[Federal Register Volume 76, Number 190 (Friday, September 30, 2011)]
[Notices]
[Pages 60953-60954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-25288]
[[Page 60953]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65393; File No. SR-MSRB-2011-17]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Proposed Rule Change Regarding Professional
Qualifications and Information Concerning Associated Persons
September 26, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is
hereby given that on September 13, 2011, the Municipal Securities
Rulemaking Board (``Board'' or ``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 is filing with the SEC a proposed rule change consisting
of proposed amendments to Rule G-3, on professional qualifications, and
Rule G-7, on information concerning associated persons (the ``proposed
rule change''). The MSRB requests that the proposed rule change be made
effective on November 7, 2011, to coincide with proposed changes to the
Series 7 examination filed by the Financial Industry Regulatory
Authority (``FINRA'').\3\
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\3\ See File Number SR-FINRA-2011-45.
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The text of the proposed rule change is available on the MSRB's Web
site at http://www.msrb.org/Rules-and-Interpretations/SEC-Filings/2011-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 Board 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
MSRB Rule G-3(a)(i) defines a municipal securities representative
as a natural person associated with a broker, dealer or municipal
securities dealer (``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 that involve communication, directly or
indirectly, with public investors in municipal securities provided,
however, that the activities enumerated in 3 and 4 above are limited to
such activities as they relate to the activities enumerated in 1 and 2
above.
An individual seeking to become qualified as a municipal securities
representative must pass either of two qualification examinations--the
Municipal Securities Representative Qualification Examination (Series
52) or the General Securities Registered Representative Examination
(Series 7).
On September 7, 2011, FINRA filed with the Commission a proposed
rule change to restructure the Series 7 examination to focus on a
broader range of securities products available for sale by registered
representatives. The effect of these changes would be a de-emphasis on
non-sales aspects of the activities of securities professionals. In
focusing on general principles applicable to the buying and selling of
a broad range of securities, rather than specific products, the
restructured Series 7 examination would reduce the number of questions
that test for specific knowledge of municipal securities and the rules
of the MSRB. Given the shift in emphasis of the Series 7 examination
and the reduced number of municipal questions, in the view of the MSRB,
passage of the Series 7 examination would no longer represent a useful
gauge of whether a securities professional was qualified to perform
municipal securities activities other than sales to, and purchases
from, customers \4\ of municipal securities (``sales activities'').
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\4\ ``Customer'' is defined in MSRB Rule D-9 as ``any person
other than a broker, dealer, or municipal securities dealer acting
in its capacity as such or an issuer in transactions involving the
sale by the issuer of a new issue of its securities.''
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As a result of this restructured Series 7 examination, the MSRB
determined to file the proposed rule change consisting of amendments to
MSRB Rule G-3, on professional qualifications. The proposed rule change
would provide that the Series 7 examination would no longer qualify
individuals as ``municipal securities representatives,'' unless they
were engaged solely in sales activities or they passed the Series 7
examination prior to the effective date of the proposed rule change.
Instead, passage of the Series 52 examination would be required for any
municipal securities activities other than sales activities.
The proposed rule change would create a sub-category of municipal
securities representative referred to as a ``municipal securities sales
limited representative'' and would apply to individuals whose
activities with respect to municipal securities are limited exclusively
to sales activities. The proposed rule change would provide that an
individual could qualify as a municipal securities sales limited
representative by passage of the Series 7 examination. Other
individuals would be required to pass the Series 52 examination in
order to qualify as full municipal securities representatives, unless
they had passed the Series 7 examination prior to the effective date of
the proposed rule change and had maintained this registration.
The proposed rule change would also require a municipal securities
limited representative who wished to become a municipal securities
principal to pass the Series 52 examination prior to taking the Series
53 municipal securities principal examination. Otherwise, the proposed
amendments to Rule G-3 would not distinguish between ``municipal
securities sales limited representatives'' and other ``municipal
securities representatives.''
The MSRB is also filing proposed amendments to MSRB Rule G-7, on
information concerning associated persons. Rule G-7 requires brokers,
dealers and municipal securities dealers (``dealers'') to keep records
concerning their associated persons, including the category of function
they perform ``whether municipal securities principal, municipal
securities sales principal, municipal securities representative or
financial and operations principal.'' The proposed
[[Page 60954]]
rule change would add ``municipal securities sales limited
representative'' to that list.\5\ Additionally, the proposed rule
change would streamline Rule G-7(b) by simply requiring that dealers
obtain either Form U4 (in the case of non-bank dealers) or Form MSD-4
(in the case of bank dealers), rather than repeating the categories of
information required by those forms.
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\5\ The proposed rule change would also add ``municipal fund
securities limited principal'' to this list to reflect the previous
creation of this separate category.
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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)(A) of the Exchange Act, 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.'' Section
15B(b)(2)(A) of the Exchange Act also provides that the Board may
appropriately classify municipal securities brokers, municipal
securities dealers, and municipal advisors and persons associated with
municipal securities brokers, municipal securities dealers, and
municipal advisors and require persons in any such class to pass tests
prescribed by the Board.
The MSRB believes that the proposed rule change is consistent with
the provisions of Section 15B(b)(2)(A) of the Exchange Act in that the
proposed rule change will ensure that individuals seeking to engage in
more than sales activities will be tested on their qualification and
competency to engage in such other municipal securities activities.
These individuals will be required to pass an examination that includes
questions both on municipal securities and the municipal markets and on
U.S. government, federal agency and other financial instruments,
economic activity, government policy, factors affecting interest rates,
and applicable federal securities laws and regulations. The proposed
rule change will also more closely align the information dealers are
required to obtain pursuant to Rule G-7 with the information already
required by FINRA and the bank regulators, thereby reducing the
administrative burden on such dealers.
B. Self-Regulatory Organization's Statement on Burden on Competition
The MSRB does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Exchange Act since it would apply equally to all
dealers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Exchange 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 e-mail to [email protected].
Please include File Number SR-MSRB-2011-17 on the subject
line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MSRB-2011-17. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the MSRB's offices. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions.
You should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-MSRB-2011-17
and should be submitted on or before October 21, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25288 Filed 9-29-11; 8:45 am]
BILLING CODE 8011-01-P