-4(f)(6)(iii).
\33\ See supra note 31.
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The Commission hereby grants the MSRB's request and believes that
designating the proposed rule change operative upon filing is
consistent with the protection of investors and the public
interest.\34\ According to the MSRB, the Series 50 examination content
outline is designed to ensure that individuals are sufficiently
qualified to perform municipal advisory activities.\35\ The Commission
believes that designating the proposed rule change operative upon
filing is consistent with the protection of investors and the public
interest because it will allow individuals to prepare for the Series 50
examination without delay. In addition, the proposed rule change is not
proposing any textual changes to MSRB rules. Therefore, the Commission
hereby designates the proposed rule change operative upon filing.
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\34\ For the purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule
change's impact on efficiency, competition, and capital formation.
See 15 U.S.C. 78c(f).
\35\ See supra note 31.
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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.
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 email to [email protected]. Please include
File Number SR-MSRB-2015-04 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-MSRB-2015-04. This file
number should be included on the subject line if email 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 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
10:00 a.m. and 3:00 p.m. Copies of the 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-2015-04 and should be
submitted on or before May 28, 2015.
For the Commission, pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10946 Filed 5-6-15; 8:45 am]
BILLING CODE 8011-01-P