[Federal Register Volume 84, Number 87 (Monday, May 6, 2019)]
[Notices]
[Pages 19820-19823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09146]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85752; File No. SR-MSRB-2019-09]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Eliminate MSRB Rule G-29, on Availability of Board Rules

April 30, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on April 19, 2019 the Municipal Securities 
Rulemaking Board (``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described

[[Page 19821]]

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 seeking 
to eliminate MSRB Rule G-29, requiring that each broker, dealer and 
municipal securities dealer shall keep in each office in which any of 
the activities set forth in rule G-3(a)(i) \3\ of the Board are 
conducted, a copy of all rules of the Board as from time to time in 
effect and shall make such rules available for examination by customers 
promptly upon request (the ``proposed rule change'' or ``amendment'').
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    \3\ MSRB Rule G-3(a)(i) regarding professional qualification 
requirements provides:
    (a) Municipal Securities Representative, Municipal Securities 
Sales Limited Representative and Limited Representative--Investment 
Company and Variable Contracts Products.
    (i) Definitions.
    (A) The term ``municipal securities representative'' means a 
natural person associated with a broker, dealer or municipal 
securities dealer, other than a person whose functions are solely 
clerical or ministerial, whose activities include one or more of the 
following:
    (1) Underwriting, trading or sales of municipal securities;
    (2) financial advisory or consultant services for issuers in 
connection with the issuance of municipal securities;
    (3) research or investment advice with respect to municipal 
securities; or
    (4) any other activities which involve communication, directly 
or indirectly, with public investors in municipal securities;
    provided, however, that the activities enumerated in 
subparagraphs (3) and (4) above shall be limited to such activities 
as they relate to the activities enumerated in subparagraphs (1) and 
(2) above.
    (B) The term ``municipal securities sales limited 
representative'' means a municipal securities representative whose 
activities with respect to municipal securities are limited 
exclusively to sales to and purchases from customers of municipal 
securities.
    (C) The term ``limited representative--investment company and 
variable contracts products'' means a municipal securities 
representative whose activities with respect to municipal securities 
are limited exclusively to sales to and purchases from customers of 
municipal fund securities.
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    The MSRB has designated the proposed rule change for immediate 
effectiveness and will be effective upon filing pursuant to Section 
19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6) thereunder.\5\ The 
operative date of the proposed rule change will not be less than 30 
days from the date of filing and will be announced in an MSRB Notice to 
be published on the MSRB's website within 30 days of the date of this 
filing.
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    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
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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
Background
    Rule G-29 generally requires dealers to keep a copy of all MSRB 
rules in offices that conduct any of the municipal securities 
activities defined in Rule G-3(a)(i) and make them available for 
examination by their customers upon request. The rule was designed to 
facilitate compliance with MSRB rules and protect investors by ensuring 
municipal securities professionals \6\ and their customers have access 
to MSRB rules, including timely updates.\7\ The rule was originally 
adopted by the Board in 1977,\8\ and has been amended and interpreted, 
periodically as market practices evolved and other regulatory 
developments occurred, to ensure the rule remained current and achieved 
its goal of providing ready access to important MSRB rule information.
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    \6\ As used therein, ``municipal securities professional'' means 
persons participating in the activities described in MSRB Rule G-3. 
See also note 3.
    \7\ See Notice of Approval of Fair Practice Rules, [1977-1987 
Transfer Binder] Municipal Securities Rulemaking Board Manual (CCH) 
] 10,090 at 10,494 (Oct. 24, 1978).
    \8\ See File No. SR-MSRB-77-12 (Sept. 20, 1977). The SEC 
approved Rule G-29 in Release No. 34-15247 (Oct. 19, 1978), 43 FR 
50525 (Oct. 30, 1978).
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    For example, when the MSRB published its rulebook electronically, 
the Board issued interpretive guidance noting that dealers could comply 
with Rule G-29 by giving customers access to the rules either in 
printed form, or electronically via the MSRB internet website 
(www.msrb.org) or using third party software products.\9\ This guidance 
also reminded dealers that MSRB Rule G-27, on supervision, requires a 
dealer to supervise the conduct of its municipal securities business 
and the municipal securities activities of its associated persons to 
ensure compliance with Rule G-29, including how the dealer provides its 
offices with the most current version of the rules once they are in 
effect so that its municipal securities professionals are alerted to 
new developments. A short time later, the Board issued a notice 
highlighting the SEC's guidance regarding the delivery of electronic 
information.\10\ The notice again notes that electronic media may be 
used by dealers in satisfying their obligations under MSRB rules, 
including Rule G-29.\11\
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    \9\ See Rule G-29 Interpretive Notice--Availability of Board 
Rules, May 20, 1998, MSRB Reports, Vol. 18, No. 2 (August 1998) at 
37. This notice was also updated, effective January 1, 2014, to 
reflect the discontinuation of the MSRB's printed version of the 
MSRB Rule Book.
    \10\ On May 9, 1996, the Commission issued a Release expressing 
its views on the use of electronic media for delivery of information 
by, among others, brokers and dealers. The Commission stated that 
brokers, dealers and others may satisfy their delivery obligations 
under federal securities laws by using electronic media as an 
alternative to paper-based media within the framework established in 
the 1995 SEC Release on the use of electronic media for delivery 
purposes. Securities Act Release No. 7288, Exchange Act Release No. 
37182 (May 9, 1996), 61 FR 24644 (May 15, 1996).
    \11\ See Rule G-32 Interpretation--Notice Regarding Electronic 
Delivery and Receipt of Information by Brokers, Dealers and 
Municipal Securities Dealers, November 20, 1998.
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    Most recently, as part of its retrospective rule review, the Board 
considered whether amendments to the rule were needed to address 
changing practices in the municipal securities market. In doing so, the 
Board recognized that while its interpretive guidance somewhat 
modernized how dealers could continue to comply with Rule G-29 (i.e., 
providing for access to MSRB Rules via electronic media), the rule was 
no longer necessary for purposes of ensuring municipal securities 
professionals and their customers have ready access to current MSRB 
rules, which formed the basis for the proposed rule change.\12\
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    \12\ See MSRB Informational Notice 2019-04.
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Proposed Rule Change
    The proposed rule change seeks to eliminate Rule G-29 and would 
contribute to the MSRB's continuing efforts to improve market 
efficiency by eliminating unnecessary regulatory requirements that no 
longer serve their original purpose of helping to prevent a market 
harm.

[[Page 19822]]

    Because access to the internet is more widespread and often 
necessary to conduct municipal securities activities in today's 
markets, MSRB rules and relevant updates, including on the MSRB's 
internet website, are more accessible and readily available to both 
municipal securities professionals and their customers than provided 
for under Rule G-29. That is, investors are currently more likely to 
access MSRB rules electronically on their own, as opposed to requesting 
to review them under the provisions of the rule. In addition, while 
Rule G-29 generally requires that dealers make MSRB rules available to 
customers, upon request, the rule is somewhat limiting in that a 
customer's access to the information likely depends on whether a 
customer knows they can access the information pursuant to the 
provisions under the rule. In other words, there currently is no 
requirement under Rule G-29 that dealers inform customers of their 
ability to request to review MSRB rules to which they are required to 
provide access. Additionally, there are other MSRB rules that promote 
ready access to MSRB rule information. For example, MSRB Rule G-10 
generally requires, among other things, that once a year, dealers and 
municipal advisors, provide in writing (which may be electronic) to 
each customer, information on how to access the MSRB internet website, 
which provides access to all MSRB rules and updates. More specifically, 
under Rule G-10 customers and municipal advisory clients must be 
provided a statement that their dealers or municipal advisors are 
registered with the SEC and the MSRB, the MSRB's internet website 
address, and a statement about the availability of a brochure, posted 
on the MSRB's website, that describes the protections that may be 
provided by the MSRB's rules and how to file a complaint with an 
appropriate regulatory authority. The requirements set forth in Rule G-
10 effectively remind customers and municipal advisory clients about 
the MSRB's website, which provides access to more than just the MSRB 
rule information specified under Rule G-29. For these reasons, the MSRB 
believes that the proposed rule change would have little effect on 
municipal securities professionals' or their customers' ability to 
access MSRB rules.
    Finally, as previously discussed, MSRB guidance makes clear that 
MSRB Rule G-27, on supervision, requires each dealer to supervise the 
conduct of its municipal securities activities to ensure compliance 
with Rule G-29. It is the MSRB's understanding that dealers typically 
comply with Rule G-29 by virtue of providing access to the internet in 
offices conducting municipal securities activities but may lack the 
required supervisory procedures detailing the process by which they 
ensure compliance with the rule.\13\ Thus, the MSRB believes that the 
proposed rule change will not only eliminate unnecessary rule 
provisions but will also reduce supervisory burdens for dealers, 
without hampering access to MSRB rule information for customers or 
municipal securities professionals' ability to comply with regulatory 
requirements.
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    \13\ The MSRB intends to include in the notice announcing the 
operative date of the elimination of Rule G-29 a statement that, to 
the extent any MSRB guidance references Rule G-29, that guidance, as 
it concerns Rule G-29 and any related supervisory requirements, will 
no longer be applicable.
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
the provisions of Section 15B(b)(2)(C) of the Act,\14\ which provides 
that the MSRB's rules shall:
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    \14\ 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.

    Specifically, the proposed rule change would remove regulatory 
burdens on dealers by recognizing that there is no longer a market harm 
that the rule seeks to prevent. By eliminating a rule that no longer 
resolves a market harm, the proposed rule change removes impediments to 
and perfects the mechanism of a free and open market by more 
appropriately responding to actual market practices, reducing 
regulatory burdens and thus focusing on compliance with a more 
appropriate and beneficial process by which MSRB rule information is 
made available and accessed consistent with current practices. 
Eliminating Rule G-29 also has no effect on investor protection because 
MSRB rule information remains readily available to municipal securities 
professionals and their customers.

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.\15\ The MSRB 
notes that its policy on economic analysis limits its applications 
regarding rules for which the Board seeks immediate effectiveness.\16\ 
As previously discussed, the MSRB does not believe the proposed rule 
change would result in delayed access to MSRB rule information for 
customers or hamper municipal securities professionals' ability to 
comply with regulatory requirements but instead reduces a burden for 
dealers that is no longer deemed necessary.
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    \15\ Id.
    \16\ The scope of the Board's policy on the use of economic 
analysis in rulemaking provides that:
     [t]his Policy addresses rulemaking activities of the MSRB that 
culminate, or are expected to culminate, in a filing of a proposed 
rule change with the SEC under Section 19(b) of the Exchange Act, 
other than a proposed rule change that the MSRB reasonably believes 
would qualify for immediate effectiveness under Section 19(b)(3)(A) 
of the Exchange Act if filed as such (e.g., fee filing or facility 
filing) or as otherwise provided under the exception process of this 
Policy.
    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 usually focuses exclusively its 
examination on the burden of competition on regulated entities.
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    The MSRB also considered the alternative of modernizing Rule G-29 
but, given the ease with which the MSRB rulebook can be accessed 
electronically, the fact investors receive annual disclosures, 
including the location of the MSRB's internet website, under Rule G-10, 
and the widespread availability and use of the internet by both 
investors and those conducting municipal securities activities, the 
MSRB currently believes the existence of Rule G-29 would continue to 
result in unnecessary supervisory burdens, while providing limited 
benefits to municipal securities professionals or customers.
    The MSRB also believes that the costs associated with compliance 
with the regulatory requirements and elimination of Rule G-29 are 
negligible, given the MSRB rulebook is accessible on its website at no 
cost, and internet services are universally available in municipal 
securities offices. However, the proposed rule change would 
nevertheless reduce costs for dealers as they would no longer be 
required to continue to maintain supervisory procedures and conduct 
supervisory reviews to ensure compliance with existing Rule G-29.

[[Page 19823]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received on the 
proposed rule change.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Exchange Act \17\ and Rule 19b-4(f)(6) \18\ 
thereunder. 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.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MSRB-2019-09 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-MSRB-2019-09. 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 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-2019-09 and should be submitted on 
or before May 28, 2019.

    For the Commission, pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09146 Filed 5-3-19; 8:45 am]
 BILLING CODE 8011-01-P