Notice2022-25475
Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MSRB Rule G-27, on Supervision, To Further Extend the Current Regulatory Relief for Remote Office Inspections Through June 30, 2023
Primary source
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Published
November 23, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 225 (Wednesday, November 23, 2022)</title>
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[Federal Register Volume 87, Number 225 (Wednesday, November 23, 2022)]
[Notices]
[Pages 71719-71722]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-25475]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96346; File No. SR-MSRB-2022-08]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend MSRB Rule G-27, on Supervision, To Further Extend the
Current Regulatory Relief for Remote Office Inspections Through June
30, 2023
November 17, 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 November 16, 2022, the Municipal Securities
Rulemaking Board (``MSRB'' or ``Board'') 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
current regulatory relief and permit brokers, dealers and municipal
securities dealers (collectively, ``dealers'') to conduct office
inspections, due to be completed during calendar year 2023, remotely,
through June 30, 2023 (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
[[Page 71720]]
this filing by the Commission. The MSRB proposes an operative date of
January 1, 2023.
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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="https://msrb.org/2022-SEC-Filings">https://msrb.org/2022-SEC-Filings</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 has continued to monitor the impact of the coronavirus
disease (``COVID-19'' or ``pandemic'') on municipal market participants
and how dealers' operations and business models have evolved during the
public health crisis. The MSRB understands that a large number of firms
have integrated a hybrid work environment in which particular business
functions continue to be de-centralized. Given that dealers are still
devising plans and spending time to implement hybrid work environments
more fully, the MSRB believes the additional time of a six-month
extension to conduct office inspections remotely, due to be completed
in calendar year 2023, would allow dealers time to focus on the
integration of their hybrid work environments.
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\ a third proposed rule change in October
2021,\7\ and a fourth proposed rule change in March 2022 \8\ (``April
relief,'' ``December relief'' ``October relief,'' and ``March
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 were due to be completed
for calendar year 2022.\9\ The March relief allowed for dealers to
complete office inspections, due to be completed during calendar year
2022, remotely until December 31, 2022.
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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\ See Exchange Act Release No. 94383 (March 9. 2022), 87 FR
14596 (March 15, 2022) (File No. SR-MSRB-2022-01).
\9\ The MSRB noted in the October relief that it would continue
to assess through engagement with key stakeholders 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.
See Exchange Act Release No. 93435 (October 27, 2021), 86 FR 60522
(November 2, 2021) (File No. SR-MSRB-2021-06). The MSRB is still
undertaking such review.
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Through stakeholder engagement, the MSRB understands that dealers
delayed their original return to office plans due to the continued
pandemic and only more recently implemented long-term hybrid work
arrangements dependent on functions and regulatory requirements, which
continue to lead to logistical challenges to conducting in-person
office inspections that are still being addressed. To that end, in
recognition of the aforementioned challenges, and in order to address
ongoing industry-wide concerns regarding having to conduct in-person
office inspections while safety concerns continue to evolve as new
infections, hospitalizations, and deaths due to the COVID-19 virus
still persist in the United States,\10\ the MSRB is proposing
amendments to Supplementary Material .01 of MSRB Rule G-27.
Specifically, 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 2023 office
inspections remotely for the first six months of 2023--extending the
current relief for an additional six months from December 31, 2022, to
June 30, 2023.\11\
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\10\ See The Centers for Disease Control and Prevention
(``CDC''), COVID Data Tracker (showing that as of September 29,
2022, there are 47,112 daily average new cases of COVID-19, 343
daily average new deaths from COVID-19, and 3,634 daily average new
hospitalizations from COVID-19 in the United States). The CDC's
COVID Data Tracker is available at <a href="https://covid.cdc.gov/covid-data-tracker/#datatracker-home">https://covid.cdc.gov/covid-data-tracker/#datatracker-home</a>. The MSRB recognizes that the
aforementioned numbers are not representative of cases,
hospitalizations and deaths during the height of the pandemic, but
is also mindful that new variants and breakthrough cases persist.
\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 would remain
unchanged under Rule G-27; however, amendments are being proposed to
paragraphs (a) and (d) of Supplementary Material .01 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,
dealers electing to conduct their office inspections remotely 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 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
[[Page 71721]]
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, municipal
entities, obligated persons, and the public interest.
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\12\ 15 U.S.C. 78o-4(b)(2)(C).
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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. The proposed rule change does not relieve
dealers from compliance with their core regulatory obligations to
establish and maintain a system to supervise the activities of each of
their 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 that an additional extension affording dealers the option to
conduct remote inspections, due to be completed in calendar year 2023,
for the first half of the calendar year, or until June 30, 2023, is a
prudent regulatory approach. This approach will allow dealers time to
adapt to long-term hybrid work arrangements more fully and to continue
to assess the ongoing events related to the pandemic while continuing
to serve the important investor protection objectives of the inspection
obligations.
In a time when faced with unique challenges resulting from the
sustained pandemic and while much uncertainty still remains, 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
proposed rule change also will 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 June 30, 2023. With
that in mind, dealers should consider whether, under their
particular operating conditions, electing to conduct the required
office inspections remotely would be reasonable under facts and
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 until June 30, 2023. The goal of the
proposed rule change is to grant additional time for dealers to fully
focus their time on the establishment and integration of long-term
hybrid work arrangements--recognizing the use of a remote work force
and transformative technology to decentralize functions--while also
balancing the regulatory obligation to establish office inspection
schedules for the first half of 2023 and meet their office inspection
obligations, under Supplementary Material .01 of Rule G-27. 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<ls-thn-eq> Send an email to <a href="/cdn-cgi/l/email-protection#fd8f889198d09e9290909893898ebd8e989ed39a928b"><span class="__cf_email__" data-cfemail="b2c0c7ded79fd1dddfdfd7dcc6c1f2c1d7d19cd5ddc4">[email protected]</span></a>. Please
include File Number SR-MSRB-2022-08 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.
All submissions should refer to File Number SR-MSRB-2022-08. 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-2022-08 and should be submitted on
or before December 14, 2022.
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\17\ 17 CFR 200.30-3(a)(12).
[[Page 71722]]
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For the Commission, pursuant to delegated authority.\17\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25475 Filed 11-22-22; 8:45 am]
BILLING CODE 8011-01-P
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