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SECURITIES AND EXCHANGE COMMISSION
File No.* SR - 2010 - * 08
WASHINGTON, D.C. 20549
Amendment No. (req. for Amendments *) 1
Form 19b-4
Page 1 of * 6
Proposed Rule Change by Municipal Securities Rulemaking Board
Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934
Initial *
Amendment *
Withdrawal
Section 19(b)(2) *
Section 19(b)(3)(A) *
Section 19(b)(3)(B) *
Rule
Extension of Time Period
for Commission Action *
Pilot
Exhibit 2 Sent As Paper Document
19b-4(f)(1)
Date Expires *
19b-4(f)(4)
19b-4(f)(2)
19b-4(f)(5)
19b-4(f)(3)
19b-4(f)(6)
Exhibit 3 Sent As Paper Document
Description
Provide a brief description of the proposed rule change (limit 250 characters, required when Initial is checked *).
Contact Information
Provide the name, telephone number and e-mail address of the person on the staff of the self-regulatory organization
prepared to respond to questions and comments on the proposed rule change.
First Name * Lawrence
Last Name * Sandor
Title *
Senior Associate General Counsel
E-mail *
lsandor@msrb.org
Telephone * (703) 797-6600
Fax
(703) 797-6700
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
Municipal Securities Rulemaking Board
has duly caused this filing to be signed on its behalf by the undersigned thereunto duly authorized officer.
Date 09/30/2010
By
Ronald W. Smith
Corporate Secretary
(Name *)
(Title *)
NOTE: Clicking the button at right will digitally sign and lock
this form. A digital signature is as legally binding as a physical
signature, and once signed, this form cannot be changed.
Ronald Smith, rsmith@msrb.org
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For complete Form 19b-4 instructions please refer to the EFFS website.
Form 19b-4 Information (required)
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Exhibit 1 - Notice of Proposed Rule Change
(required)
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Exhibit 2 - Notices, Written Comments,
Transcripts, Other Communications
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The self-regulatory organization must provide all required information, presented in a
clear and comprehensible manner, to enable the public to provide meaningful
comment on the proposal and for the Commission to determine whether the
proposal is consistent with the Act and applicable rules and regulations under the Act.
The Notice section of this Form 19b-4 must comply with the guidelines for
publication in the Federal Register as well as any requirements for electronic filing
as published by the Commission (if applicable). The Office of the Federal Register
(OFR) offers guidance on Federal Register publication requirements in the Federal
Register Document Drafting Handbook, October 1998 Revision. For example, all
references to the federal securities laws must include the corresponding cite to the
United States Code in a footnote. All references to SEC rules must include the
corresponding cite to the Code of Federal Regulations in a footnote. All references
to Securities Exchange Act Releases must include the release number, release
date, Federal Register cite, Federal Register date, and corresponding file number
(e.g., SR-[SRO]-xx-xx). A material failure to comply with these guidelines will result in
the proposed rule change being deemed not properly filed. See also Rule 0-3 under
the Act (17 CFR 240.0-3)
Copies of notices, written comments, transcripts, other communications. If such
documents cannot be filed electronically in accordance with Instruction F, they shall
be filed in accordance with Instruction G.
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Exhibit Sent As Paper Document
Exhibit 3 - Form, Report, or Questionnaire
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Copies of any form, report, or questionnaire that the self-regulatory organization
proposes to use to help implement or operate the proposed rule change, or that is
referred to by the proposed rule change.
Exhibit Sent As Paper Document
Exhibit 4 - Marked Copies
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Exhibit 5 - Proposed Rule Text
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Partial Amendment
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The full text shall be marked, in any convenient manner, to indicate additions to and
deletions from the immediately preceding filing. The purpose of Exhibit 4 is to permit
the staff to identify immediately the changes made from the text of the rule with which
it has been working.
The self-regulatory organization may choose to attach as Exhibit 5 proposed
changes to rule text in place of providing it in Item I and which may otherwise be
more easily readable if provided separately from Form 19b-4. Exhibit 5 shall be
considered part of the proposed rule change.
If the self-regulatory organization is amending only part of the text of a lengthy
proposed rule change, it may, with the Commission's permission, file only those
portions of the text of the proposed rule change in which changes are being made if
the filing (i.e. partial amendment) is clearly understandable on its face. Such partial
amendment shall be clearly identified and marked to show deletions and additions.
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The Municipal Securities Rulemaking Board (“MSRB” or “Board”) is filing this partial
amendment to File No. SR-MSRB-2010-08, originally filed with the Securities and Exchange
Commission (the “Commission”) on August 27, 2010, with respect to a proposed rule change
(the “original proposed rule change”) relating to Rule A-3, on membership on the Board (as
amended, the “proposed rule change”). The proposed rule change would facilitate the change in
composition of the Board to comply with the provisions of Section 975 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
Among other things, the original proposed rule change would add new section (i) to Rule
A-3 as a transitional provision that would increase the size of the Board from 15 members to 21
members, 11 of whom would be independent, public representatives and 10 of whom would be
regulated representatives, as of October 1, 2010. Of the 11 public members, at least one would
be representative of institutional or retail investors, at least one would be representative of
municipal entities, and at least one would be a member of the public with knowledge of or
experience in the municipal industry. Of the 10 regulated representatives, at least one would be
associated with and representative of brokers, dealers or municipal securities dealers that are not
banks or subsidiaries or departments or divisions of banks, at least one would be associated with
and representative of municipal securities dealers that are banks or subsidiaries or departments or
divisions of banks, and at least one, and not less than 30% of the total number of regulated
representatives, would be associated with and representative of municipal advisors. Further,
subsection (iv) of new section (i) to Rule A-3 would require that, on or after October 1, 2010 and
prior to the formation of the Nominating Committee for purposes of nominating the next class of
new Board members, the Board shall amend the provisions of existing Rule A-3(c) relating to the
composition and procedures of the Nominating Committee to reflect the new composition of the
Board as provided under the Dodd-Frank Act and to reflect such other considerations consistent
with the provisions of the Securities Exchange Act of 1934 (the “Exchange Act”) and the DoddFrank Act as the Board shall determine are appropriate.
The original proposed rule change was published by the Commission for comment in the
Federal Register. The Commission received comments from a number of commentators and the
MSRB has provided its responses to the comments.1 This partial amendment makes two
1
See Exchange Act Release No. 34-62827 (September 1, 2010), 75 FR 54673 (September
8, 2010). The Commission received comments from American Governmental Financial
Services (two submissions) (“AGFS”), Bond Dealers of America (“BDA”), Fieldman
Rolapp & Associates (“Fieldman Rolapp”), Government Finance Officers Association
(“GFOA”), National Association of Independent Public Finance Advisors (“NAIPFA”),
Mr. Kevin Olson, Securities Industry and Financial Markets Association (“SIFMA”),
Swap Financial Group LLC (“Swap Financial”) and WM Financial Strategies (“WM
Financial”). The comment letters and letters from the MSRB in response to the
comments are posted on the Commission’s Web site at http://www.sec.gov/comments/srmsrb-2010-08/msrb201008.shtml.
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amendments to the original proposed rule change, as described below. In all other respects, the
original proposed rule change remains as originally filed.
First, this partial amendment amends proposed Rule A-3(i)(i)(B)(3) in the original
proposed rule change to provide that, in addition to the requirement that at least one, and not less
than 30% of the total number of regulated representatives, be associated with and representative
of municipal advisors, such municipal advisor representatives could not be associated with a
broker, dealer or municipal securities dealer. Although the MSRB had expected that the
municipal advisor representatives it would be electing would in fact not be associated with any
broker, dealer or municipal securities dealer, the MSRB has determined to incorporate this
provision into the rule language to provide further assurances in this regard in view of certain
comments relating to whether municipal advisor representatives could be affiliated with brokerdealers.
Additionally, this partial amendment amends proposed Rule A-3(i)(iv) in the original
proposed rule change to assure that the Nominating Committee to be formed by the Board after
October 1, 2010 will be composed of a majority of public representatives and will have fair
representation of bank representatives, broker-dealer representatives and municipal advisor
representatives. The MSRB notes that the language of proposed Rule A-3(i)(iv) in the original
proposed rule change already would require that the Nominating Committee would be formed in
a manner that would reflect the new composition of the Board as provided under the Dodd-Frank
Act. Further, Section 15B(b)(2)(B) of the Exchange Act, as amended by the Dodd-Frank Act
effective October 1, 2010, provides for the MSRB to adopt rules that, among other
things, establish fair procedures for the nomination and election of members of the Board and
assure fair representation in such nominations and elections of public representatives, brokerdealer representatives, bank representatives, and municipal advisor representatives. The
MSRB deferred the formation of the new Nominating Committee until the newly
constituted Board is seated after October 1, 2010 specifically to ensure that a majority public
Board with municipal advisor representation would make the appropriate decisions with regard
to the formation of the Committee in compliance with the Dodd-Frank Act and so that the
Committee can reflect the new composition of the Board as majority public with representation
of municipal advisors, broker-dealers and bank dealers. Consistent with the requirements of the
Dodd-Frank Act, the MSRB has determined to make explicit in proposed Rule A-3(i)(iv)(B) that
the Nominating Committee shall be composed of a majority of public members and shall have
fair representation of broker-dealers, bank dealers, and municipal advisors.
In the original proposed rule change, the MSRB requested that the Commission find good
cause, pursuant to Section 19(b)(2) of the Exchange Act, for approving the original proposed rule
change on an accelerated basis. The MSRB is renewing such request with respect to the original
proposed rule change, as amended by this partial amendment, noting that the proposed rule
change must be effective prior to October 1, 2010, the effective date of Section 975 of the DoddFrank Act, so that the Board may elect a new slate of members for the 2011 fiscal year in order
to comply with the Board composition provisions of the Dodd-Frank Act.
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The changes made by this partial amendment to the text of the original proposed rule
change are indicated below:2
* * * * * * * * *
Rule A-3. Membership on the Board
(a) – (h) No additional changes.
(i) Transitional Provision for the Board’s Fiscal Year Commencing October 1, 2010.
(i) Notwithstanding any other provision of this rule, for the Board’s fiscal years
commencing October 1, 2010 and ending September 30, 2012, the Board shall consist of 21
members who are knowledgeable of matters related to the municipal securities markets and are:
(A) No additional changes.
(B) Regulated Representatives. 10 individuals who are associated with a broker,
dealer, municipal securities dealer, or municipal advisor, of which:
(1)-(2) No additional changes.
(3) at least one, and not less than 30 percent of the total number of
regulated representatives, shall be associated with and representative of municipal
advisors and shall not be associated with a broker, dealer or municipal
securities dealer.
(ii)-(iii) No additional changes.
(iv) On or after October 1, 2010 and prior to the formation of the Nominating Committee
for purposes of nominating potential new members of the Board with terms commencing on
October 1, 2011, the Board shall amend the provisions of section (c) of this rule relating to the
composition and procedures of the Nominating Committee to [reflect]:
(A) reflect the composition of the Board as provided under the Dodd-Frank Act;
(B) assure that the Nominating Committee shall be composed of a majority of
public representatives and to assure fair representation of bank representatives,
broker-dealer representatives and advisor representatives within the meaning of
Section 975 of the Dodd-Frank Act; and
2
Underlining indicates additions and brackets indicate deletions made by this partial
amendment to the original proposed rule change.
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(C) [to] reflect such other considerations consistent with the provisions of the Act
and the Dodd-Frank Act as the Board shall determine are appropriate.
(v) No additional changes.