[Federal Register Volume 84, Number 214 (Tuesday, November 5, 2019)]
[Notices]
[Pages 59666-59669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24090]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87423; File No. SR-MSRB-2019-12]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of Revisions to the
Content Outline for the Municipal Advisor Principal Qualification
Examination and Its Associated Selection Specifications for the
Examination
October 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 October 18, 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 revisions to the content outline
for the Municipal Advisor Principal Qualification Examination (``Series
54 examination'') and its associated selection specifications for the
examination (``selection specifications'') (collectively, the
``proposed rule change''). The proposed revisions to the content
outline include incorporating MSRB Rule G-40, on advertising by
municipal advisors, and a description of the functions and knowledge
required to perform the supervisory tasks related to Rule G-40;
specifying that the passing score for the examination is 70%; updating
the sample questions; and making other technical changes to clarify
topic descriptions. The MSRB is not proposing in this filing any
textual changes to its rules.
The proposed rule change has been filed for immediate effectiveness
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(1)
thereunder.\4\ The MSRB proposes to make available the permanent Series
54 examination beginning November 12, 2019.
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\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(1). See also letter to Diane G. Klinke,
General Counsel, MSRB, from Belinda Blaine, Associate Director,
Division of Market Regulation, SEC, dated July 24, 2000, attached
[sic] as Exhibit 3b.
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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
[[Page 59667]]
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
Section 15B(b)(2)(A) of the Act authorizes the MSRB to prescribe
``standards of training, experience, competence, and such other
qualifications as the Board finds necessary or appropriate in the
public interest or for the protection of investors and municipal
entities or obligated persons'' \5\ and requires persons in any such
class to pass tests prescribed by the Board.\6\ Section
15B(b)(2)(L)(iii) of the Act further requires the MSRB to establish
professional standards for municipal advisors.\7\ A professional
qualification examination is intended to determine whether an
individual meets the MSRB's required qualification standards. The MSRB
believes that professional qualification examinations, such as the
Municipal Advisor Representative Qualification Examination (``Series 50
examination'') and the Series 54 examination are means for determining
the competency of individuals in particular qualification
classifications. More specifically, the Series 54 examination is
designed to measure a candidate's knowledge of the application of
federal securities laws, including MSRB rules to the municipal advisory
activities of a municipal advisor and that of its associated persons.
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\5\ 15 U.S.C. 78o-4(b)(2)(A).
\6\ 15 U.S.C. 78o-4(b)(2)(A)(iii).
\7\ 15 U.S.C. 78o-4(b)(2)(L)(iii).
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On September 19, 2018, the MSRB filed with the SEC amendments to
Rule G-3, on professional qualification requirements, for immediate
effectiveness, to require municipal advisor principals to become
appropriately qualified by passing the Series 54 examination.\8\
Thereafter, on December 20, 2018, the MSRB filed the Series 54
examination content outline with the SEC for immediate
effectiveness.\9\ The Series 54 examination content outline was
developed to serve as a guide to the subject matter tested on the
Series 54 examination and prescribes the specified knowledge required
in each functional area that is specific to the role and
responsibilities of a municipal advisor principal (``principal-level
activity'').\10\ The MSRB has noted that the establishment of
qualification requirements for municipal advisor principals and the
subject matter covered on the examination to be tested on would assist
in ensuring that municipal advisor principals have a baseline knowledge
of the municipal market, municipal advisory activities, as well as the
regulatory requirements.
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\8\ See Exchange Act Release No. 84630 (November 20, 2018), 83
FR 60927 (November 27, 2018) (File No. SR-MSRB-2018-07).
\9\ See Exchange Act Release No. 84926 (December 21, 2018), 83
FR 67772 (December 31, 2018) (File No. SR-MSRB-2018-10).
\10\ Under Rule G-3(e) a ``municipal advisor principal'' is
defined as ``a natural person associated with a municipal advisor
who is directly engaged in the management, direction or supervision
of the municipal advisory activities of the municipal advisor and
its associated persons.''
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Current Content Outline
The Series 54 examination content outline describes the knowledge
and tasks required in carrying out principal-level activity related to
the three topical sections comprising the examination:
(1) Understanding the Municipal Advisor Regulatory Framework (25
questions);
(2) Supervising Municipal Advisory Activities (35 questions); and
(3) Supervising Municipal Advisor Firm Operations (40 questions).
As the MSRB has previously noted, while the subject matters
represented on the Series 54 examination content outline may have
redundancies with subject matters appearing on the Series 50
examination content outline, the Series 54 examination is designed to
test the specific application of MSRB rules and other federal
securities laws to the municipal advisory activities of the municipal
advisor, whereas the Series 50 examination is meant to test the
baseline competency of individuals engaged in municipal advisory
activities and is not designed to specifically or extensively test the
application of those laws.\11\ Additionally, to familiarize candidates
with the format of the Series 54 examination, the content outline
includes sample questions that are similar to the type of questions
that may be found on the Series 54 examination.
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\11\ See supra note 9.
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The Series 54 examination will consist of 100 multiple-choice
questions drawn from a collection of test questions available for the
Series 54 examination with each multiple-choice question being worth
one point. Individuals will receive an additional 10 questions that are
randomly distributed throughout the Series 54 examination and do not
count for scoring purposes; these questions serve to pretest questions
to be used in future administration of the Series 54 examination.
Individuals will be allowed 180 minutes to complete the Series 54
examination.\12\
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\12\ Prior to beginning the examination, individuals will be
provided with a brief tutorial on the administration of the
computerized exam. Candidates will be given 30 minutes to complete
the tutorial in addition to the 180 minutes allowed to complete the
Series 54 examination.
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Proposed Revisions
As a result of the recent implementation of Rule G-40, on
advertising by municipal advisors, which became effective on August 23,
2019, the proposed rule change adds a description of the functions and
knowledge required to perform the supervisory tasks related to Rule G-
40. Additionally, the proposed rule change includes information about
the passing score, updates the sample questions and makes other
technical changes to the content outline to clarify topic descriptions.
A summary of the proposed rule change, detailed by major topic
headings, is provided below:
Administration of the Exam
On pg. 3: The passing score of 70% is added to the
``Administration of the Examination'' section of the outline.
Part 1: Understanding the Municipal Advisor Regulatory Framework
For Subtopic A., under the ``Knowledge Required'' section,
the description is being revised to read ``Regulation of Municipal
Securities;''
For Subtopic A.2.d., under the ``Knowledge Required''
section, the description is being revised to remove the word
``understanding;''
For Subtopic A.2.e., under the ``Knowledge Required''
section, the description is being revised to remove the word
``understand;''
For Subtopic A.3., under the ``Knowledge Required''
section, the description is being revised to add the phrase ``SEC
Statutory Fiduciary Duty Standard'' and the word ``and;''
For Subtopic B., under the ``Knowledge Required'' section,
the description is being revised to change ``Regulators'' to
``Regulatory;''
For Subtopic B.1., under the ``Knowledge Required''
section, the description is being revised to remove the phrase
``understanding the;''
Part 2: Supervising Municipal Advisory Activities
Under the ``Tasks'' section, for words not taking the
gerund form of a verb, revising as such:
[cir] Changing ``Determination'' to ``Determining;'' ``Review'' to
[[Page 59668]]
``Reviewing;'' ``Documentation of'' to ``Documenting;'' ``Assess'' to
``Assessing;'' ``Determination'' to ``Determining;'' and ``Maintain''
to ``Maintaining;''
For Subtopic A.8., under the ``Knowledge Required''
section, the description is being revised to read ``Disclosure of
Conflicts of Interest and Other Information;'' the rule reference MSRB
Rule G-42(b) is being added; the rule reference MSRB Rule G-44 is being
deleted; and the description ``Other duties of municipal advisors'' is
renumbered as A.10;
For Subtopic A.9., under the ``Knowledge Required''
section, the description is being revised to ``Provision on the process
to cure inadvertent advice;''
Part 3: Supervising Municipal Advisor Firm Operations
Under the ``Tasks'' section, for words not taking the
gerund form of a verb, revising as such:
[cir] Changing ``Education'' to ``Educating;'' ``Submit'' to
``Submitting;'' ``Ensure'' to ``Ensuring;'' ``Maintain'' to
``Maintaining;'' Implement'' to ``Implementing;'' ``Oversee'' to
``Overseeing;'' ``Monitor'' to ``Monitoring;'' ``Review'' to
``Reviewing;'' and ``Ensure'' to ``Ensuring;''
Under the ``Tasks'' section, for bullet 2 change the e.g.
to ``continuing education;''
Under the ``Tasks'' section, for bullet 4 add the word
``Fulfilling;''
Under the ``Tasks'' section, adding the description
``Surveilling for political contributions that may trigger a ban on
municipal advisory business and required filings'' to the list of
tasks;
For Subtopic A.4., under the ``Knowledge Required''
section, the description is being revised to add the word ``SEC''
before ``Form MA;''
For Subtopic A.6., under the ``Knowledge Required''
section, the description is being revised to ``Notification regarding
the municipal advisory client brochure;''
For Subtopic A.7., under the ``Knowledge Required''
section, the description is being revised to ``Gifts, gratuities and
normal business dealings compliance obligations;''
For Subtopic A.8., under the ``Knowledge Required''
section, the description is being revised to ``Activities triggering a
ban on municipal advisory business, exemptions and required filings;
the rule reference is being updated to MSRB Rule G-37(b)(i)(A)-(D) and
(e);
Under the ``Knowledge Required'' section, adding as
subtopic A.10., the description ``Advertising and content standards;
and the rule reference MSRB Rule G-40;
For Subtopic B.1., under the ``Knowledge Required''
section, the description is being revised to add the word ``SEC''
before ``Form MA-I;''
Sample Questions
Sample questions 1-5 are being replaced and updated with the sample
questions initially published in the Understanding the Municipal
Advisor Principal Qualification Examination compliance resource.
As noted above, the MSRB has designated the proposed rule change
for immediate effectiveness. The selection specifications for the
Series 54 examination, which the MSRB has submitted under separate
cover with a request for confidential treatment to the Commission,
pursuant to Rule 24b-2 under the Act,\13\ describe additional
confidential information regarding the Series 54 examination.
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\13\ 17 CFR 240.24b-2.
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2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(A) of the Act,\14\ which authorizes the MSRB to
prescribe ``standards of training, experience, competence, and such
other qualifications as the Board finds necessary or appropriate in the
public interest or for the protection of investors and municipal
entities or obligated persons'' and Sections 15B(b)(2)(A)(i) \15\ and
15B(b)(2)(A)(iii) \16\ of the Act, which provides that the Board may
appropriately classify associated persons of municipal advisors and
require such persons in any such class to pass tests prescribed by the
Board. The MSRB also believes that the proposed rule change is in
furtherance of Section 15B(b)(2)(L)(iii) of the Act, which requires the
MSRB to establish professional standards for municipal advisors.\17\
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\14\ 15 U.S.C. 78o-4(b)(2)(A).
\15\ 15 U.S.C. 78o-4(b)(2)(A)(i).
\16\ 15 U.S.C. 78o-4(b)(2)(A)(iii).
\17\ 15 U.S.C. 78o-4(b)(2)(L)(iii).
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The MSRB believes that the proposed rule change is consistent with
the provisions of Section 15B(b)(2)(A) of the Act in that the revisions
will ensure that certain key concepts and rules are tested on the
Series 54 examination in furtherance of the MSRB's mandate that
individuals' demonstrate the specified level of competence that would
be appropriate and in the furtherance of the public interest. Also,
consistent with the purpose of Sections 15B(b)(2)(A) and
15B(b)(2)(L)(iii) of the Act, updating topic descriptions to ensure
individuals have an enhanced understanding of the subject matters
covered on the examination will aid individuals in their preparation
for the examination and facilitates standards of competence being
attained to carry out a municipal advisor principal's role of
supervision of the municipal advisory activities and operational
functions of the municipal advisor and that of its associated persons,
which is in furtherance of the public interest. More generally, the
MSRB's professional qualification examinations are designed to measure
knowledge of the business activities and regulatory requirements under
federal securities laws, including MSRB rules, applicable to a
particular qualification classification, which is also in furtherance
of the Act.
The MSRB also believes the proposed rule change is in accordance
with Section 15B(b)(2)(C) of the Act,\18\ which requires, among other
things, that MSRB rules ``be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, . . . and, in general, to protect investors,
municipal entities, obligated persons, and the public interest . . .''
The MSRB notes the proposed rule change is consistent with this
provision of the Act, to foster the prevention of fraudulent practices,
because by ensuring individuals have a guide to the subject matters
covered in the requisite professional examinations and demonstrating
competence in the application of federal securities laws and MSRB rules
to a firm's municipal advisory activities, such individuals are likely
better equipped to exercise proper supervisory control over the
activities of municipal advisor representatives.
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\18\ 15 U.S.C. 78o-4(b)(2)(C).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Act \19\ requires that MSRB rules not
be designed to impose any burden on competition not necessary or
appropriate in furtherance of the purpose of the Act. In addition,
Section 15B(b)(2)(L)(iv) of the Act \20\ 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 does not believe that the
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proposed rule change will result in any burden on competition that is
not necessary or appropriate in furtherance of these provisions and
their purposes under the Act, relative to the economic baseline, which
includes the requirement that municipal advisor professionals
demonstrate, by passing an examination, that they meet professional
standards deemed necessary or appropriate in the public interest or for
the protection of investors, municipal entities and obligated persons.
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\19\ 15 U.S.C. 78o-4(b)(2)(C).
\20\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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Moreover, the MSRB has no reason to believe that revisions to the
Series 54 examination content outline will pose any greater burden on
individuals associated with smaller municipal advisors than those
associated with larger municipal advisors or that the burden could be
materially reduced while still achieving the purposes of the Act of
protection of investors against fraud. Lastly, the proposed rule change
is more explanatory in nature to ensure individuals have an enhanced
understanding of the functions and associated tasks covered on the
Series 54 examination.
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.
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 Act \21\ and paragraph (f) of Rule 19b-4
thereunder.\22\ 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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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f).
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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-2019-12 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-2019-12. 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-2019-12 and should be submitted on
or before November 26, 2019.
For the Commission, pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-24090 Filed 11-4-19; 8:45 am]
BILLING CODE 8011-01-P