[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