
[Federal Register Volume 81, Number 39 (Monday, February 29, 2016)]
[Notices]
[Pages 10306-10308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04250]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77212; File No. SR-FINRA-2016-004]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Adopt FINRA Rule 0151 (Coordination with the 
MSRB) and Amend FINRA Rule 0150 (Application of Rules to Exempted 
Securities Except Municipal Securities)

February 23, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 10, 2016, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by FINRA. FINRA has designated 
the proposed rule change as constituting a ``non-controversial'' rule 
change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which 
renders the proposal effective upon receipt of this filing by the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    FINRA is proposing to adopt FINRA Rule 0151 (Coordination with the 
MSRB) regarding coordination between FINRA and the Municipal Securities 
Rulemaking Board (``MSRB''), as required by the Exchange Act. FINRA 
also proposes to amend FINRA Rule 0150 to better align the language of 
the rule with the relevant language in the Exchange Act.
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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
Background
    The proposed rule change would adopt FINRA Rule 0151 regarding 
coordination between FINRA and the MSRB. The proposed rule change would 
also amend FINRA Rule 0150 to better align the language of the rule 
with the relevant language in the Exchange Act.
Statutory Requirement
    With respect to the proposed adoption of Rule 0151, the Dodd-Frank 
Wall Street Reform and Consumer Protection Act of 2010 added Section 
15A(b)(15) to the Exchange Act.\4\ Section 15A(b)(15) of the Exchange 
Act mandates that the rules of a national securities association 
require the association to: (i) Request guidance from the MSRB in 
interpretation of the rules of the MSRB;\5\ and (ii) provide 
information to the MSRB about the enforcement actions and examinations 
of the association under 15 U.S.C. Section 78o-4(b)(2)(E) so that the 
MSRB may assist in such enforcement actions and examinations and 
evaluate the ongoing effectiveness of the rules of the MSRB.
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    \4\ 15 U.S.C. 78o-3(b)(15).
    \5\ Section 15B of the Exchange Act provides, among other 
things, that the MSRB shall adopt rules with respect to municipal 
securities transactions 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. 15 U.S.C. 78o-4(b)(2).
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    With respect to the proposed amendments to Rule 0150, Section 
15A(f) of the Exchange Act provides that ``[n]othing in subsection 
(b)(6) or (b)(11) of [Section 15A] shall be construed to permit a 
registered securities association to make rules concerning any 
transaction by a registered broker or dealer in a municipal security.'' 
\6\
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    \6\ 15 U.S.C. 78o-3(f).
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Proposal
    FINRA, a national securities association, is proposing to adopt 
Rule 0151 addressing coordination between FINRA and the MSRB to comply 
with the statutory requirement. Specifically, proposed Rule 0151 would 
state that FINRA will request guidance from the MSRB in interpretation 
of the rules of the MSRB. Proposed Rule 0151 would also state that 
FINRA will provide information to the MSRB about the enforcement 
actions and examinations pertaining to municipal securities brokers, 
municipal securities dealers, and municipal advisors conducted by FINRA 
regarding the Exchange Act and the rules and regulations thereunder and 
the rules of the MSRB, so that the MSRB may: (i) Assist in such 
enforcement actions and examinations; and (ii) evaluate the ongoing 
effectiveness of the rules of the MSRB (collectively, 
``coordination'').
    FINRA notes that the reference to ``enforcement actions and 
examinations pertaining to municipal securities brokers, municipal 
securities dealers, and municipal advisors conducted by FINRA regarding 
the Exchange Act and the rules and regulations thereunder and the rules 
of the MSRB'' in proposed Rule 0151 is intended as a non-substantive 
change from the statutory language in Section 15A(b)(15) of the 
Exchange Act,\7\ which instead includes a cross-reference to 15 U.S.C. 
Section 78o-4(b)(2)(E). FINRA proposes the change in the proposed rule 
for ease of reference and not to reflect any substantive change from 
the statutory requirement.
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    \7\ 15 U.S.C. 78o-3(b)(15).
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    FINRA believes that proposed Rule 0151 reflects FINRA's current 
close coordination with the MSRB and satisfies the requirements of 
Section 15A(b)(15) of the Exchange Act.\8\ FINRA has regulatory 
responsibilities to, among other things, engage in surveillance of the 
securities markets, administer qualification examinations, perform 
examinations and investigations, and enforce the Exchange Act, the 
rules and regulations thereunder, the rules of FINRA, and the rules of 
the MSRB as to its member firms and their associated persons, for the 
protection of investors and in the public interest. These 
responsibilities extend to broker-dealers engaged in municipal 
securities activities and municipal advisory activities and persons 
associated with such firms.
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    \8\ 15 U.S.C. 78o-3(b)(15).
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    FINRA is also proposing to amend Rule 0150 to better align the 
language of the rule with the relevant language in Section 15A(f) of 
the Exchange Act.\9\ Specifically, FINRA is proposing to amend Rule 
0150(b) to provide that FINRA rules are not intended to be, and

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shall not be construed as, rules concerning transactions in municipal 
securities. FINRA notes that this change is consistent with the 
approach in NASD Rule 0114 (Effect on Transactions in Municipal 
Securities) which provided that FINRA rules shall not be construed to 
apply to transactions in municipal securities.\10\
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    \9\ 15 U.S.C. 78o-3(f).
    \10\ In 2008, FINRA incorporated NASD Rule 0114's statement that 
FINRA rules are not applicable to transactions in municipal 
securities into NASD Rule 0116 (Application of Rules of the 
Association to Exempted Securities), and transferred NASD Rule 0116, 
as amended, into the consolidated FINRA rulebook as Rule 0150. See 
SR-FINRA-2008-026.
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    FINRA has filed the proposed rule change for immediate 
effectiveness and has requested that the Commission waive the 
requirement that the proposed rule change not become operative for 30 
days after the date of the filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\11\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. FINRA believes that the proposed rule change to adopt 
Rule 0151 will further the purposes of the Act by addressing 
coordination between FINRA and the MSRB, consistent with Section 
15A(b)(15) under the Exchange Act.\12\ In addition, the proposed rule 
provides transparency to municipal securities brokers, municipal 
securities dealers, municipal advisors and investors regarding 
coordination between FINRA and the MSRB. FINRA also believes that the 
proposed amendments to Rule 0150(b) will further the purposes of the 
Act by better aligning the language of the rule with the relevant 
language in Section 15A(f) of the Exchange Act.\13\
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    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78o-3(b)(15).
    \13\ 15 U.S.C. 78o-3(f).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Under the proposed rule change, 
FINRA would adopt as part of its rulebook the statutory requirements 
for coordination with MSRB around rulemaking and enforcement and 
examination actions that seek to enhance FINRA's regulatory programs 
and the rulemaking of the MSRB. Given FINRA's responsibilities under 
the Exchange Act and the degree of coordination between FINRA and the 
MSRB, which reflects regulatory and market conditions, the proposed 
rule change is consistent with current practices and therefore would 
not at this time impose additional burdens or costs on FINRA or firms.
    Furthermore, the proposed rule provides a benefit by providing 
transparency regarding coordination between FINRA and the MSRB.

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.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act\14\ and Rule 19b-
4(f)(6)\15\ thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. FINRA has satisfied this requirement.
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    FINRA has asked the Commission to waive the 30-day operative delay 
so that the proposal may become operative immediately upon filing. 
FINRA stated that waiver of the operative delay is appropriate as Rule 
0151 will address coordination between FINRA and the MSRB, consistent 
with Section 15A(b)(15) under the Act.\16\ With respect to the proposed 
amendments to Rule 0150, FINRA stated that waiver of the operative 
delay is appropriate as the proposed amendments to Rule 0150(b) will 
better align the language of the rule with the relevant language in 
Section 15A(f) of the Exchange Act,\17\ and also noted that the 
proposed language is consistent with previously approved rule 
language.\18\ For these reasons, the Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission hereby 
waives the operative delay and designates the proposal operative upon 
filing.\19\
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    \16\ 15 U.S.C. 78o-3(b)(15).
    \17\ 15 U.S.C. 78o-3(f).
    \18\ See supra note 10 and accompanying text.
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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. 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-FINRA-2016-004 on the subject line.

Paper Comments:

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2016-004. 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

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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 
such filing also will be available for inspection and copying at the 
principal office of FINRA. 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-FINRA-2016-004, and should be submitted on or before March 21, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04250 Filed 2-26-16; 8:45 am]
 BILLING CODE 8011-01-P


