Notice2021-23809
Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Further Extend the Regulatory Relief and Permit Dealers To Conduct Office Inspections Remotely Until June 30, 2022, Pursuant to MSRB Rule G-27, on Supervision
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 2, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 209 (Tuesday, November 2, 2021)</title>
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[Federal Register Volume 86, Number 209 (Tuesday, November 2, 2021)]
[Notices]
[Pages 60522-60524]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-23809]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93435; File No. SR-MSRB-2021-06]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Further Extend the Regulatory Relief and Permit Dealers To
Conduct Office Inspections Remotely Until June 30, 2022, Pursuant to
MSRB Rule G-27, on Supervision
October 27, 2021.
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 26, 2021 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 a proposed rule change to amend
Supplementary Material .01, Temporary Relief for Completing Office
Inspections, of MSRB Rule G-27, on supervision, to further extend the
regulatory relief and permit brokers, dealers and municipal securities
dealers (collectively, ``dealers'') to conduct office inspections, due
to be completed during calendar year 2022, remotely until June 30, 2022
(the ``proposed rule change'').
The MSRB has designated the proposed rule change as constituting a
``noncontroversial'' rule change under Section 19(b)(3)(A) \3\ of the
Act and Rule 19b-4(f)(6) \4\ thereunder, which renders the proposal
effective upon receipt of this filing by the Commission. The
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MSRB proposes an operative date of January 1, 2022.
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\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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The text of the proposed rule change is available on the MSRB's
website at <a href="http://www.msrb.org/Rules-and-Interpretations/SEC-Filings/2021-Filings.aspx">www.msrb.org/Rules-and-Interpretations/SEC-Filings/2021-Filings.aspx</a>, 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 MSRB continues to closely monitor the impact on municipal
market participants resulting from the coronavirus disease (``COVID-
19'') pandemic. In light of the operational challenges and disruptions
to normal business functions as a result of the pandemic, the MSRB
previously filed a proposed rule change for immediate effectiveness
with the SEC in April 2020 \5\ and a second proposed rule change in
December 2020 \6\ (``April relief'' and ``December relief''). In
connection with the April relief, the MSRB provided additional time for
dealers to complete certain supervisory obligations, including, among
other things, that office inspections due to be conducted during
calendar year 2020 could be conducted by March 31, 2021, but with the
expectation that dealers would conduct their inspections on-site. The
December relief allowed dealers to conduct their office inspections
remotely that were due to be completed by March 31, 2021, for calendar
year 2020 and those for calendar year 2021, subject to certain
conditions being met.
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\5\ See Exchange Act Release No. 88694 (April 20, 2020), 85 FR
23088 (April 24, 2020) (File No. SR-MSRB-2020-01).
\6\ See Exchange Act Release No. 90621 (December 9, 2020), 85 FR
81254 (December 15, 2020) (File No. SR-MSRB-2020-09).
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Through stakeholder engagement, the MSRB has learned that dealers
have delayed their return to office plans due to the continued pandemic
and are considering or have implemented hybrid work arrangements
dependent on functions and regulatory requirements. To that end, in
order to address ongoing industry-wide concerns regarding having to
conduct in-person office inspections while safety concerns related to
the pandemic persist \7\ and to align with pandemic-related regulatory
relief provided by FINRA,\8\ the MSRB is proposing amendments to
Supplementary Material .01 of MSRB Rule G-27. The proposed amendments
to Supplementary Material .01 of MSRB Rule G-27 would allow dealers to
satisfy their office inspection obligations by permitting dealers to
conduct calendar year 2022 office inspections remotely until June 30,
2022, without the need to conduct an on-site visit to such office or
location.\9\
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\7\ See The Centers for Disease Control and Prevention
(``CDC''), What You Need to Know about Variants (stating, in part,
that ``the Delta variant causes more infections and spreads faster
than earlier forms of the virus that causes COVID-19'') available at
<a href="https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html">https://www.cdc.gov/coronavirus/2019-ncov/variants/variant.html</a>
(updated September 3, 2021).
\8\ On September 13, 2021, FINRA made a filing with the SEC for
immediate effectiveness, noting that while some firms have taken
affirmative steps to develop and implement phased-in office re-entry
plans based on local conditions, there are many other firms that
have not. See Release No. 34-93002 (September 15, 2021), 86 FR 52508
(September 21, 2021) (File No. SR-FINRA-2021-023).
\9\ As previously noted, a temporary location established in
response to the implementation of a business continuity plan is not
deemed an office for purposes of complying with the office
inspection obligations, under MSRB Rule G-27. See supra note 5.
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The conditions required to be met for dealers to avail themselves
of the option to conduct office inspections remotely remain unchanged;
however, technical amendments are being proposed to paragraphs (b) and
(d) to reflect the additional extension of time under the proposed rule
change. Pursuant to paragraphs (b) and (d) of Supplementary Material
.01 of MSRB Rule G-27, for dealers that elect to conduct their office
inspections remotely, such dealers must (i) amend or supplement their
written supervisory procedures as appropriate to provide for remote
inspections that are reasonably designed to assist in detecting and
preventing violations of, and achieving compliance with, applicable
securities laws and regulations, and with applicable Board rules; (ii)
use remote office inspections as part of an effective supervisory
system, which would include the ongoing review of activities and
functions occurring at all offices and locations; and (iii) make and
maintain the required records related to remote office inspections.
The regulatory relief provided for under the proposed rule change
will automatically sunset on June 30, 2022. During this time, the MSRB
will continue to monitor the effectiveness of remote office inspections
on dealers' overall supervisory systems and will consider more long-
term regulatory initiatives that align with and promote the evolving
ways dealers are doing business and supervising the activities of the
dealer and its associated persons.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Exchange Act,\10\ which provides that the
MSRB's rules shall:
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\10\ 15 U.S.C. 78o-4(b)(2)(C).
be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities and
municipal financial products, to remove impediments to and perfect
the mechanism of a free and open market in municipal securities and
municipal financial products, and, in general, to protect investors,
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municipal entities, obligated persons, and the public interest.
The proposed rule change is designed to provide dealers additional
time to comply with certain obligations under MSRB rules for a
temporary period of time; it does not relieve dealers from compliance
with their core regulatory obligations to establish and maintain a
system to supervise the activities of each of its associated persons
that is reasonably designed to achieve compliance with applicable rules
and regulations, and with applicable MSRB rules, which directly serve
to protect investors, municipal entities, obligated persons, and the
public interest. The MSRB believes extending the relief and affording
dealers the option to conduct remote inspections in calendar year 2022,
until June 30, 2022, is a prudent regulatory approach while continuing
to serve the important investor protection objectives of the inspection
requirements under these unique circumstances.
In a time when faced with unique challenges resulting from the
sustained pandemic, the proposed rule change will afford dealers the
ability to safeguard the health and safety of their personnel and to
more effectively allocate resources to serve and promote the protection
of investors, municipal entities, obligated persons and the public
interest. In addition, the
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proposed rule change will also alleviate some of the operational
challenges dealers may be experiencing, which will allow them to more
effectively allocate resources to the operations that facilitate
transactions in municipal securities and municipal financial products,
to remove impediments to and perfect the mechanism of a free and open
market in municipal securities and municipal financial products.
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Act requires that MSRB rules be
designed not to impose any burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Act.\11\ In fact,
the MSRB does not believe the proposed rule change will have any burden
on competition because the proposed rule change treats all dealers
equally in that all dealers have the option to elect to conduct remote
inspections remotely through June 30, 2022. The goal of the proposed
rule change is to grant additional time for dealers to meet their
office inspection obligations, under Supplementary Material .01 of Rule
G-27, while also determining how to best implement their return to
office plans in a safe and effective manner during the exigent
circumstances of the COVID-19 pandemic. The temporary relief afforded
does not alter dealers underlying obligations under the rule.
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\11\ Id.
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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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \12\ and Rule 19b-
4(f)(6) \13\ thereunder. 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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet<ls-thn-eq> Send an email to <a href="/cdn-cgi/l/email-protection#bac8cfd6df97d9d5d7d7dfd4cec9fac9dfd994ddd5cc"><span class="__cf_email__" data-cfemail="7f0d0a131a521c1012121a110b0c3f0c1a1c51181009">[email protected]</span></a>. Please
include File Number SR-MSRB-2021-06 on the subject line.
Paper Comments
<bullet> 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-2021-06. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-06 and should be submitted on
or before November 23, 2021.
For the Commission, by the Office of Municipal Securities,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3a(a)(2).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-23809 Filed 11-1-21; 8:45 am]
BILLING CODE 8011-01-P
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