[Federal Register Volume 75, Number 222 (Thursday, November 18, 2010)]
[Notices]
[Pages 70760-70763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29078]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63310; File No. SR-MSRB-2010-12]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing and Immediate Effectiveness of Revisions to the
Study Outline and Selection Specifications for the Municipal Securities
Representative Qualification Examination (Series 52) Program
November 12, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``the Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 10, 2010, the Municipal Securities Rulemaking Board
(``Board'' or ``MSRB'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') a proposed rule change (File No.
SR-MSRB-2010-12) (``the proposed rule change'') as described in Items
I, II, and III below, which Items have been prepared by the MSRB. The
MSRB has designated the proposed rule change as constituting a stated
policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule of the self-
regulatory organization pursuant to Section 19(b)(3)(A)(i) \3\ of the
Act and Rule 19b-4(f)(1) thereunder,\4\ which renders the proposal
effective upon filing with the Commission. The MSRB proposes to
implement the revised Series 52 examination program on January 3, 2011.
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.
\3\ 15 U.S.C. 78s(b)(3)(A)(i).
\4\ 17 CFR 240.19b-4(f)(1).
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[[Page 70761]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB is filing with the Commission revisions to the study
outline and selection specifications for the Municipal Securities
Representative Qualification Examination (Series 52) program.\5\
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\5\ The MSRB is also proposing corresponding revisions to the
Series 52 question bank, but based upon instructions from the
Commission staff, the MSRB is submitting SR-MSRB-2010-12 for
immediate effectiveness pursuant to Section 19(b)(3)(A)(i) of the
Act and Rule 19b-4(f)(1) thereunder, and is not filing the question
bank for Commission review. See letter to Diane G. Klinke, General
Counsel, MSRB, from Belinda Blaine, Associate Director, Division of
Market Regulation, SEC, dated July 24, 2000. The question bank is
available for Commission review.
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The revised study outline is available on the MSRB's Web site at
http://www.msrb.org/Rules-and-Interpretations/SEC-Filings/2010-Filings.asp, 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 Board 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
Section 15B(b)(2)(A) of the Act \6\ authorizes the MSRB to
prescribe standards of training, experience, competence, and such other
qualifications as the Board finds necessary or appropriate in the
public interest or for the protection of investors and municipal
entities or obligated persons. The MSRB has developed examinations that
are designed to establish that persons associated with brokers, dealers
and municipal securities dealers that effect transactions in municipal
securities have attained specified levels of competence and knowledge.
The MSRB periodically reviews the content of the examinations to
determine whether revisions are necessary or appropriate in view of
changes pertaining to the subject matter covered by the examinations.
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\6\ 15 U.S.C. 78o-4(b)(2)(A).
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MSRB Rule G-3(a)(i) states that the activities of a municipal
securities representative include one or more of the following
activities relating to municipal securities: Underwriting, trading or
selling municipal securities; rendering financial advisory or
consultant services to issuers of municipal securities; research or
investment advice, or communications with customers, about any of the
activities named heretofore. A municipal securities representative may
also qualify as such by taking the General Securities Representative
Examination (Series 7). An individual who takes the Investment Company
Products/Variable Contracts Examination (Series 6) may qualify as a
limited representative, but activities are limited to those in
municipal fund securities.
A committee of industry members and MSRB staff recently undertook a
review of the Series 52 examination program. As a result of this
review, the MSRB is proposing to make revisions to the study outline to
regroup certain topics to allow more detailed testing of certain
product knowledge and MSRB rules and eliminate redundancy; delete dated
references to certain topics in the current outline; provide detail
about products covered in the examination; and incorporate generic
terms instead of proprietary names. The revised examination continues
to cover areas of knowledge required to conduct municipal securities
activities.
A summary of the changes to the content outline for the Series 52
Examination, detailed by major topic headings, is provided below.
Changes are stated as revisions to the current outline.
Part One: Municipal Securities
The emphasis given this section has been increased from
55% to 57% of the examination.
Part One--I: Types of Municipal Securities
Special type bonds
``Variable rate securities'' is moved and tested as
``Variable rate demand obligations'' under ``Short-term
obligations.''
``Taxable municipals'' are tested under a new section
entitled ``Taxable municipal securities.''
Taxable municipal securities
``Build America Bonds (BABs),'' ``Taxable municipal
bonds'' and ``Other tax credit bonds'' are added.
Short-term obligations
``Variable rate demand notes'' are tested as ``Variable
rate demand obligations.''
Municipal fund securities
``Municipal fund securities (Basic characteristics,
ownership and contribution limits)'' are added.
Part One--II: Characteristics
Basic characteristics
``Basis price'' is removed from ``Method of
quotations.''
``Bearer'' and ``Registered as to principal only'' are
deleted from ``Forms of Ownership.''
The subtopics ``Interchangeable with bearer'' and
``Non-interchangeable'' are deleted from ``Fully registered.''
``When as and if issued (WI)'' under ``Delivery
procedures'' is moved to ``Syndicate operational procedures.''
``As mutually agreed upon'' becomes a descriptor for
``Special settlement.''
``Forwards (forward delivery)'' is stated as ``Forward
delivery.''
``Zeros'' are added as a subtopic under ``Rates.''
``Convertible'' is changed to ``Convertible/stepped
coupons.''
Tax considerations
``Original issue discount'' is tested as ``Original
issue discount/premium.''
``Market discount/premium'' is added.
Factors affecting marketability and liquidity
``Quality'' is deleted.
``Dollar price'' is changed to ``Dollar/yield price.''
``Registered, bearer, or book-entry only form'' is
deleted.
``Credit and liquidity support,'' ``Denominations,''
``Type of issuance'' and ``Source of funds'' are added.
Part One--III: The Market for Municipal Securities
Primary market
Methods of primary financing
``Limited offering'' is added as a parenthetical after
``Private placement.''
Information sources
``Direct mail from issuers or financial advisors'' is
stated as ``Issuers or financial advisors.''
The following topics have been deleted: ``The Bond
Buyer;'' ``Munifacts;'' ``Dalnet;'' ``Newspaper and publications;''
``Bond Buyer New Issue Worksheets;'' ``Moody's Bond Survey;''
``Bloomberg;'' and ``Other sources (e.g., Bond Express and
Bondtrac).''
The following subtopics are added: ``EMMA;'' ``New
issue wires;'' and ``Print and electronic news services.''
Underwriting procedures
The parenthetical descriptor ``eastern account'' is
deleted from the topic ``Undivided.''
The parenthetical descriptor ``western account'' is
deleted from the topic ``Divided.''
``Formation of selling groups'' is changed to ``Selling
groups.''
``Bid form'' under topic ``Determination of syndicate
bid'' is deleted.
``Terms and conditions'' and ``Submission of bid'' are
added under ``Computation of bid.''
[[Page 70762]]
``Gross interest cost'' is added as a subtopic under
``Basis for award.''
``Bond years'' is added under ``Computation of bid.''
Syndicate operational procedures
``Retail orders'' is added as a subtopic under
``Priority provisions.''
``Establish time of first trade'' is added.
``Required disclosures'' is added with subtopics ``(a)
EMMA;'' ``(i) Primary offerings;'' ``(ii) Material event notices;''
``(b) NIIDS;'' ``(c) SHORT;'' and ``(d) Delivery of official
statement.''
Secondary market
Heading ``Characteristics'' and subtopic ``Negotiated
versus auction'' are deleted.
Subtopic ``Over-the-Counter (OTC)'' is changed to
``Traded over-the-counter (OTC).''
Information sources
``The Bond Buyer,'' ``Munifacts,'' and ``Bloomberg''
are deleted; ``Alternative trading systems (ATS),'' ``EMMA,'' and
``Electronic information services'' are added.
Market participants
``Dealers'' is added.
Secondary market procedures
``Quote,'' ``Firm bid,'' ``Firm offering,'' and
``Multiples of'' are deleted from ``Trading terms.''
``Offering,'' ``Minimums and multiples,'' and ``Cover
bid'' are added to ``Trading terms.''
Market indicators
The heading ``The Bond Buyer'' and subtopics
``Placement ratio'' and ``Indices'' (and indices listed thereunder)
are deleted.
The following topics are added under new heading
``Published indices:'' ``Bond Buyer indices'' and subtopics
``Visible supply'' and ``Placement ratio'' thereunder; ``MMD
curve;'' ``SIFMA index;'' subtopic ``U.S. Treasuries;'' and ``London
Interbank Offered Rate (LIBOR).''
Other market-level indicators
The following topics are deleted: ``Secondary market
activity;'' ``Dollar bond market activity;'' ``Financial futures''
and subtopics ``Municipal bond contract'' and ``Municipal over bond
(MOB) spread'' thereunder.
Customer suitability considerations
Kinds of investment risks
The following topics are added: ``Legislative risk;''
``Price risk;'' ``Selection risk;'' ``Timing risk;'' and ``Liquidity
risk.''
Part One--IV: Analyzing Municipal Credit
Revenue bonds
Security
``Non-discrimination covenant'' under the topic ``Bond
indenture'' is deleted.
The word ``fund'' has been deleted in each of the types
of funds named under ``Flow of funds.''
The parenthetical ``depreciation'' has been deleted
from ``Renewal and replacement.''
Sources of credit information
``Continuing disclosure information (EMMA)'' has been
added.
Credit enhancements
``Enhanced securities'' and ``Guaranteed investment
contract (GIC)'' have been deleted.
``Insured'' has been changed to ``Insurance.''
``Escrow'' has been added.
Part One--V: Mathematical Calculations and Methods
The order of certain topics under this section has been
changed to facilitate assignment of questions on the test. Changes
in content are as indicated below.
Relationship of bond prices to change in:
``Call/put features'' has been added.
Accretion of discount
Parenthetical ``OID'' has been added.
Underwriting computations
This header has been removed with each topic thereunder
(``Bond years;'' ``Production;'' ``Spread;'' ``Net interest cost;''
and ``True interest cost'') because all are covered under
``Underwriting procedures.''
Part Two: U.S. Government, Federal Agency and Other Financial
Instruments
The emphasis given this section has decreased from 7%
to 4% of the examination.
Part Two--I: Types
Obligations of the U.S. Treasury
``TIPS'' has been added.
Obligations of Federal agencies
``Student Loan Marketing Association (SLMA or Sallie
Mae)'' has been deleted.
Money market instruments
``Bankers acceptances'' has been deleted.
Other financial instruments
Topics detailed under this heading have been removed;
revised heading is ``Other financial instruments (corporate bonds,
CMOs, etc.).''
Part Two--II: Characteristics of Various U.S. Government, Federal
Agency and Other Financial Instruments
Marketability
``Ratings'' and ``Economic indicators'' are added.
Delivery
Detail under this topic (``Book-entry only;''
``Bearer;'' and ``Registered'') has been deleted; revised header is
``Form of Delivery.''
Part Two--III: The Market for U.S. Government, Federal Agency and Other
Financial Instruments
The major heading for this section has been revised:
``The Market for U.S. Government, Federal Agency and Other Financial
Instruments--Impact and Relationship to Other Fixed Income
Markets.''
These topics and all associated subtopics have been
deleted: ``New Issue Marketing Methods;'' ``Secondary market;'' and
``Federal Reserve's open-market participation in the market for each
security, where applicable.''
The topics ``Index floaters'' and ``Credit spreads''
have been added.
Part Four: Federal Legal Considerations
The emphasis given to this section has increased to 26%
from 25% of the examination.
Part Four--I: Regulation of Municipal Market Professionals Securities
Exchange Act of 1934
The reference to ``National Association of Securities
Dealers Regulation, Inc. (NASDR)'' under ``Enforcement'' has been
changed to ``FINRA.''
Part Four--II: Securities Investor Protection Act of 1970
Heading ``Inapplicable to bank dealers'' has been
deleted.
Part Four--III: MSRB rules
Detail under ``Advertising (G-21)'' has been deleted.
``Delivery of Official Statements, Advance Refunding
Documents and Forms G-36 (OS) and G-36 (ARD) to the Board or Its
Designee (G-36)'' has been deleted.
``Anti-money laundering compliance program (G-41)'' has
been added.
ATTACHMENT A: Contents of a Typical Notice of Bond Sale
``Terms and Conditions'' has been added.
ATTACHMENT B: Outline of a Typical Official Statement
``Organization and management'' has been revised to
``Organization'' under ``Description of issuer.''
The MSRB is proposing similar changes to the Series 52 selection
specifications and question bank. The increased length of the
examination permits testing of certain key concepts or rules without
decreasing representation of related topics under the general topic
heading. The examination will consist of 115 multiple choice-
questions assigned to the four areas of the examination as shown
below. The percentages given for each section are rounded to an even
number.
Municipal Securities 57%
U.S. Government, Federal Agency and Other Financial Instruments 4%
Economic Activity, Government Policy and the Behavior of 13%
Interest Rates
Federal Legal Considerations 26%
Candidates will now be allowed three and one-half hours (instead
of the current three hours) for each testing session because of the
increase in the length of the examination from 100 to 115 questions.
Each question will continue to count one point, and each candidate
must correctly answer 70 percent of the questions in order to
receive a passing grade.
2. Statutory Basis
The MSRB believes that the proposed revisions to the Series 52
examination program are consistent with the provisions of Section
15B(b)(2)(A) of the Act, which authorizes the MSRB to prescribe
standards of training,
[[Page 70763]]
experience, competence, and such other qualifications as the Board
finds necessary or appropriate in the public interest or for the
protection of investors and municipal entities or obligated persons.
Section 15B(b)(2)(A) of the Act also provides that the Board may
appropriately classify municipal securities brokers, municipal
securities dealers, and municipal advisors, and persons associated with
municipal securities brokers, municipal securities dealers, and
municipal advisors and require persons in any such class to pass tests
prescribed by the Board.
The MSRB believes that the proposed revisions to the Series 52
examination program are consistent with the provisions of Section
15B(b)(2)(A) of the Act in that the revisions will provide more updated
material covered on the examination as well as ensure that certain key
concepts or rules are tested on each administration of the examination
in order to test the competency of individuals seeking to qualify as
municipal securities representatives with respect to their knowledge
about MSRB rules and the municipal securities market.
B. Self-Regulatory Organization's Statement on Burden on Competition
The MSRB does not believe that the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act, as amended.
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
The proposed rule change has become effective pursuant to Section
19(b)(3)(A)(i) of the Act \7\ and Rule 19b-4(f)(1) \8\ thereunder, in
that the proposed rule change constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule of the self-regulatory organization.
The MSRB proposes to implement the revised Series 52 examination
program on January 3, 2011. 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.\9\
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\7\ 15 U.S.C. 78s(b)(3)(A)(i).
\8\ 17 CFR 240.19b-4(f)(1).
\9\ See Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C).
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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
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-MSRB-2010-12 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-MSRB-2010-12. This file
number should be included on the subject line if e-mail 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site 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 a.m. and 3
p.m. Copies of such filing also will be available for inspection and
copying at the MSRB's offices. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-MSRB-2010-12 and should be submitted on or before
December 9, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-29078 Filed 11-17-10; 8:45 am]
BILLING CODE 8011-01-P