[Federal Register Volume 82, Number 207 (Friday, October 27, 2017)]
[Notices]
[Pages 49908-49912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23374]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81921; File No. SR-MSRB-2017-08]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Form G-
45 To Collect Additional Data About the Transactional Fees Primarily 
Assessed by Programs Established To Implement the ABLE Act

October 23, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on October 13, 2017 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, II, and III 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 a proposed rule change to amend 
Form G-45 under MSRB Rule G-45, on reporting of information on 
municipal fund securities,\3\ to collect additional data about the 
transactional fees primarily assessed by programs established to 
implement the Stephen Beck, Jr., Achieving a Better Life Experience Act 
of 2014 (the ``ABLE Act'' and an ``ABLE program'') (the ``proposed rule 
change'').\4\ The MSRB requests that the proposed rule change become 
effective on June 30, 2018.\5\
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    \3\ Form G-45 is an electronic form on which submissions of the 
information required by Rule G-45 are made to the MSRB.
    \4\ The ABLE Act was enacted on December 19, 2014 as part of The 
Tax Increase Prevention Act of 2014 (Pub. L. 113-295).
    \5\ As noted under ``Self-Regulatory Organization's Statement of 
the Purpose of, and Statutory Basis for, the Proposed Rule Change'' 
below, the proposed rule change does not alter the date that 
underwriters to ABLE programs must submit data under Rule G-45 to 
the MSRB.
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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/2017-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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The ABLE Act added Section 529A to the Internal Revenue Code of 
1986, as amended (the ``Code''), to permit a state, or an agency or 
instrumentality thereof, to establish and maintain a new type of tax-
advantaged savings program to help support individuals with 
disabilities in

[[Page 49909]]

maintaining health, independence, and quality of life.\6\ Section 529A 
was modeled, in part, on Section 529 of the Code.\7\ Section 529 
established college savings plans (``529 college savings plans'') to 
encourage saving for future higher education costs.\8\ The SEC has 
determined that interests offered by such 529 college savings plans are 
municipal securities under Section 3(a)(29) of the Act.\9\
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    \6\ 26 U.S.C. 529A.
    \7\ Report to accompany H.R. 647, Committee on Ways and Means, 
H.R. Rept. No. 113-614, part 1 at 7 (2014).
    \8\ 26 U.S.C. 529(b)(1)(A)(ii). Section 529 also established 
prepaid tuition plans. 26 U.S.C. 529(b)(1)(A)(i). Under a prepaid 
tuition plan, an investor may purchase tuition credits or 
certificates on behalf of a designated beneficiary, which entitle 
the beneficiary to the waiver or payment of qualified higher 
education expenses. Prepaid tuition plans generally have residency 
requirements. Such credits or certificates generally are not viewed 
as being municipal securities, and dealers generally do not 
participate in the marketing of prepaid tuition plans.
    \9\ Exchange Act Release No. 70462 (Sept. 20, 2013), 78 FR 
67468, 67472-73 (Nov. 12, 2013). See Letter from Catherine McGuire, 
Chief Counsel, Division of Market Regulation, U.S. Securities and 
Exchange Commission, to Diane G. Klinke, General Counsel, Municipal 
Securities Rulemaking Board (Feb. 26, 1999) (determining that at 
least some interests in higher education trusts are municipal 
securities under the Act).
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    Given the similarities between the structure of ABLE accounts and 
529 college savings plan accounts and the manner in which interests in 
ABLE accounts would be distributed, the MSRB requested and received 
interpretive guidance from the SEC staff about the status of interests 
in ABLE accounts under the federal securities laws.\10\ SEC staff 
stated that ``at least some interests in ABLE accounts . . . may be 
`municipal securities' as defined in Section 3(a)(29) of the Exchange 
Act, depending on the facts and circumstances'' \11\ and that ``[i]f a 
dealer is acting as an `underwriter' (as defined in Rule 15c2-12(f)(8)) 
in connection with that primary offering, the dealer may be subject to 
the requirements of Rule 15c2-12.'' \12\
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    \10\ Letter dated March 31, 2016 from Jessica S. Kane, Director, 
Office of Municipal Securities, U.S. Securities and Exchange 
Commission to Robert A. Fippinger, Esq., Chief Legal Officer, 
Municipal Securities Rulemaking Board, in response to letter dated 
December 31, 2015 from Robert A. Fippinger to Jessica S. Kane, both 
letters are available at https://www.sec.gov/info/municipal/msrb-letter-033116-interests-in-able-accounts.pdf.
    \11\ Id.
    \12\ Id.
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    After the MSRB received the SEC staff guidance, the MSRB provided 
interpretative guidance relating to interests in ABLE programs under 
MSRB Rule D-12, on the definition of ``municipal fund security.'' \13\ 
That guidance was followed by the August 2016 guidance published by the 
Board to address particular issues, including Rule G-45, applicable to 
the sale of interests in ABLE programs by brokers, dealers and 
municipal securities dealers (collectively, ``dealers'').\14\
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    \13\ MSRB Notice 2016-14 (Apr. 12, 2016).
    \14\ Id.
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    Specifically, in August 2016, the MSRB filed for immediate 
effectiveness an amendment to Rule G-45 to delay, by two years from 
August 29, 2016 until August 29, 2018, the date that submissions are 
due under Rule G-45 from underwriters to ABLE programs (the ``August 
filing'').\15\ The MSRB believed that the delay would help ensure that 
the MSRB would receive reliable, complete and accurate filings on Form 
G-45 from such underwriters. The MSRB also believed that the delay 
would help ensure that the MSRB would receive more meaningful data 
about a larger set of ABLE programs on Form G-45.\16\ Similarly, to 
receive more meaningful data about ABLE programs, the MSRB submits the 
proposed rule change. However, this proposed rule change does not alter 
the date that underwriters to ABLE programs must begin to submit data 
to the MSRB under Rule G-45.
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    \15\ See SR-MSRB-2016-11 (Aug. 12, 2016).
    \16\ Further, as part of that August filing, the MSRB provided 
guidance in supplementary material under (i) Rule G-42, that such 
rule applies to municipal advisors that engage in municipal advisory 
activities for sponsors or trustees of ABLE programs and (ii) Rule 
G-44, that such rule equally applies to municipal advisors that 
engage in municipal advisory activities for sponsors or trustees of 
529 college savings plans, ABLE programs, and other municipal fund 
securities. That guidance provided clarity about the applicability 
of such rules to municipal advisors that engage in municipal 
advisory activities for sponsors or trustees of municipal fund 
securities. The MSRB provided that guidance in response to requests 
from industry groups in other Board rulemaking proposals. Id.; see 
also MSRB Notice 2016-20 (Aug. 12, 2016).
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(ii) The Collection of Additional Relevant Fee and Expense Data
    At the time the MSRB submitted the August filing, there were two 
ABLE programs that were operational. Since that time, the MSRB 
understands that 27 more ABLE programs have become operational. As each 
additional ABLE program has become operational, the MSRB has reviewed 
the disclosure booklet for the program to determine whether there is 
data about the programs that would be beneficial for the MSRB to 
analyze under Rule G-45 that an underwriter to an ABLE program would 
not be required to submit under current Form G-45. But for the program 
type, the review process of ABLE program fees was identical to the 
review process that the MSRB used in determining the data elements 
relating to the fees and expenses associated with an investment in a 
529 college savings plan when the MSRB first developed Form G-45.
    While the MSRB believes that current Form G-45 would capture most 
of the data that would be informative to the MSRB, the MSRB noted that 
there are differences between the pricing structure of certain ABLE 
programs and the typical 529 college savings plan. Specifically, based 
on the MSRB's review, there are transactional fees assessed by ABLE 
programs that generally are not assessed by 529 college savings plans, 
and there is variance based on state residency in the level of the 
account maintenance fee assessed by ABLE programs that generally does 
not occur with 529 college savings plans.\17\
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    \17\ The MSRB believes that the transactional fees assessed by 
an ABLE program reflect the nature of an ABLE program as more of a 
short-term, rather than as a longer-term, savings vehicle when 
compared to a 529 college savings plan. Further, the MSRB believes 
that the variance in the level or amount of the account maintenance 
fee assessed by an ABLE program between an in-state and an out-of-
state resident account owner reflects state disability policies.
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    Rule G-45 requires dealers acting in the capacity as underwriters 
to ABLE programs or 529 college savings plans to submit on a semi-
annual or annual basis (in the case of performance data) certain 
information about the programs or plans they underwrite. That 
information includes program or plan descriptive information, assets, 
asset allocation information (at the investment option level), 
contributions, withdrawals, fee and cost structure, performance, and 
other information. The MSRB and other regulatory authorities use this 
data to analyze 529 college savings plans (and will be able to use this 
data to analyze ABLE programs), monitor their growth rate, size and 
investment options, and compare 529 college savings plans based on 
fees, costs, and performance. By collecting this information, the MSRB 
enhances its understanding of 529 college savings plans (and will be 
able to enhance its understanding of ABLE programs). The Commission has 
agreed with the MSRB that the collection of information under Rule G-45 
is intended to protect investors, municipal entities and the public 
interest and prevent fraudulent and manipulative acts and practices by 
allowing the MSRB to collect comprehensive, reliable, and consistent 
electronic data about such programs or

[[Page 49910]]

plans.\18\ The Commission has stated that ``to fulfill its statutory 
responsibilities to investors and municipal entities in the context of 
529 plans, the Commission believes that it is appropriate for the MSRB 
to possess basic, reliable information regarding 529 plans, including 
the underlying investment options.'' \19\
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    \18\ Exchange Act Release No. 71598 (Feb. 21, 2014), 79 FR 
11161, 11167 (Feb. 27, 2014) (SR-MSRB-2013-04).
    \19\ Id.
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    To help ensure that the MSRB continues to receive comprehensive 
information regarding ABLE programs and 529 college savings plans, the 
proposed rule change would amend Form G-45 to collect additional 
information relating to fees and expenses. This data would enhance the 
MSRB's understanding of the markets for ABLE programs and 529 college 
savings plans, including the differences among such programs or plans. 
Further, as discussed under ``Statutory Basis'' below, the additional 
fee and expense information would assist the MSRB in fulfilling its 
investor protection mission. The information about fees and expenses 
would continue to be submitted in a format that is consistent with the 
disclosure principles of the College Savings Plan Network (``CSPN''), 
an affiliate of the National Association of State Treasurers,\20\ which 
commenters on previous MSRB rulemaking proposals relating to Form G-45 
have stated is the industry norm.\21\
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    \20\ CSPN published its voluntary Disclosure Principles 
Statement No. 6 (``Disclosure Principles No. 6'') on July 1, 2017 
available at http://www.collegesavings.org/wp-content/uploads/2015/06/CSPN-Disclosure-Principles-Statement-No.-6.pdf. Disclosure 
Principles No. 6 recommends acceptable disclosure practices for 
state entities that establish and maintain 529 college savings 
plans. CSPN states that Disclosure Principles No. 6 also may be of 
use to qualified ABLE programs. See Disclosure Principles No. 6.
    To assist underwriters, the MSRB included subheadings in how 
certain investment options fees and expenses are displayed on Form 
G-45 to more closely correspond with the subheadings used in 
Disclosure Principles No. 6. The subheadings, however, do not change 
any of the data elements required to be submitted on Form G-45.
    \21\ See SR-MSRB-2013-04 (Jun. 10, 2013).
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    Under the proposed rule change, an underwriter to an ABLE program 
or a 529 college savings plan would be required to submit data on Form 
G-45 about the following additional fees and expenses, as applicable:
     Account opening fee;
     investment administration fee;
     change in account owner fee;
     cancellation/withdrawal fee;
     change in investment option/transfer fee;
     rollover fee;
     returned excess aggregate contributions fee;
     rejected ACH or EFT fee;
     overnight delivery fee;
     in-network ATM fee;
     out-of-network ATM fee;
     ATM mini statement fee;
     international POS/ATM transaction fee;
     foreign transaction fee;
     overdraft fee;
     copy of check or statement fee (per request);
     copy of check images mailed with monthly statement fee;
     check fee (i.e., fee for blank checks);
     returned check fee;
     checking account option fee;
     re-issue of disbursement check fee;
     stop payment fee;
     debit card fee;
     debit card replacement fee;
     outgoing wire fee;
     expedited debit card rush delivery fee;
     paper fee; and
     miscellaneous fee (to address any miscellaneous 
transactional fee that is not otherwise specified on Form G-45).
    In addition, under the proposed rule change, the MSRB would collect 
data about any variance in the annual account maintenance fee due to 
the residency of the account owner. The proposed rule would apply to 
underwriters to ABLE programs as well as to underwriters to 529 college 
savings plans.\22\
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    \22\ The MSRB, however, anticipates that most of the data that 
would be collected by the proposed rule change would relate to ABLE 
programs. As noted, the MSRB believes that 529 college savings plans 
generally do not assess the fees and charges that are the subject of 
this proposed rule change.
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act,\23\ which provides that the MSRB's 
rules shall:
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    \23\ 15 U.S.C. 78o-4(b)(2)(C).

    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 and 
municipal financial products, to remove impediments to and perfect 
the mechanism of a free and open market in municipal securities and 
municipal financial products, and, in general, to protect investors, 
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municipal entities, obligated persons, and the public interest.

    The Act requires that the MSRB protect investors. To fulfill this 
responsibility, it is necessary for the MSRB to have a complete and 
reliable data set about ABLE programs and 529 college savings plans. 
That data includes data about the fees and expenses associated with an 
investment in an ABLE program or a 529 college savings plan. The 
proposed rule change would provide the MSRB with more meaningful data 
about the transactional fees primarily assessed by ABLE programs and 
about variances in the account maintenance fee due to the residency of 
the account owner. The additional information about fees and expenses 
associated with ABLE programs and 529 college savings plans would 
facilitate the MSRB's ability to analyze the market for ABLE programs 
and 529 college savings plans as well as to evaluate trends and 
differences among the ABLE programs and 529 college savings plans. The 
MSRB believes that understanding the costs associated with ABLE 
programs and 529 college savings plans as well as the other data 
collected under Rule G-45 are basic requirements for regulation and 
necessary to assist the MSRB with its evaluation as to whether its 
regulatory scheme for dealers that sell interests in or underwrite ABLE 
programs and/or 529 college savings plans is sufficient, or whether 
additional rulemaking is necessary to protect investors. Further, the 
information that would be collected by the proposed rule change would 
help the MSRB and other regulators that examine dealers prioritize 
their efforts with respect to those dealers that sell interests in or 
underwrite ABLE programs and 529 college savings plans. Those other 
regulators may use this information to determine the nature or timing 
of risk-based dealer examinations. In short, the MSRB believes that the 
information to be collected by the proposed rule change would better 
enable the MSRB to protect investors in these programs and plans and 
the public interest.
    Further, the MSRB has a statutory obligation to prevent fraudulent 
and manipulative acts and practices and to promote just and equitable 
principles of trade. In general, underwriters to ABLE programs and 529 
college savings plans draft or participate in the drafting of the 
program or plan disclosure booklets, as well as the marketing materials 
for the ABLE program or 529 college savings plans. The MSRB or other 
regulators may use the information submitted on Form G-45 to, among 
other things, determine if the disclosure documents or marketing 
materials prepared or reviewed by underwriters are consistent with the 
data submitted to the MSRB for regulatory purposes.

[[Page 49911]]

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

    Section 15B(b)(2)(C) of the Act 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.\24\ In 
accordance with the Board's policy on the use of economic analysis in 
rulemaking, the Board has reviewed the proposed rule change.\25\ To 
fulfill its responsibility to protect investors, as ABLE programs and 
529 college savings plans have significant retail investor components, 
the MSRB must become well informed about the fees and expenses assessed 
under such programs or plans and about the market for ABLE programs and 
529 college savings plans as a whole. The proposed rule change is 
necessary for the MSRB to gather relevant data required to ensure the 
MSRB's regulatory scheme is sufficient and/or to determine whether 
additional rulemaking is necessary to protect investors and the public 
interest.
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    \24\ Id.
    \25\ Policy on the Use of Economic Analysis in MSRB Rulemaking 
is available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx.
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    The proposed rule change would require an underwriter to submit 
additional information about the fees and expenses associated with the 
applicable ABLE program or 529 college savings plan. The proposed rule 
change would enable the MSRB to carry out its regulatory 
responsibilities under the Act and fulfill its mission to ensure 
efficiency in the market for these programs. The MSRB would realize 
substantial benefits in obtaining reliable and consistent information 
about the fees and expenses of ABLE programs and 529 college savings 
plans, promoting greater regulatory oversight and investor protection.
    Although there are costs associated with compliance with the 
proposed rule change, these costs should be minimal. The data that the 
MSRB wishes to collect are readily available and should be known to the 
underwriters of these plans. Additionally, underwriters are already 
required to submit certain information to the MSRB on Form G-45 on a 
semi-annual basis.\26\
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    \26\ The proposed rule change would not impose any burden on 
non-underwriting dealers that only sell interests in either ABLE 
programs or 529 college savings plans, as the obligation to submit 
information semi-annually to the MSRB will only be imposed on 
underwriters.
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    Among the possible alternatives to the proposed rule change are (a) 
a manual review of information in program or plan disclosure documents 
submitted to EMMA or on program or plan Web sites; or (b) a review of 
data supplied by information vendors voluntarily. However, neither of 
these alternatives would satisfy the regulatory needs of the MSRB. A 
manual review of information would be insufficient because some of the 
information sought by the MSRB is not disclosed in public documents in 
a uniform and consistent manner. Moreover, a manual review of 
information would be time consuming and inefficient, especially given 
that underwriters are already required to submit certain information to 
the MSRB on a semi-annual basis. In addition, while a review of 
information voluntarily submitted to informational vendors may be of 
interest, it is unreliable from a regulatory standpoint. Information 
supplied by dealers that are underwriters to ABLE programs and/or 529 
college savings plans to information vendors may differ with respect to 
its reliability and quality. Essentially, the MSRB would be relying on 
such information vendors for important regulatory activities. For 
regulatory purposes, the MSRB seeks a consistent set of uniform, 
reliable and relevant information about ABLE programs and 529 college 
savings plans.
    On balance, the MSRB believes that semi-annual reporting of limited 
information, which is readily available to dealers that are 
underwriters to ABLE programs and/or 529 college savings plans, would 
not pose an unreasonable burden on such underwriters, and the likely 
benefits of the proposed amendments justify the likely associated costs 
in both the near and long term.
    The MSRB does not believe that the proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The additional information 
would be submitted on an equal and non-discriminatory basis, and the 
requirement would apply equally to all dealers that serve as 
underwriters to ABLE programs and/or 529 college savings plans.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period of up to 90 days (i) as 
the Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
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-2017-08 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-2017-08. 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. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish

[[Page 49912]]

to make available publicly. All submissions should refer to File Number 
SR-MSRB-2017-08 and should be submitted on or before November 17, 2017.

    For the Commission, pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23374 Filed 10-26-17; 8:45 am]
 BILLING CODE 8011-01-P