Notice2022-25476
Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule G-3, on Professional Qualification Requirements, To Delete References to Certain Temporary Regulatory Relief Implemented During the Height of the Coronavirus Disease
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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 71731-71734]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-25476]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96348; File No. SR-MSRB-2022-09]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Rule G-3, on Professional Qualification Requirements,
To Delete References to Certain Temporary Regulatory Relief Implemented
During the Height of the Coronavirus Disease
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
Rule G-3, on professional qualification requirements, to delete
references to certain temporary regulatory relief,\3\ implemented
during the height of the coronavirus disease (``COVID-19'' or
``pandemic'') (the ``proposed rule change'').
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\3\ See Release No. 34-88694 (April 20, 2020), 85 FR 23088
(April 24, 2020) (File No. SR-MSRB-2020-01) (the ``April 2020
relief'').
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The MSRB has designated the proposed rule change as constituting a
``non-controversial'' rule change under Section 19(b)(3)(A) \4\ of the
Act and Rule 19b-4(f)(6) \5\ thereunder, which renders the proposed
rule change effective upon receipt of this filing by the Commission.
The MSRB would have the proposed rule change become operative on
December 27, 2022.
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\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 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.
[[Page 71732]]
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
In 2020, 2021 and 2022, the MSRB provided temporary regulatory
relief to brokers, dealers, and municipal securities dealers
(``dealers'') and municipal advisors (collectively ``regulated
entities'') in complying with certain obligations under MSRB rules in
light of operational challenges due to the pandemic.\6\ Specifically,
with respect to regulatory relief provided from certain professional
qualification standards, the MSRB was guided in part by operational
concerns related to Prometric Test Centers, the physical facilities
used for the MSRB-owned professional qualification examinations.\7\ In
March 2020, Prometric announced that, due to the pandemic, it was
temporarily closing all test center locations in the United States and
Canada through April 15, 2020.\8\
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\6\ See supra note 3. In 2020, 2021 and 2022, the MSRB provided
and further extended other COVID-19 related temporary relief to
regulated entities for certain compliance obligations under MSRB
rules. See Release No. 34-90621 (December 9, 2020), 85 FR 81254
(December 15, 2020) (File No. SR-MSRB-2020-09), Release No. 34-93435
(October 27, 2021), 86 FR 60522 (November 2, 2021) (File No. SR-
MSRB-2021-06) and Release No. 34-94383 (March 9, 2022), 87 FR 14596
(March 15, 2022) (File No. SR-MSRB-2022-01).
\7\ The Financial Industry Regulatory Authority (``FINRA'') has
been designated to provide test administration services to the MSRB
for the delivery of MSRB-owned professional qualification
examinations. FINRA uses Prometric as its sole vendor for the
delivery of MSRB-owned professional qualification examinations. See
e.g., Release No. 34-75714 (August 17, 2015), 85 FR 50863 (August
21, 2015) (Designation of the Financial Industry Regulatory
Authority to Administer Professional Qualification Tests for
Associated Persons of Registered Municipal Advisors).
\8\ See <a href="https://www.prometric.com/corona-virus-update">https://www.prometric.com/corona-virus-update</a>.
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In response to the test center closures and in light of other
operational challenges due to the pandemic, such as stay-at-home orders
imposed by many states and the vast number of regulated entities
operating under business continuity plans, the April 2020 relief
extended the time to comply with certain professional qualification
obligations, as follows:
<bullet> The date by which an individual functioning in the
capacity as a principal before passing the applicable MSRB-owned
principal qualification examination pursuant to Rule G-3(b)(ii)(D), G-
3(b)(iv)(B)(4) and G-3(c)(ii)(D), as applicable, would be extended 120
days from the time that the MSRB announces that Prometric has resumed
access to its testing centers; thereby, marking the expiration date of
the temporary period.\9\
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\9\ See Rule G-3, Supplementary Material .10-.12.
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<bullet> The date by which an individual must complete their
Regulatory Element component of continuing education training,\10\ as
required by Rule G-3(i)(i)(A)(1), would be extended 120 days from the
time the MSRB announces that Prometric has resumed access to its
testing centers; thereby, marking the expiration date of the temporary
period.\11\
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\10\ The Regulatory Element component of continuing education is
a computer-based training program that focuses on dealer compliance,
regulatory, ethical and sales practice standards with the content
derived from common industry rules and regulations for dealers, as
well as widely accepted standards and practices within the industry.
\11\ See Rule G-3, Supplementary Material .14. This extension
was only for purposes of compliance with MSRB Rule G-3(i)(i)(A)(1)
and was not intended to provide regulatory relief to individuals who
needed to complete Regulatory Element pursuant to the rules of
another regulatory authority.
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<bullet> The date by which certain individuals are required to
become qualified with the Municipal Advisor Principal Qualification
Examination (``Series 54'') was extended until November 30, 2021. On
October 11, 2019, the MSRB announced that a municipal advisor
principal, as defined under Rule G-3(e),\12\ had a one-year grace
period, sunsetting on November 12, 2020, to pass the Series 54.\13\ The
MSRB subsequently extended the grace period until March 31, 2021,\14\
and further extended it to November 30, 2021.\15\ These extensions
permitted individuals qualified with the Municipal Advisor
Representative Qualification Examination (Series 50) to continue to
engage in principal-level activities without passing the Series 54
until November 30, 2021.\16\
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\12\ The term ``municipal advisor principal'' is defined in Rule
G-3(e)(i) to mean a natural person associated with a municipal
advisor who is directly engaged in the management, direction or
supervision of the municipal advisory activities of the municipal
advisor and its associated persons. To become qualified as a
municipal advisor principal a person must, as a pre-requisite, take
and pass the Municipal Advisor Representative Qualification
Examination; and take and pass the Municipal Advisor Principal
Qualification Examination.
\13\ See MSRB Notice 2019-18 (October 21, 2019) announcing the
launch of the Series 54 exam, which the SEC had approved on November
20, 2018. See Release No. 34-84630 (November 20, 2018), 80 FR 60927
(November 27, 2018) (File No. SR-MSRB-2018-07).
\14\ See Release No. 34-90621 (December 9, 2020), 85 FR 81254
(December 15, 2020) (File No. SR-MSRB-2020-09).
\15\ See Release No. 34-92938 (September 10, 2021), 86 FR 51696
(September 16, 2021) (File No. SR-MSRB-2021-05).
\16\ See Rule G-3, Supplementary Material .13.
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<bullet> The Firm Element \17\ obligations for calendar year 2020
were deemed satisfied if completed on or before March 31, 2021.\18\
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\17\ The Firm Element component of continuing education is a
firm-administered training program that requires all regulated
entities to annually evaluate and prioritize their training needs
based on a completed needs analysis. A needs analysis generally
reflects a firm's assessment of its unique training needs based on
various factors, for example, the business activities the firm and
its associated persons engage in, the level of industry experience
the firm's associated persons have and any changes to applicable
rules or regulations.
\18\ See Rule G-3, Supplementary Material .15.
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<bullet> The annual needs analysis and the delivery of continuing
education pursuant to Rule G-3(i)(i)(B) and G-3(i)(ii), as applicable,
was deemed to have been timely completed for calendar year 2020,
provided that the needs analysis and the delivery of continuing
education were completed on or before March 31, 2021.\19\
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\19\ See Rule G-3, Supplementary Material .16.
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These modified obligations were reflected in Supplementary Material
to Rule G-3. By their terms, Supplementary Material paragraphs .13, .15
and .16 have expired.\20\ The MSRB stated in the April 2020 relief that
it would announce an end date for the temporary relief provided under
Supplementary Material .10 through .12 and .14 by a notice published on
its website.\21\
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\20\ In an effort to provide regulated entities the opportunity
to better manage and allocate resources, the MSRB modified the date
by which compliance obligations were due to be completed, under
certain MSRB rules, to March 31, 2021.
\21\ See supra note 3. Specifically, the MSRB stated it would
publish a notice on its website announcing when Prometric resumes
operations in its testing centers so regulated entities are on
notice of when the 120-day period begins to toll.
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Prometric fully restored access to its test centers, thus
permitting individuals seeking to take an MSRB-owned professional
qualification examination to visit any Prometric test center in-person
to take a principal qualification examination.\22\ Therefore, on July
25,
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2022, the MSRB published a notice (the ``2022 Notice''),\23\ announcing
that the remaining temporary relief under Supplementary Material .10
through .12 under Rule G-3, which provisions provided temporary relief
for persons designated as municipal securities principals, municipal
securities limited principals, and/or municipal securities sale
principals would expire on August 29, 2022. Accordingly, principals
designated under Supplementary Material .10 through .12, who, under the
rule provisions, were required to be qualified in a representative
capacity with at least 18 months experience functioning as
representatives within the preceding five-year period of such principal
designation, may continue to do so until December 27, 2022, without
taking and passing the appropriate principal qualification examination.
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\22\ While Prometric test centers are now open, regulated
entities are reminded that, due to the uncertain nature of the
ongoing pandemic, individuals are advised to continue to review
Prometric's website, at <a href="https://www.prometric.com/">https://www.prometric.com/</a> for any
operational changes that may affect test center access.
\23\ See MSRB Notice 2022-05 (July 25, 2022) announcing the end
of regulatory relief that extended certain professional
qualification requirements due to COVID-19.
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The 2022 Notice also announced that the temporary relief from
Regulatory Element requirements for registered persons under
Supplementary Material .14 of Rule G-3 would expire on August 29, 2022.
Accordingly, persons designated under Supplementary Material .14 who
are subject to the Regulatory Element must complete any Regulatory
Element required under Rule G-3 (i)(i)(A)(1) within 120 days of August
29, 2022, or by December 27, 2022--recognizing the stated regulatory
relief was not intended to provide regulatory relief to individuals who
may need to complete Regulatory Element pursuant to the rule of another
regulatory authority; and thereby, may have completed such continuing
education requirements.
The MSRB intends to have the proposed rule change become operative
on December 27, 2022. This aligns with the provision of allowing 120
days from August 29, 2022, the expiration date of the temporary
regulatory relief under Supplementary Material .10 through .12 and .14
under Rule G-3, for individuals to meet their regulatory obligation.
Thus, upon the operative date of December 27, 2022, the expired
regulatory relief will be deleted from MSRB Rule G-3. The MSRB notes
that, while the temporary regulatory relief related to Supplementary
Material .10 through .12 and .14 expired on August 29, 2022, the MSRB
will continue to monitor the impact of the ongoing pandemic and work in
close coordination with other regulatory and governmental authorities,
as needed, to address any additional pandemic-related issues that may
arise in the future.\24\
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\24\ The MSRB notes that while certain professional
qualifications pandemic-related regulatory relief expired on August
29, 2022, other relief remains in place; specifically, the ability
for dealers to continue to conduct office inspections remotely.
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2. Statutory Basis
Section 15B(b)(2) of the Exchange Act,\25\ provides that the Board
shall propose and adopt rules to effect the purposes of this title with
respect to transactions in municipal securities effected by brokers,
dealers, and municipal securities dealers and advice provided to or on
behalf of municipal entities or obligated persons by brokers, dealers,
municipal securities dealers, and municipal advisors with respect to
municipal financial products, the issuance of municipal securities, and
solicitations of municipal entities or obligated persons undertaken by
brokers, dealers, municipal securities dealers, and municipal advisors.
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\25\ 15.U.S.C. 78o-4(b)(2).
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Section 15B(b)(2)(C) of the Act \26\ provides that the MSRB's rules
shall be designed to: prevent fraudulent and manipulative acts and
practices; promote just and equitable principles of trade; 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; remove impediments to and perfect the mechanism of
a free and open market in municipal securities and municipal financial
products; and, in general, protect investors, municipal entities,
obligated persons, and the public interest.
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\26\ 15 U.S.C. 78o-4(b)(2)(C).
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The proposed rule change to remove outdated references to the
regulatory relief that is no longer applicable would ensure that rule
provisions are clear, accurate, and streamlined, thereby facilitating
compliance and promoting just and equitable principles of trade by
clarifying the regulatory obligations of dealers and municipal
advisors. The removal of expired and outdated references will promote
just and equitable principles of trade by reducing the risk of
potential confusion as to the current state of one or more regulatory
obligations and ensuring that the existing rule provisions are accurate
and understandable by all dealers and municipal advisors.
B. Self-Regulatory Organization's Statement on Burden on Competition
Section 15B(b)(2)(C) of the Exchange 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 Exchange Act.\27\ In
fact, the MSRB does not believe that the proposed rule change will have
any burden on competition because the proposed rule change would apply
equally to all regulated entities by deleting references to certain
temporary regulatory relief implemented during the height of the
pandemic for all regulated entities. Regulated entities of all size
would be equitably and proportionately impacted by the proposed rule
change. Therefore, the proposed rule change would not impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Exchange Act.\28\
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\27\ Id.
\28\ The Board's ``Policy on the Use of Economic Analysis in
MSRB Rulemaking'' (``policy''), available at: <a href="https://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx">https://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx</a>, maintains
that proposed rule changes filed for immediate effectiveness under
Section 19(b)(3)(A) of the Exchange Act are not subject to the
policy. With such filings, the MSRB usually focuses its economic
analysis exclusively on the burden of competition to regulated
entities. However, the MSRB may include further analysis based upon
facts and circumstances if it believes that such analysis may inform
the rulemaking process.
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Additionally, Section 15B(b)(2)(L)(iv) of the Act requires that
MSRB rules not impose a regulatory burden on small municipal advisors
that is not necessary or appropriate in the public interest and for the
protection of investors, municipal entities, and obligated persons,
provided that there is robust protection of investors against
fraud.\29\ The MSRB believes that the proposed rule change is
consistent with Section 15B(b)(2)(L)(iv) of the Act in that, while the
proposed rule change will affect all municipal advisors, including
small municipal advisors, there is no new regulatory burden that
results.
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\29\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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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
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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 \30\ and Rule 19b-
4(f)(6) \31\ 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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\30\ 15 U.S.C. 78s(b)(3)(A).
\31\ 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#2f5d5a434a024c4042424a415b5c6f5c4a4c01484059"><span class="__cf_email__" data-cfemail="9defe8f1f8b0fef2f0f0f8f3e9eeddeef8feb3faf2eb">[email protected]</span></a>. Please
include File Number SR-MSRB-2022-09 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-2022-09. 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-2022-09 and should be submitted on
or before December 14, 2022.
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\32\ 17 CFR 200.30-3(a)(12).
For the Commission, pursuant to delegated authority.\32\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-25476 Filed 11-22-22; 8:45 am]
BILLING CODE 8011-01-P
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