[Federal Register Volume 82, Number 149 (Friday, August 4, 2017)]
[Notices]
[Pages 36472-36476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16399]
[[Page 36472]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81264; File No. SR-MSRB-2017-05]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Assess an Underwriting Fee on Dealers That Are Underwriters
of Primary Offerings of Plans
July 31, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on July 19, 2017 the Municipal Securities
Rulemaking Board (``MSRB'' or ``Board'') filed with the Securities and
Exchange Commission (``Commission'' or ``SEC'') 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 amendment to MSRB
Rule A-13, on underwriting and transaction assessments for brokers,
dealers and municipal securities dealers (collectively ``dealers''), to
assess an underwriting fee on dealers that are underwriters of primary
offerings of plans, as the terms ``underwriter'' and ``plan'' are
defined under MSRB Rule G-45, on reporting of information on municipal
fund securities (the ``proposed rule change'').\3\ The MSRB has
designated the proposed rule change for immediate effectiveness.
Beginning in May 2018, the Board will invoice underwriters for the
assessments due under the proposed rule change. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\3\ Under Rule G-45(d)(xiv), an ``underwriter'' shall mean a
dealer that is an underwriter, as defined in Rule 15c2-12(f)(8)
under the Act, of municipal fund securities that are not local
government investment pools.
Under Rule G-45(d)(ix), a ``plan'' is a college savings plan or
program established by a state, or agency or instrumentality of a
state, to operate as a qualified tuition program in accordance with
Section 529 of the Internal Revenue Code of 1986, as amended. The
proposed rule change will not apply to underwriters of other types
of municipal fund securities.
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The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2017-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 purpose of the proposed rule change is to assess an
underwriting fee on underwriters to plans to defray the costs and
expenses of operating and administering the MSRB. The proposed rule
change will amend Rule A-13 to add a new fee on an underwriter to a
plan at a rate of .0005% ($.005 per $1,000) of the total aggregate
assets for the plan underwritten as of December 31 each year, as
reported on MSRB Form G-45, reporting of information on municipal fund
securities. The MSRB believes that the proposed fee is reasonable as
well as necessary and appropriate to help defray the costs of operating
and administering the MSRB. The MSRB is committed to appropriately and
equitably assessing fees across all regulated activities to ensure
fairness, and, as summarized below, the MSRB's activity concerning
underwriters to plans has historically been funded with minimal fees.
Background
A. MSRB's Regulatory Authority Over Dealers and Underwriters to Plans
The MSRB's regulation of dealers that sell interests in and dealers
that are underwriters to plans began over 18 years ago. In 1998, after
certain states created 529 college savings plans,\4\ the MSRB contacted
the SEC to determine whether plan investments were securities and,
further, whether they were municipal securities under the federal
securities laws.\5\ In early 1999, in response to the MSRB's inquiry,
SEC staff informed the Board that ``at least some interests in . . .
higher education trusts may be, depending on the facts and
circumstances, `municipal securities' for purposes of the Exchange
Act.'' \6\ Based on that guidance, the MSRB began its regulation of
dealer and underwriter activity in plans and local government
investment pools,\7\ collectively known as municipal fund securities
under Rule D-12, ``municipal fund security.'' Further, the Board
expanded its mission to include, among other things, the protection of
investors in plans and the public interest by promoting a fair and
efficient market for interests in those plans.
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\4\ A 529 college savings plan is a plan, as defined under Rule
G-45(d)(ix).
\5\ Section 529(b)(1) of the Internal Revenue Code of 1986, as
amended (the ``Code'') provides, in part, that a 529 college savings
plan is a ``program established and maintained by a State or agency
or instrumentality thereof.'' 26 U.S.C. 529(b)(1).
Although Congress amended the Code to add Section 529 in 1996,
the market for 529 college savings plans did not grow significantly
until after the enactment of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (``EGTRRA''). EGTRRA made several
improvements, such as permitting distributions to be withdrawn free
of federal income tax, if the distributions were used for qualified
higher education expenses.
\6\ Letter dated February 26, 1999 from Catherine McGuire, Chief
Counsel, Division of Market Regulation, SEC, to Diane G. Klinke,
General Counsel of the Board, in response to letter dated June 2,
1998 from Diane G. Klinke to Catherine McGuire.
\7\ Local government investment pools (``LGIPs'') are
established by state or local governmental entities as trusts that
serve as vehicles for the pooled investment of public moneys of
participating governmental entities. Although most LGIPs are fully
administered by governmental personnel or non-dealer contractors, a
limited number of LGIPs involve dealers undertaking transaction-
based activities. Such dealers are subject to the MSRB's rules
regarding municipal fund securities.
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To support the MSRB's regulation of dealers that are underwriters
to plans, as well as its mission to protect investors in those plans,
the MSRB has engaged in significant rulemaking, market transparency,
educational and market outreach initiatives. In addition, the MSRB has
provided examination and enforcement support to other regulatory
agencies related to dealer activity regarding plans. Those initiatives
and support require the Board's resources, including the resources of
its staff and of its Electronic Municipal Market Access (EMMA[supreg])
\8\ system.
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\8\ EMMA is a registered trademark of the MSRB, and is the
official repository for information on virtually all municipal
bonds, providing free access to official disclosures, trade data and
other information about the municipal securities market.
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i. Rulemaking Initiatives
Approximately one third of the MSRB's general rules specifically
[[Page 36473]]
address municipal fund securities. The MSRB's rulemaking relating to
dealers that sell interests in and dealers that are underwriters to
plans has addressed, among other areas, professional qualifications
(e.g., the MSRB added a new permanent category of principal--Series
51--municipal fund securities limited principal--to supervise
activities regarding plans under Rule G-3, on professional
qualification requirements),\9\ fair practice (e.g., the Board
addressed under Rule G-20, on gifts, gratuities, non-cash compensation
and expenses of issuance, promotional gifts and ``other business
logos'' of a 529 college savings plan for which a dealer is acting as a
distributor,\10\ and advertising, including a proposed rule change
relating to municipal fund security product advertisements submitted to
the Commission on June 22, 2017, under Rule G-21(e), on municipal fund
security product advertisements),\11\ and market transparency (e.g.,
the Board addressed disclosures in connection with the offering of
interests in 529 college savings plans under Rule G-32, on disclosures
in connection with primary offerings).\12\ Since 2001, the Board has
issued over 60 regulatory notices pertaining to plans. Many of those
notices provided guidance to dealers regarding the application of
existing MSRB rules to plans.
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\9\ See Exchange Act Release No. 45652 (Mar. 26, 2002), 67 FR
15844 (Apr. 3, 2002), SR-MSRB-2002-03.
\10\ See Exchange Act Release No. 76381 (Nov. 6, 2015), 80 FR
70271 (Nov. 13, 2015), SR-MSRB-2015-09.
\11\ See Exchange Act Release No. 81060 (Jun. 30, 2017), 82 FR
31644 (Jul. 7, 2017), SR-MSRB-2017-04.
\12\ See Exchange Act Release No. 43858 (Jan. 18, 2001), 66 FR
8126 (Jan. 29, 2001), SR-MSRB-00-06.
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ii. Market Transparency Initiatives
The MSRB has engaged in several market transparency initiatives
relating to municipal fund securities. For example, under MSRB Rule G-
32, on disclosures relating to primary offerings, an underwriter to a
plan, among other things, must submit the official offering statement
and any amendment thereto, i.e., the program disclosure booklet for the
plan it distributes, to the MSRB. To assist the underwriter in making
its submission, the MSRB developed a filing portal on EMMA as well as
the database for the underwriter's submissions. In addition, to assist
an investor with finding the program disclosure booklet for a plan of
interest, the MSRB developed an interactive Web site with a 50-state
map that allows the investor to more quickly and easily access that
information.
Under Rule G-45, an underwriter must submit information about each
plan for which it is an underwriter on a semi-annual basis to the MSRB.
To facilitate such submissions, the MSRB developed two methods through
which an underwriter could make those submissions to the MSRB so that
the underwriter could select the method it prefers (either through the
EMMA dataport or through a computer-to-computer interface) as well as
developed the database for the submissions. The MSRB continues to
enhance the database as well as to assist underwriters to plans by
answering inquiries relating to the submission of that data through the
MSRB's call center. Further, MSRB staff utilizes the data submitted
under Rule G-45 to analyze plans, monitor their growth rate, size and
investment options, and compare plans based on fees, costs, and
performance.
iii. Educational and Market Outreach
The MSRB has engaged in educational and market outreach both to
underwriters to plans and to investors in those plans. That outreach
has included: Conducting regional compliance seminars for dealers; MSRB
staff presentations and attendance at major industry conferences; and
the development and distribution of multiple educational pieces to
assist dealers and investors in 529 college savings plans, including an
investor's guide to 529 college savings plans.
iv. Market Leadership Activities
Beyond its rulemaking, market transparency, educational and market
outreach initiatives, the MSRB has engaged in market leadership
activities relating to plans. Those market leadership activities, among
other things, have resulted in Congressional testimony and in the
development of voluntary industry disclosure standards for 529 college
savings plan program disclosure booklets.\13\ For example, MSRB staff
testified at a 2004 Senate subcommittee oversight hearing on sales and
disclosure practices in the 529 college savings plan market. In
addition, the MSRB encouraged the College Savings Plans Network to
promulgate more comprehensive voluntary disclosure standards and to
establish a central information clearinghouse on 529 college savings
plans. Further, in 2009, the MSRB submitted a comment letter on the use
of 529 college savings plans in advance of the Report on 529 College
Savings Plans prepared by the U.S. Department of the Treasury on behalf
of the White House Task Force on the Middle Class.
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\13\ The MSRB's Web site discusses the Board's market leadership
activities. http://www.msrb.org/Market-Topics.aspx.
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v. Support to Other Regulatory Agencies
To facilitate efficient and effective examination and enforcement
of MSRB rules, the MSRB provides support to the regulatory agencies
that enforce the MSRB's rules. Those regulatory agencies include the
Financial Industry Regulatory Authority, Inc. (``FINRA'') and the
Commission. That support includes education and guidance about MSRB
rules, training of the staff of those regulatory agencies regarding the
MSRB rules, and the provision of additional information about plans to
support the monitoring of the market for potential misconduct. The MSRB
continues and will continue in the future to provide this support.
B. Holistic Review of MSRB Fees
The MSRB assesses dealers and municipal advisors (collectively,
``regulated entities'') various fees designed to defray the costs of
its operations and administration, including rulemaking, market
transparency, educational and market outreach initiatives that fulfill
its Congressional mandate to, among other things, protect investors,
state and local governments and other municipal entities by promoting
the fairness and efficiency of the municipal securities market. Section
15B(b)(2)(J) of the Act \14\ provides, in pertinent part, that each
regulated entity shall pay to the Board such reasonable fees and
charges as may be necessary or appropriate to defray the costs of
operating and administering the Board, and that the MSRB shall have
rules specifying the amount of such fees. The current MSRB fees are:
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\14\ 15 U.S.C. 78o-4(b)(2)(J).
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1. Initial Registration Fee (Rule A-12, on Registration)
$1,000 one-time registration fee to be paid by each dealer to
register with the MSRB before engaging in municipal securities
activities and each municipal advisor to register with the MSRB before
engaging in municipal advisory activities.
2. Annual Registration Fee (Rule A-12)
$1,000 annual fee to be paid by each dealer and municipal advisor
registered with the MSRB.
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3. Underwriting Fee (Rule A-13)
$.0275 per $1,000 of the par value paid by a dealer, on all
municipal securities purchased from an issuer by or through such
dealer, whether acting as principal or agent as part of a primary
offering--except that this fee does not apply to commercial paper or
municipal fund securities, such as interests in plans.
4. Transaction Fee (Rule A-13)
.001% ($.01 per $1,000) of the total par value to be paid by a
dealer, except in limited circumstances, for inter-dealer sales and
customer sales reported to the MSRB pursuant to Rule G-14(b), on
transaction reporting requirements--this fee does not apply to the sale
of interests in plans.
5. Technology Fee (Rule A-13)
$1.00 paid by a dealer per transaction for each inter-dealer sale
and for each sale to customers reported to the MSRB pursuant to Rule G-
14(b)--this fee does not apply to the sale of interests in plans.
6. Municipal Advisor Professional Fee (Rule A-11, on Assessments for
Municipal Advisor Professionals)
$300 per Form MA-I on file with the SEC by the municipal advisor--
this fee does not apply to dealers/underwriters to plans.
7. Examination Fee (Rule A-16, on Examination Fees)
$150 test development fee assessed per candidate for each MSRB
examination.
8. Late Fee (Rule A-11 and Rule A-12)
$25 monthly late fee and a late fee on the overdue balance
(computed according to the prime rate) until paid on balances not paid
within 30 days of the invoice date by the dealer or municipal
advisor.\15\
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\15\ In addition, the MSRB charges data subscription and service
fees for subscribers, including dealers and municipal advisors,
seeking direct electronic delivery of municipal trade data and
disclosure documents associated with municipal bond issues. However,
this information is available without direct electronic delivery on
the EMMA Web site without charge.
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Begun in 2015, the Board's holistic review of fees that the Board
assesses on regulated entities continues. The Board evaluates those
fees with the goal of better aligning revenue sources with operating
expenses and all capital needs. The Board strives to diversify funding
sources among regulated entities and other entities that fund MSRB
services in a manner that ensures long-term sustainability, while
continuing to strike an equitable balance among regulated entities and
a fair allocation of the expenses of the regulatory activities, systems
development and operational activities undertaken by the MSRB. Proxies
used by the Board for fairly allocating to regulated entities the cost
of MSRB regulation include, but are not limited to: Being registered to
engage in municipal securities or municipal advisory activities; the
level of dealer market activity; and the number of associated persons
engaged in municipal advisory activities on behalf of a municipal
advisor. Recognizing that in any given year there could be more or less
activity by a particular class of regulated entities, the Board, as it
has historically, sought to establish a fee structure that would result
in a balanced and reasonable contribution over time from all regulated
entities to defray costs and expenses of operating and administering
the MSRB.
The Board's most recent evaluation focused on the fees assessed on
dealers/underwriters to 529 college savings plans. Of the fees assessed
to defray the costs of operating and administering the Board, dealers
that sell interests in and dealers that act as underwriters to plans,
that do not otherwise engage in the municipal securities business, are
subject to three MSRB fees--the initial and annual registration fees,
the examination fees, and the late fees (when applicable). During
Fiscal Year 2016, the annual registration fees assessed on all
regulated entities accounted for slightly less than 6% of the Board's
total revenue, and of that amount, registration fees for dealers/
underwriters that engage in transactions relating to plans exclusively
accounted for 0.9% of that slightly less than 6% of registration fee
revenue, or less than 0.05% of total revenue.
In 1999, the Board requested comment about a draft amendment to
Rule A-13 to assess an underwriting fee on underwriters to plans.\16\
The draft underwriting fee applicable to underwriters of plans would
have been assessed at the same level as the underwriting fee then
assessed on underwriters of municipal bonds, but based on the purchase
price the investor paid for the interests in the plan, exclusive of any
commission. In addition, the draft underwriting fee would not have
accounted for the redemption of interests in plans. The Board, however,
did not proceed with that draft amendment to Rule A-13. The Board
stated that:
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\16\ See Request for Comments (March 17, 1999) (the ``March
request''). In response to the March request, commenters submitted
that the fee structure for dealers involved in the distribution of
529 college savings plans was more like an administrative fee, and
was significantly different from an underwriting discount or
commission since such dealers did not undertake underwriting risks.
Commenters also urged, if underwriting assessments were assessed,
that assessments be lower than the assessments charged in more
traditional municipal securities offerings and that the assessments
consider any securities that are retired/redeemed. Commenters noted
that the underlying mutual funds offered through a 529 college
savings plan pay registration fees to the SEC.
Based on the . . . continuous nature of offerings in municipal
fund securities, the programmatic nature of most customer
investments and the heightened potential that underwriting
assessments could create significant financial burdens on issuers to
their customers' detriment justify caution in imposing the
underwriting assessment.\17\
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\17\ See File No. SR-MSRB-00-6 (Apr. 5, 2000).
The Board has exercised that caution, and now has determined to assess
an underwriting fee on dealers that are underwriters to plans at a
level far below the underwriting fee assessed on underwriters of
municipal bonds. As noted under ``Proposed Rule Change,'' underwriters,
consistent with the Board's long-standing prohibition, will be
prohibited under Rule A-13 from charging or otherwise passing through
the underwriting fee to issuers of plans.
Proposed Rule Change
The proposed rule change will assess an underwriter to a primary
offering of a plan an underwriting fee of .0005% of the total aggregate
assets of the plan for the reporting period ending December 31 each
year, as required to be reported on Form G-45. For the purposes of the
proposed rule change, if there are multiple underwriters of the primary
offering of the interests in plans identified on Form G-45, the term
``underwriter'' will be limited to the underwriter identified as the
primary distributor in the official statement, i.e., the program
disclosure booklet, for the primary offering submitted under Rule G-32.
The Board will invoice that primary distributor for the assessment due
under the proposed rule change beginning in May 2018.
Specifically, the proposed rule change will amend Rule A-13(a) to
reflect the amount of the proposed rule change's underwriting fee set
forth in new subsection (c)(ii). The proposed rule change also will
amend Rule A-13 to add new section (b) ``underwriting assessments--
certain municipal fund securities'' to Rule A-13. New section (b) will
require that an underwriter to a plan pay an underwriting fee to the
Board. As noted above, for the purposes of that new section, if there
are multiple
[[Page 36475]]
underwriters for the plan identified on MSRB Form G-45, the term
``underwriter'' will be limited to the underwriter identified as the
primary distributor in the official statement for the primary offering
submitted under Rule G-32 as of December 31 of the relevant year. The
proposed rule change will renumber current section (b) of Rule A-13 as
section (c). In new subsection (c)(i), the Board will set forth the
underwriting assessment for primary offerings subject to assessment in
section (a). In new subsection (c)(ii), the proposed rule change will
set forth the amount of the assessment of the underwriting fee on
underwriters to plans (.0005% of the total aggregate assets for the
reporting period ending December 31 each year, as required to be
reported on MSRB Form G-45). The proposed rule change will renumber
current section (c) of Rule A-13 as section (d) of Rule A-13. Further,
the proposed rule change will renumber current section (d) of Rule A-13
as section (e). New section (e) of Rule A-13 will address the billing
procedure as to how the Board will invoice dealers for payment of
underwriting assessments and transaction and technology assessments,
including dealers that act as underwriters to plans. For the
assessments set forth in new sections (c)(i) and (d), the Board monthly
will invoice brokers, dealers and municipal securities dealers for
payment of underwriting assessments and transaction and technology
assessments. For the assessments set forth in new subsection (c)(ii),
the Board annually will invoice the underwriter identified in section
(b) for the payment of underwriting assessments.
As previously stated, new section (e) will provide that if there
are multiple underwriters identified on Form G-45 for the reporting
period ending December 31 each year, the Board will invoice the
underwriter identified as the primary distributor in the official
statement for the primary offering submitted under Rule G-32 of the
relevant year. The proposed rule change will renumber current section
(e) of Rule A-13 as section (f). The proposed rule change will clarify
that the Board's long-standing prohibition on charging or otherwise
passing through the fees required under Rule A-13 to issuers applies to
all fees assessed under Rule A-13, including underwriting fees assessed
on underwriters to plans.\18\ Finally, the proposed rule change will
renumber current section (f) of Rule A-13 as section (g).
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\18\ For over twenty years, the Board has stated that:
the fees paid to the Board under rule A-13 should be
characterized by dealers to issuers no differently than the annual
fees paid to the Board . . . [under Rule A-12] and any other
``overhead'' expenses that are incurred by virtue of the dealer
engaging in municipal securities business.
Exchange Act Rel. No. 34601 (Aug. 25, 1994), 59 FR 169 (Sept. 1,
1994) (File No. SR-MSRB-94-12).
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2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(J) of the Act \19\ which requires, in part, that the
MSRB's rules shall provide that each municipal securities broker,
municipal securities dealer, and municipal advisor shall pay to the
Board such reasonable fees and charges as may be necessary or
appropriate to defray the costs and expenses of operating and
administering the Board and that such rules shall specify the amount of
such fees and charges.
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\19\ 15 U.S.C. 78o-4(b)(2)(J). Section 15B(b)(2)(J) provides
that each dealer shall:
pay to the Board such reasonable fees and charges as may be
necessary or appropriate to defray the costs and expenses of
operating and administering the Board. Such rules shall specify the
amount of such fees and charges, which may include charges for
failure to submit to the Board, or to any information system
operated by the Board, within the prescribed timeframes, any items
of information or documents required to be submitted under any rule
issued by the Board.
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The MSRB believes that its rules provide for reasonable dues, fees,
and other charges among regulated entities. The MSRB believes that the
proposed rule change is necessary and appropriate to fund the operation
and administration of the Board and satisfies the requirements of
Section 15B(b)(2)(J),\20\ achieving a more equitable balance among
regulated entities and a fairer allocation of the expenses of the
regulatory activities, system development, and operational activities
undertaken by the MSRB.
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\20\ Id.
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The proposed rule change will account for the differences between
municipal fund securities and other municipal securities. The Board
accounts for those differences both in the manner and in the amount of
the underwriting fee that the Board will assess on underwriters to
plans.
To recognize the continuous nature of offerings in plans, the MSRB
will assess the proposed fee in a manner that will be similar to how
the SEC assesses registration fees on mutual funds pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended. The MSRB
will assess the proposed rule change on the plan's total aggregate
assets as of December 31 each year, as reported by an underwriter on
Form G-45. Thus, the proposed rule change will account for the
redemption of units in plans. Further, to recognize the differences in
the commission structure between other municipal securities offerings,
such as municipal bonds, and offerings in plans, the Board will assess
the proposed rule change at a rate that is significantly lower than the
rate the Board uses to assess underwriters subject to assessment under
Rule A-13(a) (the amount of the underwriting assessment under Rule A-
13(a) is .00275% of the par value of the primary offering).
The proposed rule change will defray the costs of the Board's
significant rulemaking, market transparency, educational and market
outreach initiatives, market leadership, and inspections/enforcement
support relating to underwriters to plans, an industry with
approximately $266 billion in assets as of December 31, 2016, as
reported in March 2017.\21\ The proposed rule change will diversify
funding sources among regulated entities in a manner that will achieve
a more equitable balance among regulated entities and a fairer
allocation of the costs, systems, and services among other users and
regulated entities. Looking forward to Fiscal Year 2020, the MSRB's pro
forma budgets reflect a gradual decrease in reserve levels, even with
the new underwriting fee on underwriters of 529 college savings plans,
as expenses are projected to increase annually while current sources of
revenue are projected to be flat.
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\21\ See Strategic Insight 529 College Savings & ABLE 1Q 2017
529 Data Highlights available at http://www.529insiders.com/uploadedFiles/529-Insider/News/2017/January/1Q%202017%20Strategic%20Insight%20529%20Data%20Quarterly%20Highlights.pdf.
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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. In accordance
with certain aspects of the Board's policy on the use of economic
analysis,\22\ the Board has reviewed the proposed rule change. The
Board believes the
[[Page 36476]]
proposed rule change is necessary and appropriate to ensure that MSRB
registrants that participate in the underwriting activities of plans
share in the costs and expenses of operating and administering the
MSRB. The MSRB has considered the economic impact of the proposed rule
change. The MSRB expects the impact of the proposed rule change to be
small and unlikely to negatively impact the competitiveness of the
underwriters or underwriting markets for 529 college savings plans.
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\22\ 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 Securities
Exchange Act of 1934 . . . other than a proposed rule change that
the MSRB reasonably believes would qualify for immediate
effectiveness under Section 19(b)(3)(A) if filed as such or as
otherwise provided under the exception process of this policy.
Policy on the Use of Economic Analysis in MSRB Rulemaking,
available at http://www.msrb.org/en/Rules-and-Interpretations/Economic-Analysis-Policy.
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The proposed rule change will assess an annual fee of 0.0005%, or
1/20th of a basis point, on plan assets to underwriters of plans.\23\
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\23\ The SEC currently assesses a fee for mutual funds sold
annually, which in 2017 amounts to 1.159 basis point per year. The
fee rate which the SEC assessed for the mutual funds pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended, is
by law, the same rate as the annual rate assessed for registered
securities under Section 6(b) of the Securities Act of 1933, as
amended. The SEC determines the fee rate at the beginning of each
fiscal year.
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In addition, the MSRB does not believe that the proposed rule
change will result in any burden on competition that is not necessary
or appropriate in furtherance of the purpose of the Act since it will
apply equally to all underwriters engaged in a primary offering of
interests in plans required to submit data to the MSRB on Form G-45.
The assessment will be proportional to the overall size of each plan
being underwritten; therefore, the MSRB believes the total fee charged
to each underwriter will bear a reasonable relationship to the level of
underwriting activities that are undertaken by the underwriter.
Moreover, since the proposed rule change's amendment to Rule A-13 will
result in an underwriting fee that is de minimus, underwriters of 529
college savings plans that are not subject to Rule G-45 will not have
an unfair competitive advantage.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Board did not solicit comment on the proposed change.
Therefore, there are no comments on the proposed rule change received
from members, participants or others.
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 \24\ and paragraph (f) of Rule 19b-4
thereunder.\25\ 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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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 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-2017-05 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-2017-05. 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 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
10:00 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; 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-2017-05 and should be
submitted on or before August 25, 2017.
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\26\ 17 CFR 200.30-3(a)(12).
For the Commission, pursuant to delegated authority.\26\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16399 Filed 8-3-17; 8:45 am]
BILLING CODE 8011-01-P