
[Federal Register Volume 80, Number 88 (Thursday, May 7, 2015)]
[Notices]
[Pages 26310-26313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10946]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74858; File No. SR-MSRB-2015-04]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change Consisting of the Specifications for the Selection of 
Examination Questions and Content Outline for the Municipal Advisor 
Representative Qualification Examination

May 1, 2015.
    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 April 22, 2015, the Municipal Securities Rulemaking Board (the 
``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (the ``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the MSRB. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission the specifications for the 
selection of examination questions (``selection specifications'') and 
content outline for the Municipal Advisor Representative Qualification 
Examination (``Series 50 examination'') (the ``proposed rule 
change'').\3\ The MSRB is not proposing in this filing any textual 
changes to its rules.
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    \3\ The MSRB is also proposing the question bank for the Series 
50, but based upon instructions from the Commission staff, the MSRB 
is submitting SR-MSRB-2015-04 for immediate effectiveness pursuant 
to Section 19(b)(3)(A)(i) of the Act and Rule 19b-4(f)(6) 
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, attached as Exhibit 3b. The question bank 
is available for Commission review. The selection specifications for 
the Series 50 examination, Exhibit 3c, have been omitted and filed 
separately with the Commission for confidential treatment pursuant 
to Rule 24b-2 of the Securities Exchange Act.
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    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2015-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 MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

[[Page 26311]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Section 15B of the Act requires the MSRB to establish professional 
standards for municipal advisors.\4\ The Act further requires 
associated persons of municipal advisors to pass such examinations as 
the Board may establish to demonstrate that such individuals meet the 
standards as the Board finds necessary or appropriate in the public 
interest or for the protection of investors and municipal entities or 
obligated persons.\5\ A professional qualification examination is 
intended to determine whether an individual meets the MSRB's basic 
qualification standards for a particular registration category. The 
examination measures a candidate's knowledge of the business 
activities, as well as the regulatory requirements, including MSRB 
rules, SEC rules, rule interpretations and other federal law, 
applicable to a particular registration category.
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    \4\ 15 U.S.C. 78o-4(b)(2)(L)(iii).
    \5\ See Section 15B(b)(2)(A)(iii) of the Act, 15 U.S.C. 78o-
4(b)(2)(A)(iii).
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    On February 26, 2015, the Commission approved amendments to MSRB 
Rule G-3, which established the qualification examination requirements 
for municipal advisor representative and municipal advisor principal 
candidates.\6\ Individuals who engage in municipal advisory activities 
must qualify as municipal advisor representatives and individuals who 
engage in the management, direction or supervision of the municipal 
advisory activities of municipal advisors and their associated persons 
must qualify as municipal advisor principals. To qualify as either a 
municipal advisor representative or municipal advisor principal, an 
individual must pass the Series 50 examination. The examination 
requirement in MSRB Rule G-3(d) is intended, among other things, to 
increase municipal advisor representative and municipal advisor 
principal candidates' awareness and knowledge that they are operating 
in a regulated environment designed to protect municipal entities, 
obligated persons and the integrity of the municipal market.
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    \6\ See Exchange Act Release No. 74384 (Feb. 26, 2015), 80 FR 
11706 (Mar. 4, 2015), File No. SR-MSRB-2014-08.
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    The MSRB developed the Series 50 examination content outline in 
accordance with The Standards for Educational and Psychological Testing 
(``APA Standard''),\7\ including the engagement of a psychometrician 
and a committee of industry subject matter experts. The Series 50 
examination content outline has been developed to provide reasonable 
assurance that municipal advisor representative candidates understand 
their professional responsibilities, including key regulatory 
requirements and duties and obligations. The examination will test 
applicants on their general knowledge of the municipal advisory 
industry and the associated municipal advisor regulatory framework.\8\ 
To develop the examination to fulfill these purposes, the MSRB in July 
of 2014 completed a job analysis of municipal advisors based on a web-
based survey that was sent to all MSRB-registered municipal 
advisors.\9\ The MSRB received 565 responses to the survey from 
individuals who engage in a variety of municipal advisory activities 
for different-sized firms in different areas of the country. The survey 
results provided the MSRB with certain data on municipal advisors, such 
as the duties, tasks, and responsibilities performed by individuals who 
engage in various municipal advisory activities and the level of 
knowledge an individual should possess to be sufficiently qualified to 
perform municipal advisory activities. The job analysis, coupled with 
focus panels, provided the empirical basis for the representation of 
topic areas on the Series 50 examination.
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    \7\ See American Educational Research Association, American 
Psychological Association, & National Council on Measurement in 
Education, The Standards for Educational and Psychological Testing 
(2d ed. 2014).
    \8\ See Series 50 examination content outline attached hereto as 
Exhibit 3a.
    \9\ A job analysis is an assessment of the essential skills and 
functions that are required to complete a particular job.
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    The Series 50 examination will consist of 100 multiple-choice 
questions. Candidates are allowed 180 minutes to complete the 
examination.\10\ Consistent with other financial regulatory 
qualification examinations, candidates may receive (at the option of 
their firm) an informational breakdown of their performance on each 
section of the examination and their pass/fail status at the completion 
of the testing session. As provided for in MSRB Rule G-3(g) and 
consistent with other MSRB examinations, candidates that fail to pass 
the Series 50 examination are permitted to take the examination again 
after a period of 30 days has elapsed from the date of the prior 
examination. Any person, however, who fails to pass the Series 50 
examination three or more times in succession is prohibited from taking 
the Series 50 examination again until six months has elapsed from the 
date the candidate last failed the examination.
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    \10\ Prior to beginning the examination, candidates will receive 
a tutorial on how to complete the computerized examination. 
Candidates will be given 30 minutes to complete the tutorial in 
addition to the 180 minutes allowed to complete the examination.
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    The Series 50 examination content outline has been developed to 
assist municipal advisor representative candidates in preparing for the 
Series 50 examination and will be available on the MSRB's Web site. The 
Series 50 examination content outline describes the following five 
topical sections comprising the examination: (1) Understanding SEC and 
MSRB Rules Regarding Municipal Advisors (12 questions); (2) 
Understanding Municipal Finance (35 questions); (3) Performing Issuer's 
Credit Analysis and Due Diligence (12 questions); (4) Structuring, 
Pricing and Executing Municipal Debt Products (31 questions); and (5) 
Understanding Requirements Related to the Issuance of Municipal Debt 
(10 questions).
    The reference materials section of the Series 50 examination 
content outline is intended to provide candidates with a list of 
resources, which when used in conjunction with the Series 50 
examination content outline, can assist candidates in preparing for the 
Series 50 examination. The reference materials were recommended by 
municipal advisors as having been helpful resources in carrying out the 
job functions of a municipal advisor. The reference materials are not 
intended to be all-inclusive, nor are the reference materials intended 
to specifically represent content that may be covered on the 
examination.
    Prior to announcing the effective date of the Series 50 
examination, the MSRB will conduct a pilot for the Series 50 
examination. The Series 50 pilot examination will assist the MSRB in 
validating the bank of examination questions and establishing the 
passing score. The Series 50 pilot examination will consist of 120-125 
questions. Candidates will have 240 minutes to complete the Series 50 
pilot examination.\11\ The Series 50 pilot examination will be 
available for a limited time this fall and open to all municipal 
advisor representative and municipal advisor principal candidates. 
Those candidates who take and pass the

[[Page 26312]]

Series 50 pilot examination will have the municipal advisor 
representative qualification and will not be required to take the 
permanent Series 50 examination.\12\ The MSRB will notify candidates 
who take the Series 50 pilot examination of their results approximately 
three months after taking the examination. The MSRB will announce the 
dates and the registration process for the Series 50 pilot examination 
in a notice published on the MSRB's Web site no later than three months 
from the date of this filing and with at least thirty days advance 
notice.\13\ The MSRB will announce an effective date for the permanent 
Series 50 examination in a notice published on the MSRB's Web site no 
later than one year from the date of this filing and with at least 60 
days advance notice.\14\
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    \11\ Prior to beginning the pilot examination, candidates will 
receive a tutorial on how to complete the computerized examination. 
Candidates will be given 30 minutes to complete the tutorial in 
addition to the 240 minutes allowed to complete the examination.
    \12\ An individual who fails to pass the Series 50 pilot 
examination will, consistent with MSRB Rule G-3(g), still be allowed 
three attempts to pass the permanent Series 50 examination before 
having to wait a period of 6 months to take the permanent Series 50 
examination again.
    \13\ For the most up-to-date information on the Series 50 pilot 
examination visit the Municipal Advisor Professional Qualifications 
page on the MSRB's Web site.
    \14\ To provide for an orderly transition to the new examination 
requirement for municipal advisor representatives and municipal 
advisor principals, the MSRB will allow municipal advisor 
professionals one year from the announced effective date of the 
Series 50 examination to pass the examination. This one-year grace 
period is intended to provide municipal advisor representatives and 
municipal advisor principals with sufficient time to study for and 
take the examination without causing undue business disruption.
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    The selection specifications for the Series 50 examination, which 
the MSRB has submitted under separate cover with a request for 
confidential treatment to the Commission's Secretary pursuant to Rule 
24b-2 under the Act,\15\ describe additional confidential information 
regarding the Series 50 examination.
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    \15\ 17 CFR 240.24b-2.
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2. Statutory Basis
    Section 15B(b)(2)(A) of the Act authorizes the MSRB to prescribe 
standards of training, experience, competence, and such other 
qualifications for associated persons of municipal advisors as the 
Board finds necessary or appropriate in the public interest or for the 
protection of investors and municipal entities or obligated 
persons.\16\ Section 15B(b)(2)(A)(i)-(iii) of the Act also provides 
that the Board may appropriately classify municipal advisors and 
persons associated with municipal advisors and require persons in any 
such class to pass tests prescribed by the Board.\17\
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    \16\ 15 U.S.C. 78o-4(b)(2)(A).
    \17\ 15 U.S.C. 78o-4(b)(2)(A)(i)-(iii).
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    The MSRB believes that the Series 50 examination content outline 
for the Series 50 examination is consistent with the provisions of 
Section 15B(b)(2)(A) of the Act in that the Series 50 examination 
content outline is designed to ensure that individuals are sufficiently 
qualified to perform municipal advisory activities.

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

    Section 15B(b)(2)(C) of the Act \18\ requires that MSRB rules not 
be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. In addition, 
Section 15B(b)(2)(L)(iv) of the Act provides that MSRB rules may ``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.'' \19\
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    \18\ 15 U.S.C. 78o-4(b)(2)(C).
    \19\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
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    In considering these standards, the MSRB was guided by the Board's 
Policy on the Use of Economic Analysis.
    The MSRB does not believe that the Series 50 examination content 
outline will impose any burdens that are not necessary or appropriate 
in furtherance of the purposes of the Act.
Need for Rule
    The Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010 (``Dodd-Frank Act'') amended Section 15B of the Exchange Act to 
provide for the regulation by the SEC and the MSRB of municipal 
advisors and to grant the MSRB certain authority to protect municipal 
entities and obligated persons.\20\ The Dodd-Frank Act's legislative 
history indicates Congress was concerned that ``[d]uring the 
[financial] crisis, a number of municipalities suffered losses from 
complex derivatives products that were marketed by unregulated 
financial intermediaries.'' \21\
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    \20\ Public Law 111-203, 124 Stat. 1376 (2010).
    \21\ S. Rep. No. 111-176, at 38 (2010).
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Baseline
    The economic baseline for the Series 50 examination content outline 
includes the Dodd-Frank Act which established the federal regulatory 
framework for municipal advisors, required the MSRB to establish 
standards of training, experience, competence and other qualifications 
for municipal advisors and their associated persons, and required 
associated persons of municipal advisors to pass examinations to 
demonstrate that they meet the standards the Board finds necessary or 
appropriate in the public interest or for the protection of investors, 
and municipal entities or obligated persons.\22\ The baseline also 
includes MSRB Rule G-3(d), which established the municipal advisor 
representative qualification examination requirement for municipal 
advisor representative candidates.\23\
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    \22\ See Section 15B(b)(2)(A) of the Act, 15 U.S.C. 78o-
4(b)(2)(A).
    \23\ See supra note 6.
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Alternatives
    The MSRB developed the Series 50 examination content outline in 
accordance with The Standards for Educational and Psychological Testing 
(``APA Standard''),\24\ including the engagement of a psychometrician 
and a committee of industry subject matter experts, as is consistent 
with the development of other financial industry qualification 
examinations. This process resulted in the identification and 
consideration of a range of alternatives. Decisions about which 
alternatives to select for the final Series 50 examination content 
outline were made consistent with the APA Standard.
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    \24\ See supra note 7.
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Economic Impact
    Relative to the economic baseline, which includes the requirement 
that municipal advisors demonstrate by passing an examination that they 
meet standards deemed necessary or appropriate in the public interest 
or for the protection of investors, municipal entities and obligated 
persons, the MSRB believes that the economic impact of the Series 50 
examination content outline is de minimis and no greater than what is 
necessary or appropriate in furtherance of the purposes of the Act.\25\
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    \25\ As noted above, many of the costs and burdens, including 
impacts on competition, associated with the Series 50 examination 
content outline are accounted for in the baseline which is made up, 
in part, by the Dodd-Frank Act. In 2013, the SEC concluded that the 
municipal advisory services market was competitive and not highly 
concentrated under a similar baseline. See Registration of Municipal 
Advisors, Exchange Act Release No. 70462 (Sept. 20, 2013), 78 FR 
67608 at n.1723 (Nov. 12, 2013).
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    While any examination intended to identify those individuals who 
meet a particular standard of competence may represent a barrier to 
entry, the MSRB believes that the standard that successful completion 
of the examination will demonstrate is necessary to protect investors 
and

[[Page 26313]]

municipal entities or obligated persons and will help ensure that those 
offering municipal advisory service do so on a level playing field. As 
such, the MSRB believes that the Series 50 examination content outline 
poses no burden on competition that is not necessary or appropriate in 
furtherance of the Act and may enhance the competiveness of the market.
    Based on the well-established and nationally-accepted process used 
by the MSRB to develop the Series 50 examination content outline, the 
MSRB has no reason to believe that the Series 50 examination content 
outline will pose any greater burden on individuals associated with 
smaller firms than those associated with larger firms or that the 
burden could be materially reduced while still achieving the purposes 
of the Act. While it is possible that small municipal advisors may have 
access to fewer resources to prepare for this examination, the MSRB 
does not believe this will affect the competitiveness of the market.

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

    Pursuant to Section 19(b)(3)(A) \26\ of the Act and Rule 19b-
4(f)(6) \27\ thereunder, the MSRB has designated the proposed rule 
change as one that effects a change that: (i) Does not significantly 
affect the protection of investors or the public interest; (ii) does 
not impose any significant burden on competition; and (iii) by its 
terms, does not become operative for 30 days after the date of the 
filing, or such shorter time as the Commission may designate.
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative until 30 days after the date of filing.\28\ 
However, Rule 19b-4(f)(6)(iii) \29\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest.\30\ The MSRB has requested that the 
Commission designate the proposed rule change operative upon 
filing,\31\ as specified in Rule 19b-4(f)(6)(iii),\32\ which would make 
the proposed rule change operative on April 22, 2015. The MSRB has 
stated that an earlier operative date would provide municipal advisor 
professionals with an earlier opportunity to begin preparation for the 
qualification requirement.\33\
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    \28\ Id.
    \29\ 17 CFR 240.19b-4(f)(6)(iii).
    \30\ In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file a proposed rule change, along with a brief 
description and text of such proposed rule change, at least five 
business days prior to the date of filing, or such shorter time as 
designated by the Commission. The MSRB satisfied this requirement on 
April 14, 2015.
    \31\ See SR-MSRB-2015-04.
    \32\ 17 CFR 240.19b-4(f)(6)(iii).
    \33\ See supra note 31.
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    The Commission hereby grants the MSRB's request and believes that 
designating the proposed rule change operative upon filing is 
consistent with the protection of investors and the public 
interest.\34\ According to the MSRB, the Series 50 examination content 
outline is designed to ensure that individuals are sufficiently 
qualified to perform municipal advisory activities.\35\ The Commission 
believes that designating the proposed rule change operative upon 
filing is consistent with the protection of investors and the public 
interest because it will allow individuals to prepare for the Series 50 
examination without delay. In addition, the proposed rule change is not 
proposing any textual changes to MSRB rules. Therefore, the Commission 
hereby designates the proposed rule change operative upon filing.
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    \34\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule 
change's impact on efficiency, competition, and capital formation. 
See 15 U.S.C. 78c(f).
    \35\ See supra note 31.
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    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.

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 email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2015-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2015-04. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet 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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the MSRB. All 
comments received will be posted without change; 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-2015-04 and should be 
submitted on or before May 28, 2015.

    For the Commission, pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10946 Filed 5-6-15; 8:45 am]
 BILLING CODE 8011-01-P


