[Federal Register Volume 84, Number 44 (Wednesday, March 6, 2019)]
[Notices]
[Pages 8141-8146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03992]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85223; File No. SR-MSRB-2019-05]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Rule G-21, on Advertising by Brokers, Dealers and
Municipal Securities Dealers, Rule G-40, on Advertising by Municipal
Advisors, and Rule G-8, on Books and Records
February 28, 2019.
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 February 26, 2019 the Municipal Securities Rulemaking Board
(``MSRB'') filed with the Securities and Exchange Commission (``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 (the
``proposed rule change'') to amend MSRB Rule G-21, on advertising by
brokers, dealers and municipal securities dealers, (``proposed amended
Rule G-21'') and MSRB Rule G-40, on advertising by municipal advisors,
(``proposed amended Rule G-40'') to exempt interactive content that is
an advertisement and that would be posted or disseminated on an
interactive electronic forum from the requirement that a municipal
securities principal, a general securities principal, or a municipal
advisor principal approve that advertisement prior to first use. The
proposed rule change would also make a technical amendment to Rule G-8,
on books and records to be made by brokers, dealers, and municipal
securities dealers and municipal advisors (``proposed amended Rule G-
8''). The proposed rule change has been filed for immediate
effectiveness under Section 19(b)(3)(A) of the Exchange Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ The effective date of the amendments to
Rule G-21 and Rule G-40 will be announced in an MSRB Notice to be
published on the MSRB's website following the effectiveness of this
proposed rule change. To provide brokers, dealers, municipal securities
dealers and municipal advisors (collectively, ``regulated entities'')
with sufficient time to develop supervisory and compliance policies and
procedures, the effective date to be announced will be no less than 30
days and no more than 180 days following publication of the MSRB
Notice.\5\ However, proposed amended Rule G-8 will become operative 30
days after the date of filing.
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\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ See Exchange Act Release No. 83177 (May 7, 2018), 83 FR
21794 (May 10, 2018) (File No. SR-MSRB-2018-01). The amendments to
Rule G-21 and new Rule G-40 were to become effective on February 7,
2019. However, to provide the industry with sufficient time to
establish supervisory and compliance policies and procedures, the
MSRB filed with the SEC for immediate effectiveness an extension of
that effective date. The new effective date of the amendments to
Rule G-21 and new Rule G-40 will be announced in an MSRB Notice to
be published on the MSRB's website. See File No. SR-MSRB-2019-01.
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The text of the proposed rule change is available on the MSRB's
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2019-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 proposed rule change would amend Rule G-21 and Rule G-40 (the
``advertising rules'') to exempt interactive content that is an
advertisement and that would be posted or disseminated on an
interactive electronic forum from the requirement that a municipal
securities principal, a general securities principal, or a municipal
advisor principal approve that advertisement prior to first use. The
proposed rule change also would make a technical amendment to Rule G-8.
Background
Interactive and Static Content
During the development of the recent amendments to Rule G-21 and
new Rule G-40, the MSRB received requests for guidance regarding the
applicability of those rules to the use of social media by brokers,
dealers, and municipal securities dealers (collectively, ``dealers'')
and municipal advisors in connection with their municipal securities
activities and municipal advisory activities. The MSRB committed to
providing that guidance \6\ before the effective date of the
[[Page 8142]]
amendments to the advertising rules,\7\ and developed draft guidance
regarding the use of social media in the format of frequently asked
questions (the ``FAQs'').\8\
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\6\ Letter from Pamela K. Ellis, Associate General Counsel,
Municipal Securities Rulemaking Board, dated April 30, 2018,
available at http://msrb.org/~/media/Files/SEC-Filings/2018/MSRB-
2018-01%20MSRB%20Letter%20to%20SEC.ashx?.
\7\ Exchange Act Release No. 83177 (May 7, 2018), 83 FR 21794
(May 10, 2018) (File No. SR-MSRB-2018-01).
\8\ Concurrent with the submission of this proposed rule change,
the MSRB filed the FAQs with the SEC for immediate effectiveness.
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To receive the benefit of the expertise and experience of market
stakeholders, the MSRB requested comment on the draft FAQs.\9\ In
response, commenters requested \10\ that the MSRB adopt the concepts of
interactive and static content posted or disseminated in an interactive
electronic forum, including the corresponding exemption from the
requirement of principal preapproval of interactive content, as
provided in connection with FINRA Rule 2210 \11\ and the amendments
thereto.\12\ Commenters submitted that such guidance would facilitate
the use of social media by regulated entities in their municipal
securities activities and municipal advisory activities.\13\ The
proposed rule change is responsive to those requests.
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\9\ MSRB Notice 2018-19 (Aug. 14. 2018) (the ``request for
comment'').
\10\ Letter from Mike Nicholas, Chief Executive Officer, Bond
Dealers of America, dated September 14, 2018 (``BDA''); Letter from
Susan Gaffney, Executive Director, National Association of Municipal
Advisors, dated September 17, 2018 at 4-5 (``NAMA''); Letter from
Leslie M. Norwood, Managing Director and Associate General Counsel,
Securities Industry and Financial Markets Association, dated
September 14, 2018 at 2 (``SIFMA''); and Letter from Robert J.
McCarthy, Director, Regulatory Policy, Wells Fargo Advisors, dated
September 14, 2018 at 4 (``Wells Fargo'') available at http://www.msrb.org/Rules-and-Interpretations/Regulatory-Notices/2018/2018-19.aspx?c=1.
\11\ See, e.g., FINRA Rule 2210(b)(1)(D)(ii); FINRA Regulatory
Notice 17-18 (Apr. 2017) at 1; and FINRA Regulatory Notice 11-39
(Aug. 2011) at 2. The references to FINRA materials set forth in
this filing are identified for reference, and such reference is not
intended to suggest that regulated entities that are not subject to
the guidance issued by FINRA are responsible for compliance with
that guidance. In addition, the MSRB does not intend for the
guidance provided by this filing to modify or otherwise affect the
guidance contained in any of the referenced materials published by
FINRA.
\12\ Previously, FINRA Rule 2210, FINRA's rule for
communications with the public, provided that the definition of a
``public appearance'' included an unscripted participation in an
interactive electronic forum (e.g., a non-static real-time
communication); nevertheless, such a ``public appearance'' did not
require a registered principal to approve in advance the remarks
made in that interactive electronic forum. However, those remarks
would have to be supervised under National Association of Securities
Dealers (NASD) Rule 3010. See FINRA Regulatory Notice 10-06 (Jan.
2010) at 4.
Effective in February 2013, FINRA amended FINRA Rule 2210 (the
``2013 FINRA Rule 2210 amendments''). See FINRA Regulatory Notice
12-29 (Jun. 2012). The 2013 FINRA Rule 2210 amendments amended FINRA
Rule 2210 so that unscripted appearances in interactive electronic
forums now are considered retail communications. See FINRA Rule
2210(a)(5). Nevertheless, FINRA Rule 2210 provides that such retail
communications would not have to be approved by a registered
principal before their first use. However, under FINRA rules, those
retail communications must be supervised and reviewed in the same
manner as required for supervising and reviewing correspondence
under FINRA Rule 3110. See FINRA Rule 2210(b)(1)(D)(ii).
\13\ BDA, NAMA at 4-5, SIFMA at 2, and Wells Fargo at 2-3.
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Technical Amendment to Rule G-8
Rule G-27(e)(iii), on supervision, requires, in part, that each
dealer retain correspondence of municipal securities representatives
``relating to its municipal securities activities in accordance with
Rule[s] G-8(a)(xx).'' However, Rule G-8(a)(xx) omits a cross-reference
to the correspondence that is required by Rule G-27(e)(iii) to be
kept.\14\ The proposed rule change would make a technical amendment to
Rule G-8(a)(xx) to provide that cross-reference.
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\14\ Rule G-8(a)(xx) provides that ``each broker, dealer and
municipal securities dealer shall maintain the records required
under G-27(c) and G-27(d).''
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Proposed Amended Rule G-21
To facilitate municipal securities activities for dealers, as well
as to promote regulatory consistency with the advertising or
communications rules of other financial regulators, proposed amended
Rule G-21(g) would exempt interactive content that is an advertisement
and that is posted or disseminated in an interactive electronic forum
from the requirement for municipal securities principal or general
securities principal approval prior to first use as set forth in
proposed amended Rule G-21(f). However, such interactive content would
be subject to the other requirements, as relevant, of proposed amended
Rule G-21.
Interactive content refers to content that is posted or
disseminated for direct real-time interaction with the audience.
Examples of interactive content include, but are not limited to, chats
and messaging.\15\ Interactive content, however, may become static
content under certain circumstances, such as when interactive content
is copied and then posted in a static forum.\16\
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\15\ See FINRA Regulatory Notice 10-06 (Jan. 2010) at 4-5
(discussing interactive electronic content that allows for non-
static real-time communications). The proposed rule change is
aligned with FINRA's guidance in this area.
\16\ See FINRA Regulatory Notice 11-39 (Aug. 2011) at 5
(providing that interactive content could become static if the
interactive content was copied and posted in a static forum). The
proposed rule change is aligned with FINRA's guidance in this area.
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Static content, by contrast, is content that is posted or
disseminated to an audience that does not include direct real-time
interaction with that audience.\17\ An example of static content
includes, but is not be limited to, social media posts.\18\ Consistent
with other types of advertisements, static content that is an
advertisement would be subject to all applicable provisions of proposed
amended Rule G-21, including proposed amended Rule G-21(f)'s
requirement for approval by a municipal securities principal or general
securities principal prior to first use.
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\17\ See FINRA Regulatory Notice 10-06 (Jan. 2010) at 4-5
(providing that static content is content that remains posted until
it is changed by the firm or individual who established the
account). The proposed rule change is aligned with FINRA's guidance
in this area.
\18\ Id.
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Proposed amended Rule G-21(f) would no longer set forth the
recordkeeping requirement for advertisements. Instead, such requirement
would be set forth in proposed amended Rule G-21(h). By so doing,
proposed amended Rule G-21(h) would apply recordkeeping requirements to
all advertisements subject to proposed amended Rule G-21, including
advertisements that include static or interactive content that are
posted or disseminated in an interactive electronic forum.
To address the supervision and review of interactive content,
proposed amended Rule G-21 would include Supplementary Material .04 (SM
.04). SM .04 would provide that notwithstanding Rule G-21(g), a dealer
must supervise and review interactive content in the same manner in
which that dealer supervises and reviews correspondence under Rule G-
27(e), on review of correspondence.
Proposed Amended Rule G-40
To facilitate municipal advisory activities for municipal advisors,
as well as to promote regulatory consistency with the advertising or
communications rules of other financial regulators, proposed amended
Rule G-40(d), similar to proposed amended Rule G-21, would exempt
interactive content that is an advertisement and that is posted or
disseminated in an interactive electronic forum from the requirement
for municipal advisor principal approval prior to first use as set
forth in proposed amended Rule G-40(c). However, such interactive
content would be subject to the other requirements, as relevant, of
proposed amended Rule G-40.
Interactive content refers to content that is posted or
disseminated for direct real-time interaction with the audience.
[[Page 8143]]
Examples of interactive content include, but are not limited to, chats
and messaging.\19\ Interactive content, however, may become static
content, under certain circumstances, such as when interactive content
is copied and then posted in a static forum.\20\
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\19\ See note 15.
\20\ See note 16.
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Static content, by contrast, is content that is posted or
disseminated to an audience that does not include direct interaction
with that audience.\21\ An example of static content includes, but is
not limited to, social media posts.\22\ Consistent with other types of
advertisements, static content that is an advertisement would be
subject to all applicable provisions of proposed amended Rule G-40,
including proposed amended Rule G-40(c)'s requirement for approval by a
municipal advisor principal prior to first use.
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\21\ See note 17.
\22\ Id.
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Proposed amended Rule G-40(c) would no longer set forth the
recordkeeping requirement for advertisements. Instead, such requirement
would be set forth in proposed amended Rule G-40(e). By so doing,
proposed amended Rule G-40(e) would apply recordkeeping requirements to
all advertisements subject to proposed amended Rule G-40, including
advertisements that include static or interactive content that are
posted or disseminated in an interactive electronic forum.
To address the potential need to supervise and review interactive
content, proposed amended Rule G-40 would include Supplementary
Material .02 (SM .02). SM .02 would provide that notwithstanding Rule
G-40(d), each municipal advisor shall establish, implement, and
maintain a system to supervise the municipal advisory activities of the
municipal advisor and its associated persons, including any municipal
advisory activities conducted through an interactive electronic forum
that involve interactive content, that is reasonably designed to
achieve compliance with applicable securities laws and regulations,
including applicable Board rules as set forth in Rule G-44(a), on
supervisory system.
Interactive Content and FINRA Rule 2210
Commenters requested, as noted above, that the MSRB address
interactive content similar to how such content is addressed by FINRA,
and proposed amended Rules G-21 and Rule G-40 are responsive to those
requests. FINRA addresses interactive content in its communications
rule, FINRA Rule 2210, and the structure of proposed amended Rules G-21
and G-40 is consistent with that rule. FINRA Rule 2210:
Exempts interactive content in retail communications
posted on an online interactive electronic forum from the requirement
of approval by a principal prior to first use; \23\
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\23\ See FINRA Rule 2210(b)(1)(D).
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requires that such interactive content (retail
communications posted on an online interactive electronic forum) be
supervised and reviewed in the same manner as correspondence under
FINRA's supervision rule, Rule 3110; \24\ and
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\24\ Id.
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requires that records be kept regarding those retail
communications posted on an online interactive electronic forum.\25\
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\25\ See FINRA Rule 2210(b)(4).
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Proposed amended Rules G-21 and G-40, as FINRA Rule 2210, would:
Exempt interactive content that is an advertisement and
that is posted or disseminated in an interactive electronic forum from
the requirement of principal approval prior to first use; \26\
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\26\ Proposed amended Rule G-21(g); proposed amended Rule G-
40(d).
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require that records be kept relating to that interactive
content; \27\and
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\27\ Proposed amended Rule G-21(h); proposed amended Rule G-
40(e).
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address the supervision and review of interactive content
under applicable MSRB supervisory rules.
Specifically, for dealers, Rule G-27(e) requires that a dealer
establish procedures for the review by a designated principal of
incoming and outgoing written and electronic correspondence of its
municipal securities representatives with the public relating to the
municipal securities activities of the dealer. Consistent with FINRA
Rule 2210(b)(1)(D), SM .04 would provide that a dealer must supervise
and review interactive content in the same manner in which that broker,
dealer, or municipal securities dealer supervises and reviews
correspondence under Rule G-27(e), on review of correspondence.
For municipal advisors, Rule G-44(a) requires that the municipal
advisor establish and implement a supervisory system to supervise the
municipal advisory activities of the municipal advisor and its
associated persons that is reasonably designed to achieve compliance
with applicable securities laws and regulations and Board rules.
However, Rule G-44, unlike Rule G-21, does not have a specific element
that addresses the supervision of correspondence. As the MSRB has
recognized previously, the approach taken to Rule G-44 differs from the
approach taken to Rule G-27.\28\ Rule G-27 reflects evolving broker-
dealer industry practices and many of Rule G-27's more prescriptive
elements reflect the fact that many dealers, unlike municipal advisors,
hold customer funds and securities for safekeeping.\29\ Complete
parallelism between Rules G-44 and Rule G-27 is not possible given that
broker-dealers do not owe a fiduciary duty, and therefore, are subject
to different standards of conduct.\30\ Nevertheless, under Rule G-44,
depending on the municipal advisor's municipal advisory activities, a
municipal advisor's supervisory policies and procedures may include
policies and procedures regarding the supervision and review of
correspondence to achieve compliance with applicable securities laws
and regulations, including MSRB rules.
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\28\ See SR-MSRB-2014-06 (July 24, 2014).
\29\ Id.
\30\ Id.
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Consistent with FINRA Rule 2210(b)(1)(D) and to reflect that the
review of correspondence is generally conducted as a supervisory
control by a municipal advisor, SM .02 would provide each municipal
advisor, shall establish, implement, and maintain a system to supervise
the municipal advisory activities of the municipal advisor and its
associated persons, including any municipal advisory activities
conducted through an interactive electronic forum that involve
interactive content, that is reasonably designed to achieve compliance
with applicable securities laws and regulations, including applicable
Board rules as set forth in Rule G-44(a), on supervisory system. Thus,
proposed amended Rules G-21 and G-40 and FINRA Rule 2210 would be
consistent, to the extent practicable, in how interactive content would
be addressed under their rules.
Although proposed amended Rules G-21 and G-40 and FINRA Rule 2210
would address interactive content in a consistent manner, to the extent
practicable, given the nature of the MSRB's advertising rules and
FINRA's communications rule, there are differences between proposed
amended Rules G-21 and Rule G-40 and FINRA Rule 2210. Nevertheless,
those are not substantive differences in how interactive content would
be regulated.\31\
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\31\ FINRA Rule 2210 divides communications into three
categories and depending on the communication's category, may
require that the communication be filed with FINRA either before or
within a set time of first use. By contrast, Rules G-21 and G-40 do
not require filing and review by the MSRB. The advertising rules
focus, in part, on the advertisement type and the content and the
standard of liability for that advertisement type.
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[[Page 8144]]
2. Statutory Basis
Section 15B(b)(2) of the Exchange Act \32\ provides that: [t]he
Board shall propose and adopt rules to effect the purposes of this
title with respect to transactions in municipal securities effected by
brokers, dealers, and municipal securities dealers and advice provided
to or on behalf of municipal entities or obligated persons by brokers,
dealers, municipal securities dealers, and municipal advisors with
respect to municipal financial products, the issuance of municipal
securities, and solicitations of municipal entities or obligated
persons undertaken by brokers, dealers, municipal securities dealers,
and municipal advisors.
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\32\ 15 U.S.C. 78o-4(b)(2).
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Section 15B(b)(2)(C) of the Exchange Act \33\ provides that the
MSRB's rules shall: 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, municipal
entities, obligated persons, and the public interest.
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\33\ 15 U.S.C. 78o-4(b)(2)(C).
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The MSRB believes that the proposed rule change is consistent with
Sections 15B(b)(2) \34\ and 15B(b)(2)(C) \35\ of the Exchange Act. The
proposed rule change would foster coordination with persons engaged in
regulating transactions in municipal securities.
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\34\ 15 U.S.C. 78o-4(b)(2).
\35\ 15 U.S.C. 78o-4(b)(2)(C).
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The proposed rule change would amend the advertising rules to
exempt interactive content that is an advertisement and that would be
posted or disseminated in an interactive electronic forum from the
requirement that a municipal securities principal, a general securities
principal, or a municipal advisor principal, as applicable, approve
that content prior to first use. Nonetheless, the advertising rules
would continue to require that such interactive content comply with the
other provisions of the advertising rules, including the content
standards (and the requirement that advertisement not contain a false
or misleading statement) and recordkeeping requirements of those rules.
Thus, regulated entities would be able to provide such interactive
content though an interactive electronic forum on terms that would be
consistent with the regulations or guidance of FINRA, as noted under
``Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change,'' to the extent
practicable.\36\
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\36\ See e.g., FINRA Rule 2210(b)(1)(D)(ii).
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Because the MSRB has endeavored to make the proposed rule change
consistent with the communications rules and social media guidance
published by FINRA, to the extent practicable, FINRA staff should be
familiar with the standards for interactive content. In turn, that
familiarity should foster efficient examinations by FINRA of the MSRB-
regulated entities that FINRA is charged with examining. Further, a
regulated entity that is dually registered as a broker or dealer with
the SEC and/or is part of an organization that includes one or more
SEC-registered broker-dealers (as many regulated entities are) may be
able to more easily understand and develop consistent practices across
business lines and therefore promote compliance with the proposed rule
change. Nevertheless, a regulated entity that is dually registered with
the MSRB and with FINRA would be treated the same under the advertising
rules as a regulated entity that is registered with the MSRB and not
with FINRA. Thus, because the MSRB has endeavored to make the proposed
rule change consistent with the communications rules and social media
guidance of FINRA, the proposed rule change would help ensure that all
regulated entities are subject to consistent advertising regulation.
In addition, the proposed rule change would remove a regulatory
impediment regarding the need for principal pre-approval of interactive
content in the advertising rules. Nonetheless, the advertising rules
still would require that such interactive content comply with the other
provisions of the advertising rules including the content standards and
recordkeeping requirements of those rules, and generally be subject to
the regulated entity's supervisory program. Accordingly, the proposed
rule change would continue to require a regulated entity to present a
fair statement of the services, products, or municipal securities or
municipal advisory services advertised, but would facilitate a method
of communication through an interactive electronic forum. Thus,
proposed amended Rules G-21 and G-40 would continue to protect
investors, municipal entities, obligated persons and the public
interest.\37\
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\37\ See SR-MSRB-2018-01 (Jan. 24, 2018).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Exchange Act \38\ requires that MSRB
rules not be designed to impose any burden on competition not necessary
or appropriate in furtherance of the purposes of the Exchange Act. In
accordance with the MSRB's policy on the use of economic analysis, the
MSRB has reviewed the proposed rule change.\39\ Proposed amended Rules
G-21 and G-40 would specify that interactive content that contains an
advertisement and that is posted or disseminated in an interactive
electronic forum would not be required to be approved in writing by a
principal prior to first use, but still would be subject to
recordkeeping requirements and the supervisory requirements of Rule G-
27 or Rule G-44, as relevant. The MSRB believes the proposed amended
Rules G-21 and G-40 are necessary and appropriate to clarify the
requirements which would be consistent with the regulation and guidance
provided by other regulators.
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\38\ 15 U.S.C. 78o-4(b)(2)(C).
\39\ Policy on the Use of Economic Analysis in MSRB Rulemaking,
available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. For those rule changes which the MSRB seeks
immediate effectiveness, the MSRB's policy on the use of economic
analysis limits its applications and focuses exclusively on the
burden of competition on regulated entities.
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The need for proposed amended Rules G-21 and G-40 arises from
MSRB's oversight of dealers' and municipal advisors' advertising
activities. Since financial service professionals, investors, issuers,
and other market participants are increasingly using interactive
electronic forums as a part of their social media activities, the MSRB
agrees with market participants that it is highly desirable to provide
regulatory consistency, to the extent practicable, with the
requirements associated with interactive and static content that
contains advertisements provided by other financial regulators.
Proposed amended Rules G-21 and G-40 are intended to reduce impediments
to the use of interactive content that is an advertisement.
The MSRB has evaluated alternatives to proposed amended Rules G-21
and G-40. A reasonable regulatory
[[Page 8145]]
alternative is to subject interactive content posted or disseminated in
an interactive electronic forum that contains advertisements to the
same requirements as all other advertisements, including advertisements
that are posted or disseminated in static forums: namely, content that
is an advertisement would require approval in writing from a principal
prior to first use. However, the MSRB believes with increased
interactive content postings in the marketplace, this alternative is
not practical and is less preferable since this would not reflect
recent changes in the social media environment and could add
significant burden on dealers, municipal advisors and their associated
compliance professionals.
A reasonable baseline for evaluating the proposed rule change are
the current requirements of Rule G-21 and Rule G-40. The main benefit
of proposed amended Rules G-21 and G-40 for dealers and municipal
advisors is the explicit elimination of the requirement of receiving
prior approval for interactive content that is an advertisement and
that will be posted or disseminated in an interactive electronic forum.
Proposed amended Rule G-21 should reduce the burden placed on dealers,
brokers and municipal securities dealers who presently must request
approval to post or disseminate interactive content that is an
advertisement on an interactive electronic forum. Proposed amended Rule
G-40 should also reduce the potential burden on municipal advisors that
otherwise would have to seek approval to distribute interactive
advertising content on an interactive electronic forum when Rule G-40
becomes effective.\40\
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\40\ Interactive content that contains an advertisement on
interactive electronic forums would be subject to the recordkeeping
requirements under Rule G-8 for both dealers and municipal advisors.
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Effect on Competition, Efficiency and Capital Formation
As noted under ``Statutory Basis,'' a regulated entity that is
dually registered with the MSRB and with FINRA would be treated the
same under the advertising rules as a regulated entity that is
registered with the MSRB and not with FINRA. Thus, because the MSRB has
endeavored to make the proposed rule change consistent with the
communications rules and social media guidance of FINRA, the proposed
rule change would help ensure that all regulated entities are subject
to consistent advertising regulation. That consistent regulation should
improve competition among regulated entities.
In addition, the MSRB believes that proposed amended Rules G-21 and
G-40 would clarify that dealer and municipal advisor responsibility
regarding interactive content that is an advertisement and that is
posted or disseminated in an interactive electronic forum that is
consistent with the regulation and guidance provided by other
regulators, to the extent practicable. Since dealers and municipal
advisors would now be permitted to distribute advertisements on real-
time electronic forums without prior principal approval, it is probable
there would be a reduction in burden on dealers and an improvement in
their operation efficiency. At present, the MSRB is unable to
quantitatively evaluate the magnitude of the efficiency gains or the
reduction in burden, but proposed amended Rules G-21 and G-40 would
eliminate the requirement that a principal pre-approve interactive
content that is an advertisement and that would be posted or
disseminated in an interactive electronic forum, and therefore, should
improve operation efficiency and capital formation.
Section 15B(b)(2)(L)(iv) of the Exchange Act \41\ 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.'' The MSRB believes that proposed amended Rules G-21 and G-40
would not impose an unnecessary or inappropriate regulatory burden on
small regulated entities, as the potential reduced burden on dealers
and municipal advisors would be applicable to all regulated entities
and should be proportionate to each regulated entity's use of
interactive content that is an advertisement. The proposed rule change
therefore should not affect the competition.
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\41\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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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. Nevertheless, as discussed under ``Self-
Regulatory Organization's Statement of the Purpose of, and Statutory
Basis for, the Proposed Rule Change,'' the proposed rule change was
undertaken in response to the comments that the MSRB received from its
request for comment on the draft FAQs.\42\
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\42\ See notes 6-13 and accompanying text.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \43\ and Rule 19b-
4(f)(6) thereunder.\44\
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\43\ 15 U.S.C. 78s(b)(3)(A).
\44\ 17 CFR 240.19b-4(f)(6).
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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-2019-05 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-2019-05. 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 website (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
[[Page 8146]]
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 website 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 to make available publicly. All
submissions should refer to File Number SR-MSRB-2019-05 and should be
submitted on or before March 27, 2019.
For the Commission, pursuant to delegated authority.\45\
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\45\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03992 Filed 3-5-19; 8:45 am]
BILLING CODE 8011-01-P