
[Federal Register Volume 76, Number 176 (Monday, September 12, 2011)]
[Notices]
[Pages 56254-56262]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23259]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65282; File No. SR-MSRB-2011-14]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Proposed Rule G-36, on Fiduciary Duty of 
Municipal Advisors, and a Proposed Interpretive Notice Concerning the 
Application of Proposed Rule G-36 to Municipal Advisors

September 7, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on August 23, 2011, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 proposed Rule G-36 (on fiduciary duty of municipal advisors) and a 
proposed interpretive notice (the ``Notice'') concerning the 
application of proposed Rule G-36 to municipal advisors. The MSRB 
requests that the proposed rule change be made effective on the date 
that rules defining the term ``municipal advisor'' under the Exchange 
Act are first made effective by the Commission or such later date as 
the proposed rule change is approved by the Commission.
    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/2011-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 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
    With the passage of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (``Dodd-Frank Act''),\3\ the MSRB was expressly directed 
by Congress to protect municipal entities. Accordingly, the MSRB is 
proposing Rule G-36 and an interpretive notice thereunder to address 
the fiduciary duty of municipal advisors to their municipal entity 
clients.
---------------------------------------------------------------------------

    \3\ Public Law 111-203, 124 Stat. 1376 (2010).
---------------------------------------------------------------------------

    A more-detailed description of the provisions of the Notice 
follows:
    Duty of Loyalty. The Notice would provide that the Rule G-36 duty 
of loyalty would require the municipal advisor to deal honestly and in 
good faith with the municipal entity and to act in the municipal 
entity's best interests without regard to financial or other interests 
of the municipal advisor. It would require a municipal advisor to make 
clear, written disclosure of all material conflicts of interest, such 
as those that might impair its ability to satisfy the duty of loyalty, 
and to receive the written, informed consent of officials of the 
municipal entity the municipal advisor reasonably believes have the 
authority to bind the municipal entity by contract with the municipal 
advisor. Such disclosure would be required to be made before the 
municipal advisor could provide municipal advisory services to the 
municipal entity or, in the case of conflicts discovered or arising 
after the municipal advisory relationship has commenced, before the 
municipal advisor could continue to provide such services.
    The Notice would provide that a municipal advisor may not undertake 
an engagement if certain unmanageable conflicts exist, including (i) 
kickbacks and certain fee-splitting arrangements with the providers of 
investments or services to municipal entities, (ii) payments by 
municipal advisors made for the purpose of obtaining or retaining 
municipal advisory business other than reasonable fees paid to a 
municipal advisor for solicitation activities regulated by the MSRB, 
and (iii) acting as a principal in matters concerning the municipal 
advisory engagement (except when providing investments to the municipal 
entity on a temporary basis to ensure timely delivery for closing; when 
engaging in activities permitted under Rule G-23; when it is a 
municipal advisor solely because it recommends investments or municipal 
financial products provided or offered by it to a municipal entity as a 
counterparty (other than a swap or security-based swap counterparty); 
or when acting as a swap or security-based counterparty to a municipal 
entity represented by an ``independent representative,'' as defined in 
the Commodity Exchange Act or the Exchange Act, respectively.
    The Notice would provide that, in certain cases, the compensation 
received by a municipal advisor could be so disproportionate to the 
nature of the municipal advisory services performed that it would be 
inconsistent with the proposed Rule G-36 duty of loyalty and would 
represent an unmanageable conflict. The Notice would also provide that 
a municipal advisor would be required to disclose conflicts associated 
with various forms of compensation (except where the form of 
compensation has been required by the municipal entity client), in 
which case the disclosure need only address that form of compensation. 
The Notice would also include a form of disclosure of conflicts 
relating to the forms of compensation to aid advisors in preparing 
their disclosure. Use of the form would not be required.
    Duty of Care. The Notice would provide that the proposed Rule G-36 
duty of care would require that a municipal advisor act competently and 
provide advice to the municipal entity after inquiry into reasonably 
feasible alternatives to the financings or products proposed (unless 
the engagement is of a limited nature). The

[[Page 56255]]

Notice would also require the advisor to make reasonable inquiries into 
facts necessary to determine the basis for the municipal entity's 
chosen course of action, as well facts necessary to prepare 
certificates and to help ensure appropriate disclosures for official 
statements. The Notice would also permit the municipal advisor to limit 
the scope of its engagement.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2) of the Exchange Act, which provides, in pertinent 
part, 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.
    Section 15B(c)(1) of the Exchange Act also provides, in 
pertinent part, that:
    A municipal advisor and any person associated with such 
municipal advisor shall be deemed to have a fiduciary duty to any 
municipal entity for whom such municipal advisor acts as a municipal 
advisor, and no municipal advisor may engage in any act, practice, 
or course of business which is not consistent with a municipal 
advisor's fiduciary duty or that is in contravention of any rule of 
the Board.
    Section 15B(b)(2)(L) of the Exchange Act provides, in pertinent 
part, that:
    [The rules of the Board, at a minimum, shall,] with respect to 
municipal advisors--(i) prescribe means reasonably designed to 
prevent acts, practices, and courses of business as are not 
consistent with a municipal advisor's fiduciary duty to its clients.

    The proposed rule change is consistent with Section 15B(c)(1) of 
the Exchange Act and Section 15B(b)(2)(L) of the Exchange Act because 
it incorporates the fiduciary duty, imposed by the Exchange Act, into a 
proposed rule that would articulate the principal duties that comprise 
a municipal advisor's fiduciary duty to a municipal entity client (a 
duty of loyalty and a duty of care), although such duties would not be 
exclusive. The proposed rule change also would provide guidance on what 
conduct would be inconsistent with a duty of loyalty (principally 
failing to deal honestly and in good faith with the municipal entity 
and failing to act in the municipal entity's best interests without 
regard to financial or other interests of the municipal advisor) and 
the conflicts of interest that would be inconsistent with a duty of 
loyalty (including certain third-party payments and receipts and, in 
general, acting as a principal in matters concerning the municipal 
advisory engagement). It would also provide guidance on what conduct 
would be inconsistent with a duty of care (principally failing to act 
competently and to provide advice to the municipal entity after making 
reasonable inquiry into the representations of the municipal entity's 
counterparties, as well as then reasonably feasible alternatives to the 
financings or products proposed that might better serve the interests 
of the municipal entity).
    Section 15B(b)(2)(L)(iv) of the Exchange Act requires that rules 
adopted by the Board:

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.

    All municipal advisors, regardless of their size, have a fiduciary 
duty to their municipal entity clients. Because the protection of their 
clients is paramount, in this context, the MSRB has concluded that it 
is appropriate to impose the same rules on small municipal advisors as 
it imposes on larger municipal advisors. However, the MSRB recognizes 
that there are costs of compliance. That is the reason the MSRB has 
included Appendix A to the Notice. By using Appendix A to provide 
disclosure concerning compensation conflicts, small municipal advisors 
will satisfy the compensation disclosure requirement of the Notice 
without having to retain legal counsel to assist them in the 
preparation of such disclosure.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, since it would apply equally to 
all municipal advisors with municipal entity clients.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    On February 14, 2011, the MSRB requested comment on a draft of Rule 
G-36 (``draft Rule G-36'') and a draft of the Notice (the ``draft 
Notice'').\4\ The MSRB received comment letters from: the American 
Bankers Association (``ABA''); the American Council of Engineering 
Companies (``ACEC''); the American Federation of State, County and 
Municipal Employees (``AFSCME''); American Governmental Financial 
Services (``AGFS''); B-Payne Group (``B-Payne Group''); the Education 
Finance Council (``EFC''); Fi360; Lewis Young Robertson & Burningham, 
Inc. (``Lewis Young''); the Michigan Bankers Association (``Michigan 
Bankers''); Municipal Regulatory Consulting LLC (``MRC''); the National 
Association of Independent Public Finance Advisors (``NAIPFA''); Not 
for Profit Capital Strategies (``Capital Strategies''); Phoenix 
Advisors, LLC (``Phoenix Advisors''); Public Financial Management 
(``PFM''); the Securities Industry and Financial Markets Association 
(``SIFMA''); and the Wisconsin Bankers Association (``Wisconsin 
Bankers'').
---------------------------------------------------------------------------

    \4\ See MSRB Notice 2011-14 (February 14, 2011).
---------------------------------------------------------------------------

Scope of the Rule
     Comment: Delay Interpretive Notice until SEC Rule on 
Municipal Advisors Finalized. Many commenters \5\ requested that the 
MSRB withdraw or delay some or all of the provisions of the Notice 
until the SEC has defined ``municipal advisor,'' after which time they 
asked that the MSRB afford commenters an additional opportunity to 
comment on the Notice. Other comments were outside the scope of the 
request for comment on draft Rule G-36 (e.g., suggested modifications 
to the definition of ``municipal advisor'') and are not summarized 
here.
---------------------------------------------------------------------------

    \5\ ABA; SIFMA; Wisconsin Bankers; Michigan Bankers; NAIPFA; 
MRC; AFSCME; EFC; Phoenix Advisors; and ACEC.
---------------------------------------------------------------------------

     MSRB Response: Because the fiduciary duty applicable to 
municipal advisors was effective as of October 1, 2010, the MSRB feels 
it is important to provide guidance on basic fiduciary duties 
applicable to municipal advisors. The MSRB has requested that the 
proposed rule change be made effective on the date that rules defining 
the term ``municipal advisor'' under the Exchange Act are first made 
effective by the SEC or such later date as the proposed rule change is 
approved by the SEC. At that time, the MSRB may propose additional 
guidance, if necessary.
     Comment: References to Duty of Loyalty and Duty of Care 
Too Limiting. Lewis Young suggested said that the MSRB should delete 
the clause ``which shall include a duty of loyalty and a duty of care'' 
from the text of draft Rule G-36 on the theory that it is too limiting

[[Page 56256]]

and that there is a substantial body of state and Federal law governing 
fiduciary duty that includes more than these two duties.
     MSRB Response: The MSRB has determined not to make this 
change to these provisions in proposed Rule G-36. Proposed Rule G-36 
would provide that a municipal advisor's fiduciary duty to its 
municipal entity client includes a duty of loyalty and a duty of care. 
While the duties of loyalty and care are generally recognized as the 
principal components of a fiduciary duty, the MSRB recognizes that 
certain state fiduciary duty laws address other duties. The use of the 
word ``includes'' permits the MSRB to articulate other duties in the 
future. Therefore the MSRB has determined not to make this change.
     Comment: Clarification of Relationship to Duty of Fair 
Dealing. NAIPFA requested that the MSRB clarify its statement that the 
duties of fair dealing under Rule G-17 are subsumed within the 
municipal advisor's fiduciary duty, and that the fair dealing duties 
under Rule G-17 are applicable to municipal advisors when advising 
municipal entities.
     MSRB Response: The Notice would provide that, ``The Rule 
G-36 fiduciary duty to municipal entity clients goes beyond and 
encompasses the obligation under MSRB Rule G-17 for municipal advisors, 
in the conduct of their municipal advisory activities, to deal fairly 
with all persons and not engage in any deceptive, dishonest, or unfair 
practice. A violation of Rule G-17 with respect to a municipal entity 
client, therefore, would necessarily be a violation of Rule G-36.'' 
Endnote 3 to the Notice provides examples of conduct by financial 
advisors with respect to issuers of municipal securities that has been 
found to violate Rule G-17. The MSRB would consider such conduct to 
also be a violation of proposed Rule G-36.
     Comment: Application of Draft Rule G-36 to Broker-Dealers. 
PFM suggested that the MSRB clarify that draft Rule G-36 applies to 
broker-dealers who engage in municipal advisory activities (except in 
the course of underwriting under Section 2(a)(11) of the Securities 
Act).
     MSRB Response: The Notice would provide that: ``The term 
``municipal advisory activities'' is defined by MSRB Rule D-13 to mean 
the activities described in Section 15B(e)(4)(A)(i) and (ii) of the 
Exchange Act, whether conducted by a broker, dealer, or municipal 
securities dealer (``dealer'') that is a municipal advisor within the 
meaning of Section 15B(e)(4) of the Exchange Act or by a municipal 
advisor that is not a dealer.''
     Comment: Duty When Advising Obligated Person. Capital 
Strategies requested that the MSRB clarify the municipal advisor's duty 
when a financing alternative for a municipal advisor's obligated person 
client is not in the best interests of a municipal entity.
     MSRB Response: The Exchange Act does not impose a 
fiduciary duty on municipal advisors with obligated person clients. 
Accordingly, the MSRB has determined not to make this change in the 
Notice relating to proposed Rule G-36. The obligations of a municipal 
advisor to an obligated person client would be set forth in a companion 
MSRB notice relating to Rule G-17. That notice would provide (in 
endnote 7): ``Although a municipal advisor advising an obligated person 
does not have a fiduciary duty to the municipal entity that is the 
conduit issuer for the obligated person, it still has a fair dealing 
duty to the municipal entity.'' Thus, when a municipal advisor is 
advising an obligated person, its primary obligation of fair dealing is 
to its client. The municipal advisor would not required to act in the 
best interest of the municipal entity acting as a conduit issuer, 
although the advisor would be prohibited from acting in a deceptive, 
dishonest or unfair manner.
     Comment: Limitations on Fiduciary Duty. SIFMA requested 
that the MSRB clarify that a municipal advisor's fiduciary duty only 
applies in connection with a specific transaction or during the course 
of a specific engagement and does not apply to solicitation activities 
of a municipal advisor, to activities concerning obligated persons, or 
when a municipal advisor solicits a municipal entity on its own behalf. 
SIFMA requested that the MSRB clarify that the municipal advisor's 
fiduciary duty will not apply to those entities exempt from the 
definition of municipal advisor (i.e., underwriters, investment 
advisors providing investment services, etc.).
     MSRB Response: Proposed Rule G-36 would provide that a 
municipal advisor's fiduciary duty applies when the advisor has a 
municipal entity client. A companion MSRB notice relating to Rule G-17 
would specifically provide that a municipal advisor does not have a 
fiduciary duty under proposed Rule G-36 to an obligated person client 
or a municipal entity it solicits on behalf of a third-party client. 
The MSRB also determined to clarify when a municipal entity is 
determined to be a client and has revised the Notice so that it would 
provide: ``A municipal entity will be considered to be a client of the 
municipal advisor from the time that the advisor has been engaged to 
provide municipal advisory services (either pursuant to a written 
agreement or by informal arrangement) until the time that the agreed 
upon engagement ends.''
Duty of Loyalty
    Conflicts of Interest; Disclosure.
     Comment: Certain Conflicts Not Waiveable. Lewis Young 
suggested removing the examples of the types of conflicts that must be 
disclosed because this is not necessary and because certain of the 
conflicts concerning third-party payments should be considered not to 
be waiveable.
     MSRB Response: The MSRB has determined not to revise the 
Notice to remove the examples of conflicts, because it is important to 
provide this guidance to municipal advisors. However, the revised 
Notice would clarify that disclosures of conflicts and consent by the 
recipient would not suffice to allow a municipal advisor to undertake a 
municipal advisory engagement if the conflicts are so significant that 
they are unmanageable.
     Comment: Substitute Term ``Engagement'' for 
``Relationships.'' Lewis Young suggested that, because the term 
``relationships'' was vague and overbroad, the term ``engagement'' 
should be used instead, because such term was clear and measurable. It 
said that this substitution would also avoid the suggestion that 
municipal advisors were subject to a higher standard than that 
applicable to attorneys. It also said that only those relationships 
that the advisor reasonably feels will cloud its judgment should be 
required to be disclosed; otherwise, it said, important relationships 
may get lost in the disclosure of a long list of items.
     MSRB Response: The MSRB does not agree with this comment 
and therefore has determined not to make the changes suggested. The 
cases cited in the endnotes to the Notice include examples of informal 
relationships of which issuers should have been made aware. 
Furthermore, if a relationship is so significant that it would 
materially impair an advisor's duty to act in the best interests of its 
client, the municipal advisor would be precluded from entering into the 
engagement. Disclosure and informed consent would not suffice.
     Comment: Disclosure of Conflicts of Interest. SIFMA said 
that disclosure of conflicts should be based on reasonableness and upon 
actual knowledge of personnel who are specifically involved in 
municipal

[[Page 56257]]

advisory activities. It said that requiring large organizations to 
centralize and maintain information would be costly and could also risk 
compromising confidentiality barriers.
     MSRB Response: The MSRB has addressed these concerns and 
has revised the Notice so that it would provide that the advisor must 
disclose all material conflicts ``of which it is aware after reasonable 
inquiry.'' The MSRB has also determined to apply this standard to 
conflicts ``existing at the time the engagement is entered into, as 
well those discovered or arising during the course of the engagement.''
    The MSRB recognizes the issues concerning compromising 
confidentiality barriers when making inquiries about other 
relationships with municipal entities. Nevertheless, the MSRB believes 
that actual knowledge of only those persons involved in the municipal 
advisory activity is not sufficient. Section 15B(e)(4) of the Exchange 
Act does not limit the term ``municipal advisor'' to natural persons. A 
municipal entity client retains a municipal advisor firm, not an 
individual that works for the firm. Accordingly, it is the conflicts of 
the firm that must be disclosed. The revised Notice would clarify that 
persons preparing the conflicts disclosure must make a reasonable 
inquiry into the activities of their firm to determine what conflicts 
may exist. This may include inquiry of persons in addition to those 
specifically engaged in the municipal advisory activity. In addition, 
the revised Notice would provide that reasonable inquiry will continue 
to apply during the course of the engagement to address conflicts 
discovered or arising after the engagement has been entered into.
     Comment: Disclose Only General Conflicts of Interest. 
SIFMA said that generalized disclosure of conflicts, rather than 
disclosure tailored to the individual client, should be permitted, 
allowing the municipal entity to request additional disclosure. SIFMA 
argued that requiring a municipal advisor to undertake an 
individualized investigation relating to conflicts applicable to the 
specific municipal entity, or analyzing the exact implications of the 
conflict applicable to the municipal entity client, would be time 
consuming and expensive. It said that the municipal entity could 
request more information and decide if the expense was worth it.
    SIFMA also said that a municipal advisor should be required to 
disclose the applicable conflicts only once, in a brochure disclosing 
material conflicts, and not be required to re-disclose or reconfirm on 
a transaction by transaction basis unless new material conflicts were 
discovered. SIFMA said that the municipal advisor should not be 
required to re-disclose conflicts previously disclosed in a request for 
proposal (``RFP'').
     MSRB Response: The MSRB has determined not to make the 
suggested changes in the Notice. Generalized disclosure, without a 
discussion of the specific conflicts that may relate to the municipal 
entity client, is not sufficient to alert a municipal entity client to 
specific conflicts and is an insufficient basis for informed consent. 
The Notice would not require disclosures to be made more than once per 
issue. An RFP response may be an appropriate place to make required 
disclosures as long as the proposed structure of the financing is 
adequately developed at that point to permit the specific disclosures 
required by the Notice.
     Comment: Conflicts of Interest Should be Addressed in Rule 
G-23. MRC suggested that the requirements to disclose conflicts and to 
obtain informed consent would be more appropriately addressed in MSRB 
Rule G-23, and that the requirements should be removed from the Notice.
     MSRB Response: The MSRB disagrees with this comment and 
has therefore determined not to make the suggested changes. Rule G-23 
only concerns financial advisory activities of dealers. It also does 
not impose a fiduciary duty.
     Comment: Rule Recognizes Essential Duties of Loyalty and 
Due Care. Fi360 applauded the MSRB for recognizing the duties of 
loyalty and due care as essential obligations under the fiduciary 
standard of care. It also said the Notice amply captured key principles 
that underlie the duties of loyalty and care. AFSCME also applauded the 
efforts of the MSRB to protect municipal entities from self-dealing and 
other deceptive practices, and said that strong protections were 
required for municipal entities.
     MSRB Response. The MSRB appreciates these comments.
     Comment: Due Diligence To Determine Authority of Municipal 
Official. SIFMA requested that the MSRB clarify the level of due 
diligence required to determine if an official has the authority to 
bind the municipal entity by contract, and suggested that a 
representation by the official that it had the requisite authority to 
execute should be sufficient, absent actual knowledge by the municipal 
advisor that such representation was false.
     MSRB Response: The MSRB has revised the Notice so that it 
would provide that a municipal advisor is only required to have a 
reasonable belief that it is making required disclosures to officials 
with the authority to bind the issuer. This change would also be made 
to the informed consent provisions of the Notice.
Conflicts of Interest; Unmanageable Conflicts
     Comment: Principal Transactions. ABA and SIFMA suggested 
that principal transactions should not be prohibited as unmanageable 
conflicts because other Federal and state laws permit entities subject 
to a fiduciary duty to effect principal transactions with clients after 
disclosure and informed consent. They said that traditional banking 
activities, including accepting deposits and foreign exchange 
transactions, should be permitted, arguing that not permitting 
municipal advisors to engage in these transactions would create an 
unfair advantage for investment advisors and swap dealers, among 
others, that have the ability to effect these types of transactions. 
They said that such a ban would also effectively limit municipal 
entities' access to critical products and services. SIFMA also proposed 
that the prohibition on principal transactions not prohibit a municipal 
advisor or affiliate from serving as a trustee and that the prohibition 
should not apply to advisory transactions if the principal transactions 
were effected by ``distant cousin'' affiliates of a municipal advisor. 
ABA suggested that the MSRB propose exceptions for associated persons, 
similar to the exception provided in a 1978 interpretation \6\ of MSRB 
Rule D-11, which excludes, solely for purposes of the fair practice 
rules, persons who are associated ``solely by reason of a control 
relationship,'' unless the affiliate is otherwise engaged in municipal 
advisory activities.
---------------------------------------------------------------------------

    \6\ The ABA's citation is actually to the SEC's order approving 
Rule D-11, a portion of which is reprinted in the MSRB Rule Book.
---------------------------------------------------------------------------

     MSRB Response: The revised Notice would provide that a 
municipal advisor will not be considered to have an unmanageable 
conflict as a result of acting as principal when: (i) Providing 
investments to the municipal entity on a temporary basis to ensure 
timely delivery for closing; (ii) engaging in activities permitted 
under Rule G-23; (iii) it is a municipal advisor solely because it 
recommends investments or municipal financial products provided or 
offered by it to a municipal entity as a counterparty, but is not 
described in (iv); or (iv) acting as a swap or security-

[[Page 56258]]

based counterparty to a municipal entity represented by an 
``independent representative,'' as defined in the Commodity Exchange 
Act or the Exchange Act, respectively. Once the SEC has completed its 
rulemaking on the definition of ``municipal advisor,'' the MSRB will 
consider whether additional exceptions are appropriate.
     Comment: Engineers as Municipal Advisors. ACEC said that, 
under certain circumstances, some engineers, if subject to a fiduciary 
duty by reason of being included in the definition of ``municipal 
advisor,'' may have direct conflicts with their municipal entity 
clients because of the engineers' professional and ethical duties. It 
said that an engineer's ethical duties require it to hold the safety, 
health, and welfare of the public paramount and that an engineer's duty 
to render independent judgments might in some cases conflict with its 
duty of loyalty to its municipal entity client, particularly if the 
expectations of its client differed from the engineer's independent 
judgment.
     MSRB Response: The MSRB has determined not to make any 
changes to the Notice with respect to this comment. The MSRB recognizes 
that members of other professions that also serve as municipal advisors 
may have concurrent professional duties and standards and the MSRB 
agrees that an advisor is required to exercise its independent 
professional skill and judgment in performing its role. The rule does 
not require that the advisor abandon its professional standards in 
order to render opinions consistent with the client's expectations.
Fee Splitting; Prohibited Payments
     Comment: Compensation for Related Services. SIFMA and ABA 
requested further clarification about fee-splitting and related 
compensation arrangements, and suggested that compensation for certain 
traditional banking services (relating to corporate trust and mutual 
funds), such as shareholder servicing fees and 12b-1 fees, be permitted 
with full disclosure and informed consent.
     MSRB Response. Endnote 6 to the Notice provides examples 
of fee-splitting arrangements. The Notice also provides exceptions to 
the general rule that a municipal advisor that serves as a principal 
has an unmanageable conflict. Depending upon the SEC's definition of 
``municipal advisor,'' the MSRB may propose additional exceptions, but 
the MSRB is unwilling to do so at this time.
     Comment: Prohibited Payments to Affiliated Solicitors. 
SIFMA also requested further guidance on prohibited payments by 
municipal advisors to solicitors and argued that payments to affiliated 
solicitors should not be prohibited because the definition of municipal 
advisor adopted by the Dodd Frank Act only restricts payments to 
independent solicitors.
     MSRB Response: The MSRB has determined not to make the 
suggested changes. The cases cited in the endnotes to the Notice 
demonstrate the inappropriate role that third-party payments have 
played in many municipal securities financings. The exceptions made by 
the Notice would only concern issuer-permitted payments and payments to 
parties that are themselves regulated by the MSRB.
Compensation; Excessive Compensation
     Comment: Definition of Excessive Compensation. NAIPFA, 
SIFMA, and B-Payne Group requested further clarification on the 
definition of ``excessive compensation.'' NAIPFA suggested certain 
criteria, including, among other things, the time and labor required, 
the novelty and difficulty of the issue involved, and the skill 
requisite to perform the municipal advisory services properly; the fee 
customarily charged in the locality for similar municipal advisory 
services; the amount involved and the results obtained; the nature and 
length of the professional relationship with the client; the 
experience, reputation, and ability of the municipal advisor or 
municipal advisors performing the services; and whether the fee is 
fixed or contingent. B-Payne Group objected to any evaluation of 
whether its fees were excessive, arguing that no regulator was in a 
position to evaluate the reasonableness of the municipal advisor's fee. 
SIFMA suggested that a fully disclosed and negotiated agreement, absent 
fraud, was sufficient to guard against excessive compensation.
     MSRB Response: The MSRB has revised the Notice so that it 
would incorporate some of the factors noted in the comment letters. The 
revised Notice would describe excessive compensation as compensation 
that is so disproportionate to the nature of the municipal advisory 
services performed as to indicate that the municipal advisor is not 
acting in the best interests of its municipal advisory client. Further, 
the revised Notice would provide that ``the MSRB recognizes that what 
is considered reasonable compensation for a municipal advisor will vary 
according to the municipal advisor's expertise, the complexity of the 
financing, and the length of time spent on the engagement, among other 
factors.'' As this language recognizes, many factors may appropriately 
affect the amount of the fee, and the specific factors listed in the 
Notice would not be exclusive. Thus, it may be that the various other 
factors noted by commenters could have an impact on the compensation 
paid to a municipal advisor. In all cases, the municipal advisor must 
be able to support the legitimacy of its fees.
Compensation; Forms of Compensation
     Comment: Disclosure of Conflicts Confusing and 
Unnecessary. Several commenters \7\ suggested that the MSRB delete 
Appendix A to the Notice (Disclosure of Conflicts with Various Forms of 
Compensation) and the requirement of the Notice that municipal advisors 
disclose the conflicts with various forms of compensation. Commenters 
argued that: (i) Such disclosure was unnecessary and that including it 
would detract from the importance of the rest of the rule; (ii) 
statements about imbedded conflicts in compensation would be confusing 
to municipal entities because underwriters (who, they said, have 
inherent conflicts as both purchasers and distributors of the municipal 
entity's securities) are not required to disclose this information, 
whereas municipal advisors, who do not have these inherent conflicts, 
are nevertheless required to disclose such possible conflicts; and 
(iii) contingent fees do not affect professional performance. Other 
commenters argued that the fiduciary duty applicable to municipal 
advisors was sufficient to guard against excessive compensation. NAIPFA 
requested that, if this requirement were retained, a similar 
requirement be applicable to underwriters. B-Payne Group agreed that 
fees of all participants, including bond lawyers, should be disclosed. 
MRC suggested that any disclosure requirements were more appropriately 
addressed in Rule G-23.
---------------------------------------------------------------------------

    \7\ B-Payne Group, Lewis Young, MRC, NAIPFA, PFM, and SIFMA.
---------------------------------------------------------------------------

    AGFS said that, among other things, the proposal to require that 
firms clarify for clients the advantages and disadvantages of various 
forms of advisor compensation was excellent. It said that too many 
municipal issuers are gullible regarding the use of contingent 
compensation payable only after transactions are completed and that 
they do not think through the long-term costs and other relevant 
implications of contingent compensation that can place advisors, upon 
whom the issuers rely heavily, in the unfortunate position of 
sacrificing months of work without compensation when it becomes

[[Page 56259]]

apparent (or should be apparent to a market financial professional) 
that a transaction is not in the issuers' best interests. AGS said 
that, unfortunately, there are advisors who would plow ahead in order 
to avoid substantial financial loss, rather than informing the issuer 
clients either (1) not to proceed or (2) to alter the structure or 
approach.
     MSRB Response: The MSRB has determined not to eliminate 
Appendix A from the Notice. Because municipal advisors are fiduciaries 
with respect to their municipal entity clients, the MSRB considers it 
essential that they disclose all material conflicts to their clients. 
Appendix A was included in the Notice for the benefit of small 
municipal advisors to help them avoid the need to hire an attorney to 
prepare such compensation conflicts disclosure. Use of Appendix A would 
not be mandatory and municipal advisors would be free to draft their 
own disclosure addressing these conflicts.
    Pursuant to Section 15B(e)(4)(C) of the Exchange Act, dealers are 
not municipal advisors when they are serving as underwriters. Even so, 
MSRB Rule G-17 (on fair dealing) would apply to them when they engage 
in municipal securities activities with issuers of municipal 
securities. The MSRB recognizes that underwriters would not be subject 
to the same requirement to disclose conflicts associated with various 
forms of compensation under Rule G-17. It is appropriate to interpret 
Rule G-17 differently for arm's-length counterparty relationships on 
the one hand (such as underwriters appropriately maintain with issuers) 
and advisory relationships on the other.
    The MSRB notes that it does not have jurisdiction over bond 
lawyers, unless they are functioning as municipal advisors, and, 
therefore, in most cases, may not require them to disclose compensation 
conflicts.
     Comment: Limit Disclosure of Conflicts to Form of 
Compensation Mandated by Issuer. NAIPFA suggested that disclosure of 
conflicts be limited to the conflicts applicable to the form of 
compensation methodology at the time the compensation methodology was 
proposed. NAIPFA also suggested that ``pitches'' or other discussions 
of ideas with municipal entities prior to engagement should not require 
delivery of the disclosure. NAIPFA suggested that the disclosures 
should not be required when the municipal entity dictated the form of 
compensation, arguing that discussion of conflicts in this instance 
would not advance the duty of loyalty to the municipal entity client.
     MSRB Response: The MSRB has determined to revise the 
Notice so that it would require that conflicts disclosures, including 
those regarding compensation, need only be delivered before the 
engagement of the municipal advisor, unless a conflict is discovered or 
arises later. Furthermore, the revised Notice would provide that ``if 
the municipal entity client has required that a particular form of 
compensation be used, the compensation conflicts disclosure provided by 
the municipal advisor need only address that particular form of 
compensation.'' If the form of compensation is not required by the 
municipal entity, however, the municipal advisor would be required to 
disclose and discuss the conflicts associated with various forms of 
compensation.
     Comment: Authority of Municipal Entity Officials to 
Consent to Disclosures. Several commenters suggested that, in 
determining the authority of a municipal entity official to enter into 
a contract, to receive various disclosures, and to deliver informed 
consent, a municipal advisor should be permitted to rely on the 
apparent authority of an official to acknowledge the conflicts 
disclosure. NAIPFA suggested that the municipal advisor be able to rely 
on the designation by the municipal entity of the primary contact for 
the engagement as evidence of its authority unless the municipal 
advisor has reason to believe that the official does not have the 
requisite authority. SIFMA suggested that the municipal advisor be able 
to rely on a representation of the official as to its apparent 
authority.
     MSRB Response: As noted above under ``Conflicts of 
Interest; Disclosure,'' the MSRB determined to revise the Notice so 
that it would provide that a municipal advisor is only required to have 
a reasonable belief that it is making required disclosures to, and 
receiving informed consent from, officials with the authority to bind 
the issuer.
     Comment: Consent Presumed With Receipt of Written 
Agreement. NAIPFA suggested that a municipal advisor be permitted to 
presume consent to compensation conflicts disclosure if it receives an 
executed contract, or verbal agreement that a written engagement letter 
(or similar document) has been accepted, or written or verbal 
acknowledgement that the advisor has been selected following an RFP 
process in which the form of compensation was appropriately disclosed.
     MSRB Response: The MSRB had determined not to make changes 
to the Notice in response to this comment because the following 
provisions of the Notice would address this comment: ``The disclosures 
described in this paragraph must be provided as described above under 
``Duty of Loyalty/Conflicts of Interest/Disclosure Obligations.'' That 
section of the Notice would provide: ``For purposes of proposed Rule G-
36, a municipal entity will be deemed to have consented to conflicts 
that are clearly described in its engagement letter or other written 
contract with the municipal advisor, if the municipal entity expressly 
acknowledges the existence of such conflicts. If the officials of the 
municipal entity agree to proceed with the municipal advisory 
engagement after receipt of the conflicts disclosure but will not 
provide written acknowledgement of such conflicts, the municipal 
advisor may proceed with the engagement after documenting with 
specificity why it was unable to obtain their written 
acknowledgement.''
Duty of Care
    Necessary Qualifications.
     Comment: Restrictions on Undertaking Engagements Are 
Unnecessary. Lewis Young suggested that the requirement that the 
``municipal advisor should not undertake a municipal advisory 
engagement for which the advisor does not possess the degree of 
knowledge and expertise needed to provide the municipal entity with 
informed advice'' be removed, arguing that it was unnecessary and it 
left out many other aspects of the general fiduciary duty of care and 
``unbalanced'' the implications of the general duty.
     MSRB Response: The MSRB has determined not to make any 
changes to the Notice in response to this comment. The MSRB disagrees 
with this comment because it considers the requisite knowledge and 
expertise to be an essential element of the duty of care. The cases 
cited in endnote 20 to the Notice provide examples of instances in 
which financial advisors violated this duty.
Consideration of Alternatives
     Comment: Requirement Unnecessary. Lewis Young suggested 
that this requirement should be removed as it was unnecessary.
     MSRB Response: The MSRB disagrees with this comment and 
considers this requirement to be a fundamental distinction between a 
fiduciary and an arm's length counterparty, such as an underwriter.
     Comment: Limit Obligations to Terms of Contract. SIFMA 
argued that a municipal advisor should be required to

[[Page 56260]]

do only what the municipal entity contracts for and that imposing other 
duties will impose additional costs and will cause extensive 
negotiation on the limitations clauses in contracts. Further, SIFMA 
argued that an implied duty to review alternatives should not apply 
where the form of engagement letter is non-negotiable because the 
inability to negotiate a limited engagement clause will reduce the 
number of municipal advisors who offer services.
     MSRB Response: The MSRB has determined not to make any 
changes to the Notice in response to this comment. The MSRB expects 
that municipal advisors that wish to limit their engagements with 
municipal entities will do so in writings (whether as part of 
engagement letters or separately) that limit the scope of their 
engagements to particularly enumerated items or which state that any 
services not specified in the writing will not be provided by the 
advisor. This should impose no measurable additional cost on the 
advisor or the municipal entity.
Duty of Inquiry
     Comment: Scope of Inquiry. Lewis Young said that the 
requirement to conduct reasonable inquiry regarding representations set 
forth in a certificate should be governed by the terms of the 
certificate, which should show the scope of inquiry. SIFMA requested 
more guidance on the required scope of a factual investigation and on 
the nature and scope of any permitted qualifications, and whether a 
municipal advisor could disclaim the duty altogether in its engagement 
letter or later, noting that it would be impossible to anticipate all 
limitations on this duty at outset of engagement. NAIPFA suggested that 
the MSRB clarify its statements about a municipal advisor's duty of 
inquiry under G-36 and G-17 to form a reasonable basis for its 
recommendations.
     MSRB Response: The MSRB has determined not to make the 
suggested changes. The Notice would not permit the waiver of duties 
imposed by proposed Rule G-36, as interpreted by the Notice, if they 
are within the scope of the municipal advisor's engagement. If it is 
within the scope of the municipal advisor's engagement to prepare a 
certificate that will be relied upon by the issuer, the municipal 
advisor would be required to conduct a reasonable inquiry into the 
facts that underlie the certificate. For example, review of the 
official books of the issuer and other factual information within the 
municipal advisor's control might assist the municipal advisor in 
forming a reasonable basis for its certificate. However, if the 
certificate relies on the representations of others or facts not within 
the municipal advisor's control, additional inquiry on the part of the 
municipal advisor might be required.
    The MSRB notes that some certificates that municipal advisors 
provide already have the potential to subject the advisor to penalties 
under Section 6700 of the Internal Revenue Code. An Internal Revenue 
Service publication on Section 6700 \8\ provides: ``Participants [in a 
bond financing] can rely on matters of fact or material provided by 
other participants necessary to make their own statements or draw their 
own conclusions, unless they have actual knowledge or a reason to know 
of its inaccuracy or the statement is not credible or reasonable on its 
face.'' The Internal Revenue Service summarized the legislative history 
of Section 6700. See H. Conf. Rep. No. 101-247, 101st Cong., 1st Sess. 
1397.
---------------------------------------------------------------------------

    \8\ See Office of Chief Counsel, Internal Revenue Service, 
Memorandum No. 200610018, Application of Section 6700 Penalty with 
Respect to Various Participants in Tax-Exempt Bond Issuance (Feb. 3, 
2006).
---------------------------------------------------------------------------

    With respect to clarifying the statements in the Notice concerning 
the municipal advisor's duty to form a reasonable basis for any 
recommendation, the MSRB has determined not to make any changes to the 
Notice other than those directed to specific circumstances in the 
Notice (e.g. Duty of Inquiry, Consideration of Alternatives, etc.). The 
MSRB notes that each recommendation, and the basis for such 
recommendation, will be dependent on facts and circumstances and that 
the statements in the Notice are intended as general guidelines.
     Comment: Due Diligence. Lewis Young and SIFMA said that 
the requirement for a municipal advisor to use due diligence when 
preparing an official statement suggested that the municipal advisor 
(whose duties are to an issuer) had the duties of an underwriter (whose 
duties are to investors). Lewis Young said that this requirement is 
inconsistent with an advisor's obligation, which is to advise ``in a 
secondary role to the issuer as principal as to disclosure duties, as 
well as duplicating the duties of an underwriter.'' Lewis Young also 
noted that a municipal advisor owes a duty to the municipal entity, not 
to investors, and the municipal advisor's obligations in respect of the 
disclosure process are to explain the process to the issuer, to make 
recommendations on the structure and content of the disclosure 
document, and to recommend competent counsel to prepare.
     MSRB Response: The MSRB has determined to revise the 
Notice so that it would address these concerns. The language in the 
Notice upon which this comment is based covers the situation in which 
the municipal advisor prepares all, or substantially all, of the 
official statement, exercising discretion as to the content of 
disclosures. This is often true in the case of competitive 
underwritings. Under these circumstances, the advisor owes a duty to 
the municipal entity to make reasonable inquiries in order to help 
ensure the appropriate disclosures are made in the official statement. 
The revised Notice would no longer require that the advisor exercise 
due diligence, and would further provide that the municipal advisor 
``owes a duty to the municipal entity to make reasonable inquiries in 
order to help ensure the appropriate disclosures are made in the 
official statement.''
Permissible Limitations On Scope of Engagement
    Limitations.
     Comment: Outline Scope of Duties in Engagement. Both SIFMA 
and NAIPFA suggested that municipal advisors should be permitted to 
outline the scope of their duties in an engagement, rather than 
outlining the exclusions and limitations. NAIPFA noted that it would be 
unreasonable to subject a municipal advisor to a fiduciary duty with 
respect to services that were beyond the scope of the parties' 
agreement. Further, it said that an issuer had no reason to assume that 
services not specified in writing would be performed. The municipal 
advisor should be held to the duties it had agreed to undertake, and be 
able to include a blanket statement relating to the matters excluded 
from the engagement.
     MSRB Response: The MSRB has determined not to make any 
changes to the Notice in response to this comment. The MSRB expects 
that municipal advisors that wish to limit their engagements with 
municipal entities will do so in writings (whether as part of 
engagement letters or separately) that limit the scope of their 
engagements to particularly enumerated items or which state that any 
services not specified in the writing will not be provided by the 
advisor. This should impose no measurable additional cost on the 
advisor or the municipal entity.
Disclosure of Pre-Formed Judgment on Appropriateness of Transaction or 
Product
     Comment: Remove Requirement to Disclose Advisor's Pre-
Formed Opinion.

[[Page 56261]]

SIFMA suggested that the MSRB reconsider its position on permitting the 
municipal advisor to limit the scope of its engagement while requiring 
it to disclose any pre-formed opinion it has on matters not within the 
scope of the engagement. SIFMA said that this was burdensome, detracted 
from the scope of the limitations, and would effectively require the 
municipal advisor to consider the appropriateness of the financing or 
product (which it had excluded from its engagement) to counter any 
hindsight judgment.
     MSRB Response: The MSRB has determined to revise the 
Notice so that it would no longer include this requirement. While the 
Notice would not require the municipal advisor to conduct reasonable 
inquiry to form such an opinion, the MSRB realizes that some municipal 
advisors might feel obliged to do so to avoid being questioned in 
hindsight about whether they had, in fact, formed an opinion on 
appropriateness before being retained.
Scope of Engagement
     Comment: Define Term of Engagement. SIFMA suggested that 
the Notice include a definition of ``engagement,'' and define when the 
municipal advisor's obligation will commence and terminate pursuant to 
a written engagement letter. Absent a written engagement letter, SIFMA 
suggested that an engagement should terminate on the reasonable 
expectations of the parties, or when the related transaction has been 
concluded.
     MSRB Response: By the use of the word ``engagement,'' the 
MSRB means the municipal advisory assignment or other scope of work for 
which the municipal entity has retained the municipal advisor. When a 
municipal advisor is engaged or retained by the municipal entity, the 
municipal entity would become the client of the municipal advisor and 
the fiduciary duty under proposed Rule G-36 would begin to apply. It 
would continue to apply until the engagement is complete.
     Comment: Incorporate Requirements of Advisory Contracts in 
Rule G-23. MRC suggested that any requirements relating to the content 
of advisory contracts be incorporated into existing rules such as Rule 
G-23, rather than by interpretation. MRC also suggested clarification 
of the various statements relating to appropriateness and incorporation 
of such statements in MSRB Rule G-19 (on suitability).
     MSRB Response: The MSRB disagrees with this comment and 
has therefore determined not to make the suggested changes. As noted 
above, Rule G-23 only concerns financial advisory activities of broker-
dealers. It also does not impose a fiduciary duty. Rule G-19 only 
imposes a duty of suitability upon dealers and, even then, only in 
connection with transactions in municipal securities recommended to 
customers.\9\ The MSRB has determined not to amend that rule at this 
time.
---------------------------------------------------------------------------

    \9\ Under MSRB Rule D-9: Except as otherwise specifically 
provided by rule of the Board, the term ``customer'' shall mean any 
person other than a broker, dealer, or municipal securities dealer 
acting in its capacity as such or an issuer in transactions 
involving the sale by the issuer of a new issue of its securities.
---------------------------------------------------------------------------

Other Comments
     Comment: Other Rules May Impose Conflicting Standards. 
Various commenters \10\ noted that several regulatory agencies either 
have in place or are currently promulgating rules that concern parties 
that might be subject to draft Rule G-36 and that lack of coordination 
with these agencies could lead to conflicting standards applicable to 
such parties. They said that the MSRB and other regulatory agencies 
need to coordinate their respective guidance and AFSCME suggested that 
these agencies offer informal guidance such as webinars to aid market 
participants.
---------------------------------------------------------------------------

    \10\ ABA; AFSCME; Michigan Bankers; SIFMA; and EFC.
---------------------------------------------------------------------------

     MSRB Response: The MSRB has been coordinating with other 
regulators in areas of overlap. For example, the provisions of the 
Notice concerning the provision of swap advice use the same language as 
found in Title VII of Dodd-Frank and the proposed Commodity Trading 
Futures Commission (``CFTC'') business conduct rule for swap dealers 
and major swap participants.\11\ Further, the MSRB has conducted and 
will continue to conduct webinars and various outreach events to 
explain its rulemaking efforts.
---------------------------------------------------------------------------

    \11\ See Federal Register Vol. 75, No. 245 (December 22, 2010).
---------------------------------------------------------------------------

     Comment: Manner of Regulation and Cost of Compliance. B-
Payne Group expressed the view that the MSRB should regulate municipal 
advisors by getting ``experienced personnel on the ground in regional 
markets and charge them with staying on top of situations,'' rather 
than regulating municipal advisors as the MSRB regulates dealers. It 
argued for exemptions from MSRB rules for small municipal advisors and 
said the cost of compliance for such advisors would outweigh the 
regulatory benefit. Other parts of the comment letter addressed matters 
that were outside the scope of the request for comment on draft Rule G-
36 (e.g., professional qualifications testing, training for local 
finance officials) and are not summarized here.
     MSRB Response: For regulation of municipal advisors to be 
fair, all municipal advisors must know what rules apply to them. The 
Exchange Act itself imposes a fiduciary duty on municipal advisors and 
the proposed rule change provides guidance to municipal advisors on 
what it means to have a fiduciary duty so they can tailor their conduct 
accordingly. Without such guidance, ``experienced personnel on the 
ground'' would likely enforce the Exchange Act in an inconsistent 
manner, which the MSRB doubts that B-Payne Group would consider fair.
    As stated above, all municipal advisors, regardless of their size, 
have a fiduciary duty to their municipal entity clients. Because the 
protection of their clients is paramount, in this context, the MSRB has 
concluded that it is appropriate to impose the same rules on small 
municipal advisors as it imposes on larger municipal advisors. However, 
the MSRB recognizes that there are costs of compliance. That is the 
reason the MSRB has included Appendix A to the Notice. By using 
Appendix A to provide disclosure concerning compensation conflicts, 
small municipal advisors would be able to satisfy the compensation 
disclosure requirement of the Notice without having to retain legal 
counsel to assist them in the preparation of such disclosure.
     Comment: Implementation Period. SIFMA suggested that 
because Rule G-36 would subject municipal advisors to rules they are 
not currently subject to, the MSRB should consider providing for an 
implementation period of no less than one year.
     MSRB Response. The MSRB recognizes that some municipal 
advisors may be subject to rules that are not currently applicable. 
However, the appropriate implementation period will depend upon the 
provisions of the SEC's rule relating to municipal advisors.

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

[[Page 56262]]

    (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 Exchange Act. Interested persons are also 
invited to submit views and arguments as to whether they can 
effectively comment on the proposed rule change prior to the date of 
final adoption of the Commission's permanent rules for the registration 
of municipal advisors. 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 rule-comments@sec.gov. Please include 
File Number SR-MSRB-2011-14 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-2011-14. 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 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-2011-14 and should be submitted on or before 
October 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23259 Filed 9-9-11; 8:45 am]
BILLING CODE 8011-01-P


