Notice2022-05372
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 December 31, 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
March 15, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 50 (Tuesday, March 15, 2022)</title>
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[Federal Register Volume 87, Number 50 (Tuesday, March 15, 2022)]
[Notices]
[Pages 14596-14598]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-05372]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94383; File No. SR-MSRB-2022-01]
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 December 31, 2022 Pursuant to
MSRB Rule G-27, on Supervision
March 9, 2022.
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 March 1, 2022, 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 December 31,
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 MSRB
proposes an operative date of May 2, 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/2022-Filings.aspx">www.msrb.org/Rules-and-Interpretations/SEC-Filings/2022-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.
[[Page 14597]]
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'' or ``pandemic'') and believes the additional six-month extension
of time to conduct office inspections remotely, due to be completed in
calendar year 2022, would allow dealers to better address ongoing
operational challenges caused by the pandemic. In light of these
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\ a
second proposed rule change in December 2020,\6\ and a third proposed
rule change in October 2021 \7\ (``April relief,'' ``December relief,''
and ``October relief''). In connection with the April relief, the MSRB
provided an extension of 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 provided
dealers with the option 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. The October relief provided an additional extension of time
permitting dealers to continue to conduct office inspections remotely
until June 30, 2022, for their office inspections that are due to be
completed for calendar year 2022.\8\
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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).
\7\ See Exchange Act Release No. 93435 (October 27, 2021), 86 FR
60522 (November 2, 2021) (File No. SR-MSRB-2021-06).
\8\ The MSRB noted in the October relief that it would continue
to monitor the effectiveness of remote office inspections on
dealers' overall supervisory systems and would 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. Id. The MSRB is still
undertaking such review.
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Through stakeholder engagement, the MSRB notes 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, which has created
logistical challenges to conducting in-person office inspections. 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 \9\ and to align with the ongoing
pandemic-related regulatory relief provided by FINRA,\10\ 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 for the remainder of calendar year 2022--extending the current
relief for an additional six months from June 30, 2022, to December 31,
2022.\11\
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\9\ See The Centers for Disease Control and Prevention
(``CDC''), Omicron Variant: What You Need to Know (stating, in part,
that ``the Omicron variant spreads more easily than the original
virus that causes COVID-19 and the Delta variant. [The] CDC expects
that anyone with Omicron infection can spread the virus to others,
even if they are vaccinated or don't have symptoms.'') available at
<a href="https://www.cdc.gov/coronavirus/2019-ncov/variants/omicron-variant.html">https://www.cdc.gov/coronavirus/2019-ncov/variants/omicron-variant.html</a> (updated February 2, 2022).
\10\ On January 10, 2022, FINRA made a filing with the SEC for
immediate effectiveness having noted that amendments to FINRA Rule
3110.17 provides a tailored regulatory alternative for their member
firms to have the option, subject to specified conditions, to
complete their inspection obligations remotely. See Exchange Act
Release No. 94018 (January 20, 2022), 87 FR 4072 (January 26, 2022)
(File No. SR-FINRA-2022-001). Previously, 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 Exchange Act Release
No. 93002 (September 15, 2021), 86 FR 52508 (September 21, 2021)
(File No. SR-FINRA-2021-023).
\11\ 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, amendments are being proposed to paragraph (a) and (d) to
reflect the additional extension of time under the proposed rule
change. Pursuant to paragraphs (b)-(d) of Supplementary Material .01 of
MSRB Rule G-27, in dealers electing 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 whether or not the dealer conducts
inspections remotely; and (iii) make and maintain the required records
for all offices or locations that had inspections that were conducted
remotely; and any offices or locations for which the dealer determined
to impose additional supervisory procedures or more frequent
monitoring.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Exchange Act,\12\ which provides that the
MSRB's rules shall:
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\12\ 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 serve to protect
investors, municipal entities, obligated persons, and the public
interest. The MSRB continues to believe extending the relief and
affording dealers the option to conduct remote inspections due to be
completed in calendar year 2022, an additional six-month extension,
until December 31, 2022, is a prudent regulatory approach allowing
dealers more time to assess when and how to have their employees safely
return to
[[Page 14598]]
their offices while continuing to serve the important investor
protection objectives of the inspection obligations 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 while much uncertainty still remains. In addition, the
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.\13\
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\13\ The proposed amendments only create the option for dealers
to conduct office inspections remotely through December 31, 2022.
With that in mind, dealers should consider whether, under their
particular operating conditions, reliance on remote inspections
would be reasonable under the circumstances.
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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 be
designed not to impose any burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Act.\14\ In fact,
the MSRB does not believe that 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 December 31, 2022. The goal of the
proposed rule change is to grant additional time for dealers to assess
their resources, establish office inspection schedules for the second
half of 2022 and 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 and with applicable MSRB rules that directly serve
investor protection.
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\14\ 15 U.S.C. 78o-4(b)(2)(C).
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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 \15\ and Rule 19b-
4(f)(6) \16\ 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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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> Send an email to <a href="/cdn-cgi/l/email-protection#6b191e070e46080406060e051f182b180e08450c041d"><span class="__cf_email__" data-cfemail="82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4">[email protected]</span></a>. Please include
File Number SR-MSRB-2022-01 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-2022-01. 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-2022-01 and should be submitted on
or before April 5, 2022.
For the Commission, by the Office of Municipal Securities,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3a(a)(2).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05372 Filed 3-14-22; 8:45 am]
BILLING CODE 8011-01-P
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