[Federal Register Volume 75, Number 242 (Friday, December 17, 2010)]
[Notices]
[Pages 79061-79063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31685]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63533; File No. SR-MSRB-2010-17]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Amendments to Rule A-3, on Membership on the
Board
December 13, 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 30, 2010, the Municipal Securities Rulemaking Board
(``Board'' or ``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 is filing with the SEC a proposed rule change consisting
of amendments to Rule A-3, on membership on the Board, in order to
establish a Nominating Committee in compliance with MSRB transitional
Rule A-3(i).
The text of the proposed rule change is available on the MSRB's Web
site at http://www.msrb.org/Rules-and-Interpretations/SEC-Filings/2010-Filings.aspx, 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
[[Page 79062]]
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
The purpose of the proposed rule change is to make changes to MSRB
Rule A-3(c) as are necessary and appropriate prior to the creation of
the Nominating Committee of the MSRB (hereinafter, ``Nominating and
Governance Committee''). On September 30, 2010, the SEC approved MSRB
Rule A-3(i), a transitional rule for MSRB fiscal year 2011 intended to
implement the requirements of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010) (the
``Dodd-Frank Act'').\3\ The transitional rule provides that on or after
October 1, 2010, and prior to the formation of the Nominating Committee
for purposes of nominating Board members for fiscal year 2012, the
Board will amend the provisions of Rule A-3(c) to (a) reflect the
composition of the Board as provided under the Dodd-Frank Act, (b)
assure that the Nominating Committee will be composed of a majority of
public members and will have fair representation of broker-dealers,
bank dealers, and municipal advisors, and (c) reflect such other
considerations consistent with the provisions of Section 15B of the Act
and the Dodd-Frank Act as the Board deems appropriate. The proposed
rule change is intended to amend Rule A-3(c) to comply with the
requirements of transitional Rule A-3(i), as approved by the SEC.
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\3\ See Exchange Act Release No. 63025 (Sep. 30, 2010), 75 FR
61806 (Oct. 6, 2010).
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Amendments to Rule A-3(c)
Consistent with Rule A-3(i), the Nominating and Governance
Committee would consist of eleven members, six of whom would be public
members and five of whom would be industry members. The Chair of the
Committee would be a public member. Establishing an eleven member
committee will allow for fair representation of regulated entities by
reserving five positions for brokers, dealers, municipal securities
dealers and municipal advisors.
Each constituency identified in the Dodd-Frank Act would be
guaranteed a minimum of one seat on the Nominating and Governance
Committee but the level of each constituency would be capped to avoid
overweighting of any one over the others.
These ranges of membership are as follows:
Six public members consisting of (a) At least one, but no
more than three, representative of institutional or retail investors;
(b) at least one, but no more than three, representative of municipal
entities; (c) at least one, but no more than three, members of the
public with knowledge of or experience in the municipal industry and
not representative of investors or municipal entities; \4\ and
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\4\ In order to ensure balance on the committee and reflect the
breadth of public representatives on the Board, the proposal would
require one to three committee members be selected from Board
members who are not representative of municipal entities or
investors.
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five regulated members, consisting of (a) at least one,
but no more than two, representative of broker-dealers; (b) at least
one, but no more than two, representative of bank dealers; and (c) at
least one, but no more than two, representative of non-dealer municipal
advisors.
The Board believes this formulation is consistent with the Dodd-
Frank Act and Rule A-3(i) in that it provides for a majority of public
members on the Committee and fair representation of regulated entities.
The MSRB also believes it is important that the Chair of the Nominating
and Governance Committee be a public member, both as a governance best
practice and in recognition of the majority of public members on the
Board, as mandated by the Dodd-Frank Act.
The Board also proposes certain administrative amendments to Rule
A-3(c). First, the rule change provides that members may serve
staggered terms, which are terms that do not commence and conclude on
the same date thereby creating groups or classes of directors. The
Board had been divided previously into three classes of five members
per class. Each year, one class would conclude its service. In order to
comply with the Dodd-Frank Act, the Board modified this structure to
accommodate a 21 member Board. While the terms are staggered currently,
the new group of 11 Board members is serving a two year transitional
term, while the other members continue to serve three year terms. The
Board is currently evaluating the appropriate term for new Board
members, but expects that terms will continue to be staggered in order
to relieve the burden on the Nominating and Governance Committee of
replacing the entire Board in any one year and in order to ensure the
continuity and consistency of the Board.
Next, the proposed rule change reflects that Board members may only
serve consecutive terms under two scenarios: (a) By invitation from the
Nominating and Governance Committee due to special circumstances as
determined by the Board, such as where a Board member possesses special
expertise needed by the Board that is not possessed by other Board
members or generally by persons in the pool of potential candidates for
Board membership; or (b) having filled a vacancy under Rule A-3(e) and,
therefore, served only a partial term.
The Board also proposes revisions to Rule A-3(c) to provide that it
will solicit nominations for Board membership in a financial journal
having national circulation among members of the municipal securities
industry, as well as a financial journal having general national
circulation. This change is proposed because potential public members
and certain types of municipal advisors may not read municipal
securities newspapers or periodicals regularly. Finally, the Board
proposes changes to Rule A-3(c) to require the publishing on the
Board's Web site of the names of all applicants for Board
membership.\5\ Such publication is intended to make the nominating
process more transparent. Some commentators on the transitional Rule A-
3 amendments made suggestions regarding improving transparency of the
MSRB's election process, and the Board believes the practice of
publishing the names of all Board applicants will provide more
transparency regarding the nominating process.
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\5\ In some cases, a person may be recommended to the MSRB for
membership on the Board but he or she may not wish to be considered.
Any person who declines to be considered would not be treated as an
applicant and his or her name would not be published.
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2. Statutory Basis
The MSRB has adopted the proposed rule change pursuant to Section
15B(b)(2)(B) of the Act, which provides that the MSRB's rules shall:
establish fair procedures for the nomination and election of
members of the Board and assure fair representation in such
nominations and elections of public representatives, broker dealer
representatives, bank representatives, and advisor representatives.
The MSRB believes that the proposed rule change is consistent with
Section 15B(b) of the Act, as amended by the Dodd-Frank Act, in that it
would provide for the creation of an MSRB Nominating and Governance
Committee
[[Page 79063]]
that reflects the composition of the Board as provided under the Dodd-
Frank Act and would assure that the Nominating and Governance Committee
be composed of a majority of public members and have fair
representation of broker-dealers, bank dealers, and municipal advisors,
consistent with MSRB Rule A-3(i) as approved by the SEC.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Board 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 since it is solely concerned
with the administration of the MSRB and, in any event, provides for
fair representation on the Nominating and Governance Committee of
public representatives, broker dealer representatives, bank dealer
representatives and municipal advisor representatives.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should
be disapproved.
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. The Commission seeks comment on all
aspects of the MSRB's proposed rule change, including the proposed
composition of the Nominating and Governance Committee and whether the
number and proportion of public representatives, broker-dealer
representatives, bank representatives, and advisor representatives is
appropriate. Because the MSRB, under the Dodd-Frank Act, is now
proposing and adopting rules with respect to the activities of two
distinct categories of market participants--municipal securities
dealers and municipal securities advisors--the Commission seeks comment
on whether the proposed structure of the MSRB Nominating and Governance
Committee will assure that the interests of each constituency are
fairly represented. Are there alternative Nominating and Governance
Committee structures or other arrangements that would better achieve
these goals? Is the proposed process for soliciting nominations for
Board membership an appropriate method of identifying applicants? Will
the nomination process be sufficiently transparent? 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-2010-17 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-2010-17. 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 Internet 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 principal office of the MSRB. 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-2010-17 and should be
submitted on or before January 7, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31685 Filed 12-16-10; 8:45 am]
BILLING CODE 8011-01-P