
[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Notices]
[Pages 36039-36046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16213]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81233; File No. SR-MSRB-2017-03]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Amendment No. 1 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 1, Consisting of Proposed Amendments to MSRB Rule G-26, 
on Customer Account Transfers, To Modernize the Rule and Promote a 
Uniform Customer Account Transfer Standard

July 27, 2017.

I. Introduction

    On May 26, 2017, the Municipal Securities Rulemaking Board (the 
``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (the ``SEC'' or ``Commission''), pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change consisting of proposed 
amendments to MSRB Rule G-26, on customer account transfers, to 
modernize the rule and promote a uniform customer account transfer 
standard for all brokers, dealers, municipal securities brokers and 
municipal securities dealers (collectively, ``dealers'') (the 
``proposed rule change''). The proposed rule change was published for 
comment in the Federal Register on June 14, 2017.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 80890 (June 7, 2017) 
(the ``Notice of Filing''), 82 FR 27307 (June 14, 2017).
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    The Commission received two comment letters on the proposed rule 
change.\4\ On July 20, 2017, the MSRB responded to those comments \5\ 
and filed Amendment No. 1 to the proposed rule change (``Amendment No. 
1'').\6\ The Commission is publishing this notice to solicit comments 
on Amendment No. 1 to the proposed rule change from interested parties 
and is approving the proposed rule change, as modified by Amendment No. 
1, on an accelerated basis.
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    \4\ See Letter to Secretary, Commission, from Mike Nicholas, 
Chief Executive Officer, Bond Dealers of America (``BDA''), dated 
July 5, 2017 (the ``BDA Letter''); and, Letter to Secretary, 
Commission, from Leslie M. Norwood, Managing Director and Associate 
General Counsel, Securities Industry and Financial Markets 
Association (``SIFMA''), dated July 5, 2017 (the ``SIFMA Letter'').
    \5\ See Letter to Secretary, Commission, from Carl E. Tugberk, 
Assistant General Counsel, MSRB, dated July 20, 2017 (the ``MSRB 
Response Letter''), available at https://www.sec.gov/comments/sr-msrb-2017-03/msrb201703-1871538-156223.pdf.
    \6\ Id. In Amendment No. 1, the MSRB proposed to amend the 
requested implementation date to provide for a longer implementation 
period and later effective date by proposing an effective date six 
months from the date of Commission approval rather than three 
months.
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II. Description of Proposed Rule Change

    In the Notice of Filing, the MSRB stated that the purpose of the 
proposed rule change is to modernize Rule G-26 and promote a uniform 
customer account transfer standard for all dealers.\7\ The MSRB stated 
that it believes that, by including certain provisions parallel to the 
customer account transfer rules of other SROs, particularly FINRA Rule 
11870, in current Rule G-26, the transfer of customer securities 
account assets will be more flexible, less burdensome, and more 
efficient, while reducing confusion and risk to investors and allowing 
them to better move their municipal securities to their dealer of 
choice.\8\
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    \7\ See Notice of Filing.
    \8\ Id.
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    As further described by the MSRB in the Notice of Filing, Rule G-26 
requires dealers to cooperate in the transfer of customer accounts and 
specifies procedures for carrying out the transfer process.\9\ 
According to the MSRB, such transfers occur when a customer decides to 
transfer an account from one dealer, the carrying party (i.e., the 
dealer from which the customer is requesting the account be 
transferred) to another, the receiving party (i.e., the dealer to which 
the customer is requesting the account be transferred).\10\ Moreover, 
Rule G-26 currently establishes specific time frames within which the 
carrying party is required to transfer a customer account; limits the 
reasons for which a receiving party may take exception to an account 
transfer instruction; provides for the establishment of fail-to-receive 
and fail-to-deliver contracts; \11\ and requires that fail contracts be 
resolved in accordance with MSRB close-out procedures, established by 
MSRB Rule G-12(h).\12\ In addition, current Rule G-26 requires the use 
of the automated customer account transfer service in place at a 
registered clearing agency registered with the Commission when both 
dealers are direct participants in the same clearing agency.\13\ 
Finally, the rule contains a provision for enhancing compliance by 
requiring submission of transfer instructions to the enforcement 
authority with jurisdiction over the dealer carrying the account, if 
the enforcement authority requests such submission.\14\
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    \9\ Id.
    \10\ Id.
    \11\ The MSRB stated that fail-to-receive and fail-to-deliver 
contracts are records maintained by the receiving party and the 
carrying party, respectively, when a customer account transfer 
fails. See Notice of Filing.
    \12\ See Notice of Filing.
    \13\ See Rule G-26(h).
    \14\ See Rule G-26(i).
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    As discussed in the Notice of Filing, the MSRB adopted Rule G-26 in 
1986 as part of an industry-wide initiative to create a uniform 
customer account transfer standard by applying a customer account 
transfer procedure to all dealers that are engaged in municipal 
securities activities.\15\ The uniform standard for all customer 
account transfers (i.e., automated and manual processes) is largely 
driven by the National Securities Clearing Corporation's (``NSCC'') 
Automated Customer Account Transfer Service (``ACATS'').\16\ The MSRB 
stated that it adopted Rule G-26 in conjunction with the adoption of 
similar rules by other self-regulatory organizations (``SROs'')--New 
York Stock Exchange (``NYSE'') Rule 412 and Financial Industry 
Regulatory Authority (``FINRA'') Rule 11870.\17\ The MSRB stated that 
those rules are not applicable to certain accounts at dealers, 
particularly municipal security-only accounts and accounts at bank 
dealers.\18\ Current Rule G-26 governs the municipal security-only 
customer account transfers performed by those dealers to ensure that 
all customer account transfers are subject to regulation that is 
consistent with the uniform industry standard. Thus, the MSRB noted, in 
order to maintain consistency and the uniform standard, the MSRB has, 
from time to time, modified the requirements of Rule G-26 to conform to 
certain provisions of the parallel FINRA and NYSE customer account 
transfer rules, as well as to enhancements made to the ACATS process by 
NSCC, that had relevance to municipal securities.\19\
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    \15\ See Notice of Filing.
    \16\ Id.
    \17\ Id.
    \18\ Id.
    \19\ Id.
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Residual Credit Positions

    The MSRB has proposed to update Rule G-26 to include the transfer 
of

[[Page 36040]]

customer account residual credit positions.\20\ The MSRB noted that in 
1989 the NSCC expanded ACATS to include the transfer of customer 
account residual credit positions. These are assets in the form of cash 
or securities that can result from dividends, interest payments or 
other types of assets received by the carrying party after the transfer 
process is completed, or which were restricted from being included in 
the original transfer.\21\ The MSRB noted that the NYSE and FINRA made 
corresponding changes to their rules that require dealers that 
participate in a registered clearing agency with automated residual 
credit processing capabilities to utilize those facilities to transfer 
residual credit positions that accrue to an account after a 
transfer.\22\ Prior to allowing for these transfers, a check frequently 
would have to be produced, or a delivery bill or report, which then 
required a check to be issued or securities to be transferred.\23\ The 
MSRB stated that this process could result in lost or improperly routed 
checks and securities, as well as the expenses of postage and 
processing.\24\ According to the MSRB, the proposed amendments to Rule 
G-26(k)(ii) would benefit both customers and dealers by substantially 
decreasing the paperwork, risks, inefficiencies and costs associated 
with the practice of check issuance and initiation of securities 
deliveries to resolve residual credit positions.\25\
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    \20\ See Notice of Filing and proposed Rule G-26(k)(ii).
    \21\ See Notice of Filing.
    \22\ Id.
    \23\ Id.
    \24\ Id.
    \25\ Id.
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Partial Account Transfers

    The MSRB has proposed to update Rule G-26 to permit partial account 
transfers under the same time frames applicable to transfers of entire 
accounts, which the MSRB believes would provide dealers with the 
ability to facilitate more efficient and expeditious transfers, as well 
as increase accountability for dealers and reduce difficulties 
encountered by customers related to transfers.\26\ The proposed rule 
change would require that dealers expedite all authorized municipal 
securities account asset transfers, whether through ACATS or via other 
means permissible, and coordinate their activities with respect 
thereto. The MSRB stated that this proposed change would further 
competition among dealers by more easily allowing investors to transfer 
their municipal securities to the dealer of their choice.\27\ The MSRB 
noted that in 1994, the NYSE and FINRA amended their rules to permit 
partial or non-standard customer account transfers (i.e., the transfer 
of specifically designated assets from an account held at one dealer to 
an account held at another dealer).\28\ The MSRB further noted that in 
2004, the NYSE and FINRA further amended their rules generally to apply 
the same procedural standards and time frames that are applicable to 
the transfer of entire accounts to partial transfers as well.\29\ 
According to the MSRB, because customer and dealer obligations 
resulting from the transfer of an entire account differ from the 
obligations arising from the transfer of specified assets within an 
account that will remain active at the carrying party, the NYSE and 
FINRA rules distinguish between the transfer of security account assets 
in whole or in specifically designated part.\30\ The MSRB stated that, 
as an example, it would not be necessary for a customer to instruct the 
carrying party as to the disposition of his or her assets that are 
nontransferable if the customer is not transferring the entire 
account.\31\
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    \26\ See Notice of Filing and proposed Rule G-26(b), (c)(ii), 
(d)(i), (e)(ii), (k)(i).
    \27\ See Notice of Filing.
    \28\ Id.
    \29\ Id.
    \30\ Id.
    \31\ Id.
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Transfer of Third-Party and/or Proprietary Products

    The MSRB stated that the proposed rule change would amend Rule G-26 
to be consistent with the NSCC's Rule 50 regarding the transfer of 
third-party and/or proprietary products that the receiving party is 
unable to receive or carry--which allow the receiving party to review 
the asset validation report, designate those nontransferable assets it 
is unable to receive/carry, provide the customer with a list of those 
assets, and require instructions from the customer regarding their 
disposition--by requiring the receiving party to designate any third-
party products it is unable to receive.\32\ The MSRB stated that the 
proposed rule change will eliminate the present need for reversing the 
transfer of nontransferable assets, reduce the overall time frame for 
transferring third-party products, and generally reduce delay in and 
the cost of customer account transfers.\33\
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    \32\ See Notice of Filing and proposed Rule G-26(e)(vii).
    \33\ See Notice of Filing.
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Electronic Signature for Customer Authorization of Account Transfer

    Under current Rule G-26, a customer can initiate a transfer of a 
municipal securities account from one dealer to another by giving 
written notice to the receiving party.\34\ The MSRB states that under 
current Rule G-26(c)(i), customers and dealers may use Form G-26 (the 
transfer instruction prescribed by the MSRB), the transfer instructions 
required by a clearing agency registered with the SEC in connection 
with its automated customer account transfer system or transfer 
instructions that are substantially similar to those required by such 
clearing agency to accomplish a customer account transfer.\35\ The 
proposed rule change would replace the written notice requirement under 
current Rule G-26 with an authorized instruction requirement, which 
could be a customer's actual written or electronic signature.\36\ The 
MSRB stated that updating the written notice requirement in Rule G-26 
to include electronic signatures will expedite the transfer of customer 
assets between dealers and more easily allow investors to transfer 
their assets to the dealer of their choice.\37\
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    \34\ Id.
    \35\ Id.
    \36\ See Notice of Filing and Supplementary Material .01 to 
proposed Rule G-26.
    \37\ See Notice of Filing.
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Shortened ACATS Cycle

    The proposed rule change would shorten the time for validating or 
taking exception to the transfer instructions from three days to one 
day, and shorten the time for completing a customer account transfer 
from four days to three days, respectively.\38\ Rule G-26 currently 
specifies three days as the time to validate or take exception to the 
transfer instructions and four days as the time frame for completion of 
a customer account transfer.\39\ The MSRB stated that reducing those 
time frames to one and three day(s), respectively, will ensure 
consistency with the industry standard set by the NSCC and 
harmonization with other SROs, while providing greater efficiency and 
improving the customer experience in the customer account transfer 
process.\40\
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    \38\ See Notice of Filing and proposed Rule G-26(d)(i), (f)(i).
    \39\ See Notice of Filing and Rule G-26(d)(i), (v).
    \40\ See Notice of Filing and proposed Rule G-26(d)(i), (f)(i).
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Definition of ``Nontransferable Asset''

    In response to a specific question in the Request for Comment,\41\ 
SIFMA

[[Page 36041]]

indicated that dealers may sell proprietary products that are municipal 
securities to customers, the transferability of which FINRA Rule 11870 
addresses.\42\ Given this affirmative response, and because a receiving 
party cannot hold a proprietary product of a carrying party, the MSRB 
stated that it is important to include proprietary products of the 
carrying party in the definition of ``nontransferable asset'' to better 
harmonize with FINRA's corresponding definition and to ensure that bank 
dealers, and other dealers subject to Rule G-26, have clarity when 
handling such proprietary products in customer account transfers.\43\ 
The proposed rule change would also provide the following options for 
the disposition of such proprietary products that would be 
nontransferable assets: Liquidation; retention by the carrying party 
for the customer's benefit; or transfer, physically and directly, in 
the customer's name to the customer.\44\
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    \41\ See Notice of Filing and MSRB Notice 2017-01 (Jan. 6, 2017) 
(``Request for Comment''), Question 8 (``Do municipal securities 
brokers or municipal securities dealers sell proprietary products 
that are municipal securities to customers?'').
    \42\ See Notice of Filing and Letter from Leslie M. Norwood, 
Managing Director and Associate General Counsel, SIFMA, to Ronald W. 
Smith, Corporate Secretary, MSRB, dated February 17, 2017 (``SIFMA 
Response Letter to Request for Comment'').
    \43\ See Notice of Filing and proposed Rule G-26(a)(iii)(C); 
FINRA Rule 11870(c)(1)(D)(i).
    \44\ See Notice of Filing and proposed Rule G-26(c)(ii)(A)-(C).
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Disposition of Nontransferable Assets

    Under current Rule G-26, if there are nontransferable assets 
included in a transfer instruction, there are multiple options 
available to the customer for their disposition, and the carrying party 
must request further instructions from the customer with respect to 
which option the customer would like to exercise.\45\ Depending on the 
type of nontransferable asset at issue, FINRA Rule 11870(c) requires 
either the carrying party or the receiving party to provide the 
customer with a list of the specific nontransferable assets and request 
the customer's desired disposition of such assets. For example, FINRA 
Rule 11870(c)(4) places the burden on the receiving party for third-
party products that are nontransferable.\46\ In response to the Request 
for Comment, SIFMA noted that current industry practice and standard 
requires that, depending on the type of nontransferable asset, either 
the carrying party or the receiving party provide the customer with a 
list of the nontransferable assets and request the customer's desired 
disposition of such assets, as opposed to limiting that requirement to 
the carrying party, which was proposed in the Request for Comment.\47\ 
The MSRB stated that, because there are third-party products that are 
municipal securities that a receiving party may not be able to carry, 
and such a receiving party may be the only party to a customer account 
transfer with that knowledge, allowing the receiving party to notify 
the customer of any nontransferable assets in a transfer and request 
their disposition in such circumstances will help ensure that 
nontransferable assets are properly identified and that both parties to 
a transfer are coordinating closely to complete the transfer 
efficiently and expeditiously.\48\ The MSRB also stated that to allow 
for this, to improve harmonization with FINRA Rule 11870 and to promote 
a uniform standard for all dealers, the proposed rule change would 
explicitly require that the carrying party and/or the receiving party 
provide the list of nontransferable assets.\49\
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    \45\ See Notice of Filing and Rule G-26(c)(ii).
    \46\ See Notice of Filing.
    \47\ See Notice of Filing and SIFMA Response Letter to Request 
for Comment.
    \48\ See Notice of Filing.
    \49\ See Notice of Filing and proposed Rule G-26(c)(ii).
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Liquidation of Nontransferable Assets

    The proposed rule change would require a referral to the program 
disclosure for a municipal fund security or to the registered 
representative for specific details regarding any redemption or 
liquidation-related fees.\50\ Under current Rule G-26, one of the 
disposition options for nontransferable assets available to customers 
is liquidation.\51\ When providing customers with this option, dealers 
are required to specifically indicate any redemption or other 
liquidation-related fees that may result from such liquidation and that 
those fees may be deducted from the money balance due the customer.\52\ 
FINRA Rule 11870 provides the same requirements, but also requires 
dealers to refer customers to the disclosure information for third-
party products or to the registered representative at the carrying 
party for specific details regarding any such fees, as well as to 
distribute any remaining balance to the customer and an indication of 
the method of how it will do so.\53\ The MSRB stated that the inclusion 
of these additional requirements in Rule G-26 will help ensure that 
customers receive as much relevant information as possible regarding 
potential redemption fees, including for municipal fund securities.\54\ 
In addition, the proposed rule change would require dealers to 
specifically indicate any redemption or other liquidation-related fees 
that may result from liquidation and that those fees may be deducted 
from the money balance due the customer.\55\ The MSRB stated that it is 
important to require explicitly the distribution of the remaining 
balance to the customer and an indication of how it will be 
accomplished.\56\
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    \50\ See Notice of Filing and proposed Rule G-26(c)(ii).
    \51\ See Notice of Filing and Rule G-26(c)(ii).
    \52\ See Notice of Filing and Rule G-26(c)(ii)(A).
    \53\ See Notice of Filing and FINRA Rule 11870(c)(3)(A), 
(c)(4)(A).
    \54\ See Notice of Filing and proposed Rule G-26(c)(ii)(A).
    \55\ See Notice of Filing.
    \56\ See Notice of Filing and proposed Rule G-26(c)(ii)(A).
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Transfer of Nontransferable Assets to Customers

    The MSRB stated that some municipal securities that are 
nontransferable assets could transferred, physically and directly, to 
the customer, in a manner similar to FINRA Rule 11870(c)(3)(C)--which 
provides an option for nontransferable assets that are proprietary 
products to be transferred, physically and directly, in the customer's 
name to the customer--and have therefore included amendments in the 
proposed rule change that add this option to the alternative 
dispositions available to customers.\57\ The MSRB noted that not all 
municipal securities may be appropriate for this option and that the 
carrying party would not be required to physically deliver any 
nontransferable assets of which it does not have physical 
possession.\58\
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    \57\ See Notice of Filing and proposed Rule G-26(c)(ii)(C).
    \58\ See Notice of Filing.
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Timing of Disposition of Nontransferable Assets

    Under the proposed rule change, the Rule G-26 would be amended to 
harmonize with FINRA Rule 11870(c)(5) to require that the money balance 
resulting from liquidation must be distributed, and any transfer 
instructed by the customer must be initiated, within five business days 
following receipt of the customer's disposition instruction.\59\ Rule 
G-26 currently does not provide a time frame for the carrying party to 
effect the disposition of nontransferable assets as instructed by the 
customer. The MSRB stated that it is important to provide clarity as to 
the timing of these dispositions to ensure

[[Page 36042]]

that customer transfers are handled expeditiously.\60\
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    \59\ Id.
    \60\ See Notice of Filing and proposed Rule G-26(c)(iii).
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Transfer Procedures

    Current Rule G-26(d) establishes, as part of the transfer 
procedures, the requirements for validation of the transfer 
instructions and completion of the transfer.\61\ The proposed rule 
change would provide the provisions describing the specific validation/
exception and completion processes in new, separate sections of the 
rule.\62\ As a result of this restructuring, the subsequent, existing 
sections of Rule G-26 would be renumbered in proposed Rule G-26. The 
MSRB stated that these amendments will detail the specific validation/
exception and completion processes more clearly and better harmonize 
with FINRA Rule 11870.\63\
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    \61\ See Notice of Filing.
    \62\ See Notice of Filing and proposed Rule G-26(e), (f).
    \63\ See Notice of Filing.
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Validation of Transfer Instructions

    Under current Rule G-26(d)(iv)(A), upon validation of a transfer 
instruction, the carrying party must ``freeze'' the account to be 
transferred and return the transfer instruction to the receiving party 
with an attachment indicating all securities positions and money 
balance in the account as shown on the books of the carrying party.\64\ 
Because the proposed rule change would allow for partial account 
transfers of specifically designated municipal securities assets, the 
proposed rule change would require the account freeze only for 
validation of the transfer of an entire account, as the customer's 
account at the carrying party should not be frozen if certain municipal 
securities would remain in the account and the customer may want to 
continue transacting in that account.\65\ Under the proposed rule 
change, for whole and partial account transfers, the carrying party 
would continue to have the responsibility to return the instructions 
and indicate the securities positions and money balance to be 
transferred.\66\ However, the MSRB noted that to identify the assets 
held in the customer account at the carrying party more comprehensively 
and to harmonize with FINRA Rule 11870(d)(5)(A), the proposed rule 
change would also require the carrying party to indicate safekeeping 
positions,\67\ which are defined to be any security held by a carrying 
party in the name of the customer, including securities that are 
unendorsed or have a stock/bond power attached thereto.\68\
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    \64\ Id.
    \65\ See Notice of Filing and proposed Rule G-26(e)(i).
    \66\ See Notice of Filing and proposed Rule G-26(e)(ii).
    \67\ Id.
    \68\ See Notice of Filing and proposed Rule G-26(a)(vi).
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    Additionally, current Rule G-26(d)(iv)(B) requires the carrying 
party to include a then-current market value for all assets to be 
transferred. FINRA Rule 11870(d)(5) provides that the original cost 
should be used as the value if a then-current value cannot be 
determined for an asset.\69\ The MSRB stated that the proposed rule 
change would include a provision substantially similar to the FINRA 
provision to provide clarity on how any such municipal securities 
should be valued and to improve harmonization between the MSRB and 
FINRA rules.\70\
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    \69\ See Notice of Filing.
    \70\ See Notice of Filing and proposed Rule G-26(e)(ii).
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Exceptions to Transfer Instructions

    As part of the validation process, current Rule G-26 provides that 
the carrying party may take certain exceptions to the transfer 
instructions authorized by the customer and provided by the receiving 
party. Specifically, Rule G-26(d)(ii) allows a carrying party to take 
exception to a transfer instruction only if it has no record of the 
account on its books or the transfer instruction is incomplete.\71\ 
FINRA Rule 11870(d)(3) provides numerous other bases to take exception 
to a transfer instruction that--according to the MSRB--would more 
comprehensively address potential issues with a transfer instruction 
with which a carrying party could reasonably take issue and better 
harmonize with FINRA Rule 11870.\72\ Accordingly, the MSRB stated, in 
addition to the existing bases for exceptions, the proposed rule change 
would allow a carrying party to take exception to a transfer 
instruction if: (1) The transfer instruction contains an improper 
signature; (2) additional documentation is required (e.g., legal 
documents such as death or marriage certificate); (3) the account is 
``flat'' and reflects no transferable assets; \73\ (4) the account 
number is invalid (i.e., the account number is not on the carrying 
party's books); \74\ (5) it is a duplicate request; (6) it violates the 
receiving party's credit policy; (7) it contains unrecognized residual 
credit assets (i.e., the receiving party cannot identify the customer); 
(8) the customer rescinds the instruction (e.g., the customer has 
submitted a written request to cancel the transfer); (9) there is a 
mismatch of the Social Security Number/Tax ID (e.g., the number on the 
transfer instruction does not correspond to that on the carrying 
party's records); (10) the account title on the transfer instruction 
does not match that on the carrying party's records; (11) the account 
type on the transfer instruction does not correspond to that on the 
carrying party's records; (12) the transfer instruction is missing or 
contains an improper authorization (e.g., the transfer instruction 
requires an additional customer authorization or successor custodian's 
acceptance authorization or custodial approval; or (13) the customer 
has taken possession of the assets in the account (e.g., the municipal 
securities account assets in question have been transferred directly to 
the customer).\75\ The MSRB stated that in order to include the 
exceptions to transfer instructions with the provisions related to 
validation, the proposed rule change would move the existing exceptions 
and add the new exceptions in the new separate section on validation of 
transfer instructions.\76\
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    \71\ See Notice of Filing and Rule G-26(d)(ii).
    \72\ See Notice of Filing.
    \73\ The MSRB stated that for such an exception, the receiving 
party would have to resubmit the transfer instruction only if the 
most recent customer statement is attached. See Notice of Filing and 
proposed Rule G-26(e)(v).
    \74\ The MSRB stated that if the carrying party has changed the 
account number for purposes of internally reassigning the account, 
it would be the responsibility of the carrying party to track the 
changed account number, and such reassigned account number would not 
be considered invalid for purposes of fulfilling a transfer 
instruction. See Notice of Filing and proposed Rule G-26(e)(iv)(F).
    \75\ See Notice of Filing and proposed Rule G-26(e)(iv).
    \76\ See Notice of Filing.
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    Additionally, FINRA Rule 11870(d)(2) precludes a carrying party 
from taking an exception and denying validation of the transfer 
instruction because of a dispute over security positions or the money 
balance in the account to be transferred, and it requires the carrying 
party to transfer the positions and/or money balance reflected on its 
books for the account.\77\ The MSRB stated that this provision will be 
equally valuable to transfers covered under Rule G-26 to ensure that 
customers are able to hold their municipal securities at their dealers 
of choice.\78\
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    \77\ Id.
    \78\ See Notice of Filing and proposed Rule G-26(e)(iii).
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Recordkeeping and Customer Notification

    According to the MSRB, during the validation process for a customer 
account transfer, there is a risk that the parties to the transfer fail 
to identify

[[Page 36043]]

certain nontransferable assets, resulting in the improper transfer of 
those assets.\79\ FINRA Rule 11870(c)(1)(E) requires that the parties 
promptly resolve and reverse any such misidentified nontransferable 
assets, update their records and bookkeeping systems and notify the 
customer of the action taken. The proposed rule change would require 
that the parties promptly resolve and reverse any such misidentified 
nontransferable assets, update their records and bookkeeping systems 
and notify the customer of the action taken.\80\ The MSRB stated that 
believes it is important to add this explicit requirement to Rule G-26 
to ensure that dealers address any errors in the transfer process 
promptly.\81\
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    \79\ See Notice of Filing.
    \80\ See Notice of Filing and proposed Rule G-26(e)(vi).
    \81\ See Notice of Filing.
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Transfer Rejection

    The proposed rule change would provide the receiving party the 
ability to deny a customer's transfer request due to noncompliance with 
its credit policies or minimum asset requirements.\82\ FINRA Rule 
11870(d)(8) allows the receiving party to reject a full account 
transfer if the account would not be in compliance with its credit 
policies or minimum asset requirements.\83\ A receiving party may not 
reject only a portion of the account assets (i.e., the particular 
assets not in compliance with the dealer's credit policies or minimum 
asset requirement). Rule G-26 currently does not include any comparable 
provisions, but the MSRB stated that it is reasonable for a receiving 
party to deny a customer's transfer request due to noncompliance with 
its credit policies or minimum asset requirements.\84\
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    \82\ See Notice of Filing and proposed Rule G-26(e)(viii).
    \83\ See Notice of Filing.
    \84\ See Notice of Filing.
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Resolution of Discrepancies

    Rule G-26(f) currently provides that any discrepancies relating to 
positions or money balances that exist or occur after transfer of a 
customer account must be resolved promptly.\85\ FINRA Rule 11870(g) 
includes the same standard but also requires that the carrying party 
must promptly distribute to the receiving party any transferable assets 
that accrue to the customer's transferred account after the transfer 
has been effected. Further, FINRA Rule 11870(g) provides clarity to the 
promptness requirement by requiring that any claims of discrepancies 
after a transfer must be resolved within five business days from notice 
of such claim or the non-claiming party must take exception to the 
claim and set forth specific reasons for doing so. The proposed rule 
change would include these same additional provisions.\86\ The MSRB 
stated that these amendments will provide the same level of clarity as, 
and improve harmonization with, FINRA Rule 11870(g).\87\
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    \85\ See Notice of Filing and Rule G-26(f).
    \86\ See Notice of Filing proposed Rule G-26(i)(ii)-(iii).
    \87\ See Notice of Filing.
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Participant in a Registered Clearing Agency

    Rule G-26(h) currently requires the account transfer procedure to 
be accomplished pursuant to the rules of and through a registered 
clearing agency when both the carrying party and the receiving party 
are direct participants in a clearing agency that is registered with 
the SEC and offers automated customer securities account transfer 
capabilities.\88\ FINRA Rule 11870(m) has a similar requirement that 
provides an exception for specifically designated securities assets 
transferred pursuant to the submittal of a customer's authorized 
alternate instructions to the carrying party.\89\ FINRA Rule 
11870(m)(3) also requires the transfer of residual credit positions 
through the registered clearing agency. FINRA Rule 11870(m)(4) also 
prescribes several conditions for such transfers for participants in a 
registered clearing agency.\90\ The MSRB stated that customers and the 
parties to a customer account transfer should have the option of 
performing the transfer outside of the facilities of a registered 
clearing agency when an appropriate authorized alternate instruction is 
given.\91\ Additionally, the MSRB stated the additional prescription 
related to the process provided by FINRA will give greater clarity to 
customers and dealers.\92\ The MSRB, therefore, included these 
provisions in the proposed rule change.\93\
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    \88\ See Notice of Filing and Rule G-26(h).
    \89\ See Notice of Filing.
    \90\ See Notice of Filing and proposed Rule G-26(a)(iv)-(v).
    \91\ See Notice of Filing.
    \92\ Id.
    \93\ See Notice of Filing and proposed Rule G-26(k).
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Transfer of Residual Positions

    The proposed rule change would include a provision with the same 
10-business-day requirement as FINRA Rule 11870(n) \94\ that is not 
limited to when both parties are direct participants in a clearing 
agency registered with the SEC offering automated customer securities 
account transfer capabilities.\95\ The MSRB stated that the majority of 
customer account transfers subject to Rule G-26 occur manually, and 
that it is important to provide clarity on the obligation and timing 
required to transfer such credit balances for any customer account 
transfer.\96\
---------------------------------------------------------------------------

    \94\ See Notice of Filing.
    \95\ See Notice of Filing and proposed Rule G-26(g).
    \96\ See Notice of Filing.
---------------------------------------------------------------------------

Written Procedures

    Current Rule G-26 does not itself include any requirement for 
policies and procedures.\97\ The proposed rule change includes a 
requirement for dealers to document the procedures they follow to 
effect customer account transfers and to require explicitly written 
procedures for supervision of the same.\98\ The MSRB stated that such a 
requirement is consistent with MSRB Rule G-27, on supervision.\99\
---------------------------------------------------------------------------

    \97\ Id.
    \98\ See Notice of Filing and Supplementary Material .02 to 
proposed Rule G-26.
    \99\ See Notice of Filing.
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FINRA Rule 11650--Transfer Fees

    The MSRB stated that it is important to clarify which party is 
responsible for the fees incurred for a customer account transfer. The 
proposed rule change would include a provision identical to FINRA Rule 
11650 which specifies that the party at the instance of which a 
transfer of securities is made shall pay all service charges of the 
transfer agent.\100\
---------------------------------------------------------------------------

    \100\ See Notice of Filing and Supplementary Material .03 to 
proposed Rule G-26.
---------------------------------------------------------------------------

III. Summary of Comments Received and MSRB's Responses to Comments

    As noted previously, the Commission received two comment letters on 
the proposed rule change, as well as the MSRB Response Letter and 
Amendment No. 1. SIFMA expressed general support for the stated purpose 
of the proposed rule change, although SIFMA disapproved of the proposed 
rule change in its current form and stated that the proposed rule 
change is unnecessary and not an efficient way to achieve its stated 
purposes.\101\ SIFMA suggested alternative amendments to Rule G-26 that 
it believed would result in a more efficient rule that would be more 
closely harmonized with similar SRO rules.\102\ BDA suggested that the 
Commission request that FINRA harmonize the timeframe in FINRA Rule 
11870(f)(1) with MSRB Rules G-12(h) and G-26 as soon as practicable and 
that

[[Page 36044]]

the MSRB amend the proposed rule change to allow for a longer period 
between the adoption of the proposed rule change and its effective 
date.\103\ The MSRB stated that it believes the proposed rule change is 
consistent with its statutory mandate and has responded to the 
comments, as discussed below.\104\
---------------------------------------------------------------------------

    \101\ See SIFMA Letter.
    \102\ Id.
    \103\ See BDA Letter.
    \104\ See MSRB Response Letter.
---------------------------------------------------------------------------

1. Alternative Amendments to Rule G-26 To Further Purpose of Proposed 
Rule Change

    SIFMA stated that the MSRB should not have rejected its previously 
submitted suggestion to amend Rule G-26 to follow the NYSE model and 
incorporate FINRA Rule 11870 by reference because, contrary to the MSRB 
statement in the Notice of Filing, ``the MSRB would not be seen to be 
delegating its core mission to protect the municipal securities market, 
as there is nothing particularly unique regarding the transfer of 
customer accounts with respect to municipal securities.'' \105\ SIFMA 
noted that it believed there is precedence in the MSRB rulebook for 
making incorporating the rules of other SROs by reference in a MSRB 
rule.\106\ SIFMA also suggested that, as an alternative to 
incorporation by reference, ``FINRA member firms could elect to follow 
FINRA 11870 in lieu of MSRB Rule G-26, NYSE member firms can follow 
NYSE Rule 412 in lieu of MSRB Rule G-26, and firms that are not covered 
by either, then must follow MSRB Rule G-26.'' \107\ SIFMA stated that 
it believes adoption of one of these, or similar, alternative would be 
an ``efficient way to reduce confusion and risk to investors, and 
reduce regulatory risk to dealers.'' \108\
---------------------------------------------------------------------------

    \105\ See SIFMA Letter and SIFMA Response Letter to Request for 
Comment.
    \106\ See SIFMA Letter.
    \107\ Id.
    \108\ Id.
---------------------------------------------------------------------------

    The MSRB responded that, as it previously noted in the Notice of 
Filing, it continues to believe that Rule G-26 is necessary and that 
the proposed rule change is the appropriate approach to achieve the 
purpose of modernizing the rule and promoting a uniform customer 
account transfer standard for all dealers. The MSRB noted that it 
believed that SIFMA's comments are substantially similar to previous 
comments it submitted in response to the MSRB's Request for 
Comment,\109\ and the MSRB had addressed them in detail in the Notice 
of Filing. The MSRB stated that it believes that, although SIFMA is 
correct that any firms that are not members of FINRA or the NYSE are 
likely not direct clearing participants of the NSCC and, therefore, 
ineligible to participate in ACATS, this does not obviate the need for 
Rule G-26. The MSRB stated that, contrary to SIFMA's assertion, this is 
a key reason why Rule G-26 is not redundant and is necessary to ensure 
that all dealers are subject to a customer account transfer rule, and 
the proposed rule change is necessary and appropriate to ensure that 
the standard in Rule G-26 is consistent with the industry 
standard.\110\ The MSRB further stated that ACATS, which is established 
and governed by NSCC Rule 50, is an automated process utilized by NSCC 
members to perform customer account transfers.\111\ The MSRB also 
responded to SIFMA's comment by stating that not only does NSCC Rule 50 
not apply to dealers that are not direct clearing participants and 
members of NSCC, it does not apply to manual processes, which are used 
by certain dealers with municipal security-only customer accounts, 
particularly bank dealers that are not members of FINRA or the 
NYSE.\112\ The MSRB stated that, as a result, it believes that there 
remains a need for Rule G-26, which applies, currently and as proposed, 
to both automated and manual processes, including provisions to 
facilitate the use of ACATS,\113\ to address the customer account 
transfers of these dealers.\114\ The MSRB stated that it continues to 
believe that amending Rule G-26 to incorporate FINRA Rule 11870 by 
reference would not be an appropriate approach to the proposed rule 
change, as well as being inconsistent with the MSRB's statutory mandate 
and mission, as most relevant here, to protect investors, issuers, and 
the public interest, and to promote a fair and efficient municipal 
market.\115\ The MSRB further stated that--putting aside whether there 
are unique aspects of the transfer of municipal security-only customer 
accounts--it believes that bank dealers clearly are unique, as they 
would not be subject to a customer account transfer rule but for the 
existence of Rule G-26.\116\ The MSRB stated that, as a result, it 
believes it is important that, at a minimum, it retain the full ability 
to deliberately consider issues that may be unique to these dealers, 
but also to the municipal securities market more broadly, in the 
consideration of future amendments to Rule G-26, which ability could be 
hindered if the MSRB were merely to incorporate FINRA Rule 11870 by 
reference.\117\
---------------------------------------------------------------------------

    \109\ See Request for Comment.
    \110\ See MSRB Response Letter.
    \111\ Id.
    \112\ Id.
    \113\ See Notice of Filing, MSRB Rule G-26(h) and proposed MSRB 
Rule G-26(k)(i).
    \114\ See MSRB Response Letter.
    \115\ Id.
    \116\ Id.
    \117\ Id.
---------------------------------------------------------------------------

    In response to SIFMA's suggested alternative to effectively allow 
FINRA and NYSE members to follow FINRA Rule 11870 in lieu of Rule G-26, 
while dealers that are not members of those SROs would remain subject 
to Rule G-26, the MSRB stated that it believes that SIFMA's suggestion 
captures how Rule G-26 already operates (and would continue to operate 
as proposed to be amended).\118\ The MSRB further responded by stating 
that it had explained in the Request for Comment and the Notice of 
Filing that, at the time Rule G-26 was adopted, NYSE Rule 412 and FINRA 
Rule 11870 (NASD Rule 11870 at the time) were not applicable to certain 
dealers, particularly those with municipal security-only accounts and 
bank dealers.\119\ The MSRB further stated that this jurisdictional 
divide remains true today, such that Rule G-26 is not applicable to 
FINRA or NYSE members.\120\ However, the MSRB noted that there are 
dealers which are not members of those other SROs, particularly bank 
dealers, necessitating the existence of Rule G-26.\121\ The MSRB 
further stated that the main effect of the proposed rule change is to 
increase harmonization with FINRA Rule 11870, promoting a uniform 
customer account transfer standard that will make the transfer of 
customer securities accounts more flexible, less burdensome and more 
efficient, while reducing confusion and risk to investors and allowing 
them to better move their municipal securities to their dealer of 
choice.\122\
---------------------------------------------------------------------------

    \118\ Id.
    \119\ See MSRB Response Letter, Notice of Filing and Request for 
Comment.
    \120\ See MSRB Response Letter.
    \121\ Id.
    \122\ Id.
---------------------------------------------------------------------------

2. Extension of the Implementation Date of the Proposed Rule Change

    BDA suggested, in its comment letter, that the effective date of 
the proposed rule change be adjusted from three months from the date of 
approval to 180 days from the effective date of a approval to benefit 
smaller dealers with fewer compliance staff and resources and dealers 
subject to new Department of Labor rules effective January 1, 2018 and 
new MSRB and FINRA retail confirmation rules effective in May 
2018.\123\
---------------------------------------------------------------------------

    \123\ See BDA Letter.

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[[Page 36045]]

    The MSRB stated that it agreed that a more lengthy implementation 
period is appropriate, but that it does not believe a period of nearly 
a year is necessary, as the proposed rule change is designed primarily 
to create efficiencies in the customer account transfer process and the 
MSRB does not anticipate that the limited number of dealers subject to 
the amended rule would need to make significant changes to systems and/
or policies and procedures.\124\ To ease the extent of the burden 
created by the proposed rule change, the MSRB stated that it believes 
doubling the implementation period from three to six months from the 
date of approval is a sufficient amount of time for dealers to effect 
any changes necessary to achieve compliance.\125\ In response to the 
comment from BDA, the MSRB proposed, in Amendment No. 1, to amend the 
effective date of the proposed rule change requested in the Notice of 
Filing from three months to six months from the date of approval.\126\
---------------------------------------------------------------------------

    \124\ See MSRB Response Letter and Amendment No. 1.
    \125\ See MSRB Response Letter and Amendment No. 1.
    \126\ See Amendment No. 1.
---------------------------------------------------------------------------

3. Economic Impact of the Proposed Rule Change

    SIFMA stated that while it agrees that current Rule G-26 is not 
consistent with current securities industry standards and practices and 
that it likely creates ``uncertainties, inefficiencies and unnecessary 
costs associated with customer account transfers for all market 
participants'' but that the proposed rule change is not the most 
effective means for addressing these issues.\127\ SIFMA stated that 
``[h]aving different rules for account level transfers could result in: 
Additional compliance burdens, conflicting examiners from different 
regulators applying different rules to the same customer account 
transfer, and confusion among customers.'' \128\
---------------------------------------------------------------------------

    \127\ See SIFMA Letter.
    \128\ Id.
---------------------------------------------------------------------------

    The MSRB stated in Notice of Filing that it has evaluated the 
potential impacts on competition of the proposed rule change, including 
in comparison to reasonable alternative regulatory approaches, relative 
to the baseline in accordance with its Policy on the Use of Economic 
Analysis in MSRB Rulemaking,\129\ and does not believe the proposed 
rule change imposes any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\130\
---------------------------------------------------------------------------

    \129\ See Notice of Filing and Policy on the Use of Economic 
Analysis in MSRB Rulemaking, MSRB, available at: http://msrb.org/rules-and-interpretations/economic-analysis-policy.
    \130\ See Notice of Filing.
---------------------------------------------------------------------------

4. Request for an Update and Harmonization of Relevant FINRA Rules

    SIFMA and BDA requested that FINRA amend its Rule 11870 as soon as 
practicable to reflect the recent amendments to MSRB Rule G-12 relating 
to close-outs.\131\ SIFMA also suggested that the Commission should 
direct FINRA to ``consolidate its provisions that relate to the 
transfer of securities into FINRA 11870'' and recommended that FINRA 
delete its Rule 11650 with its operative language being included as new 
FINRA 11870 Supplementary Material .04.\132\
---------------------------------------------------------------------------

    \131\ See SIFMA Letter and BDA Letter.
    \132\ See SIFMA Letter.
---------------------------------------------------------------------------

    The comments from BDA and SIFMA regarding their suggestion that 
FINRA amend its Rules 11870 and 11650 are beyond the scope of the 
proposed rule change.

IV. Discussion and Commission Findings

    The Commission has carefully considered the proposed rule change, 
the comment letters received, the MSRB Response Letter, and Amendment 
No. 1. The Commission finds that the proposed rule change, as modified 
by Amendment No. 1, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to the MSRB.
    In particular, the proposed rule change, as modified by Amendment 
No. 1, is consistent with Sections 15B(b)(2), 15B(b)(2)(C) and 
15B(b)(2)(G) of the Act.\133\ Section 15B(b)(2) of the Act requires the 
MSRB to 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.\134\ Section 15B(b)(2)(C) of the Act requires that the MSRB's 
rules be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in municipal securities and municipal 
financial products, to remove impediments to and perfect the mechanism 
of a free and open market in municipal securities and municipal 
financial products, in general, to protect investors, municipal 
entities, obligated persons, and the public interest.\135\ Section 
15B(b)(2)(G) of the Act requires that the MSRB's rules prescribe 
records to be made and kept by municipal securities brokers, municipal 
securities dealers, and municipal advisors and the periods for which 
such records shall be preserved.\136\
---------------------------------------------------------------------------

    \133\ 15 U.S.C. 78o-4(b)(2); 78o-4(b)(2)(C) and 78o-4(b)(2)(G).
    \134\ See 15 U.S.C. 78o-4(b)(2).
    \135\ See 15 U.S.C. 78o-4(b)(2)(C).
    \136\ See 15 U.S.C. 78o-4(b)(2)(G).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change is consistent 
with the provisions of Sections 15B(b)(2) \137\ and 15B(b)(2)(C) \138\ 
of the Act because it would re-establish consistency with the customer 
account transfer rules of other SROs by conforming to significant 
updates by the NSCC, the NYSE and FINRA that have relevance to 
municipal securities. The Commission further believes that including 
certain provisions from the other rules in the proposed rule change 
will make the transfer of customer securities account assets more 
flexible, less burdensome, and more efficient, while reducing confusion 
and risk to investors and allowing them to better move their securities 
to their dealer of choice. The Commission believes that the proposed 
rule change will promote fairness and provide greater efficiency in the 
transfer of customer accounts, which should prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in municipal securities and municipal 
financial products, remove impediments to and perfect the mechanism of 
a free and open market in municipal securities and municipal financial 
products, and, in general, protect investors and the public interest.
---------------------------------------------------------------------------

    \137\ See 15 U.S.C. 78o-4(b)(2).
    \138\ See 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

    The Commission believes that the proposed rule change is consistent 
with Section 15B(b)(2)(G) of the Act \139\ because it would require 
dealers to document the procedures they follow to effect customer 
account transfers and to require explicitly written procedures for 
supervision of the same.
---------------------------------------------------------------------------

    \139\ Id.

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[[Page 36046]]

    In approving the proposed rule change, the Commission also has 
considered the impact of the proposed rule change, as modified by 
Amendment No. 1, on efficiency, competition, and capital 
formation.\140\ The Commission does not believe that the proposed rule 
change will impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. The Commission 
believes the proposed rule change would apply equally to all municipal 
securities brokers and municipal securities dealers and may reduce 
inefficiencies that stem from uncertainty and confusion associated with 
existing Rule G-26. The Commission believes that the clarifications and 
revisions included in the proposed rule change will likely result in 
dealers processing of customer account transfers by dealer in a manner 
that more closely reflects the securities industry standard, which may, 
in turn, reduce operational risk to dealers and investors. Furthermore, 
the Commission believes that the proposed rule change will likely make 
the transfer of customer municipal securities account assets more 
flexible, less burdensome, and more efficient, while reducing confusion 
and risk to investors and allowing them to more efficiently and 
effectively transfer their municipal securities to their dealer of 
choice.
---------------------------------------------------------------------------

    \140\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    As noted above, the Commission received two comment letters on the 
filing. The Commission believes that the MSRB, through its responses 
and through Amendment No. 1, has addressed commenters' concerns.
    For the reasons noted above, the Commission believes that the 
proposed rule change, as modified by Amendment No. 1, is consistent 
with the Act.

V. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
to the proposed rule change is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use of 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-2017-03 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-2017-03. 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-2017-03 and should be 
submitted on or before August 23, 2017.

VI. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause for approving the proposed rule 
change, as amended by Amendment No. 1, prior to the 30th day after the 
date of publication of notice of Amendment No. 1 in the Federal 
Register. As discussed above, Amendment No. 1 modifies the proposed 
rule change by proposing a longer implementation period of six months 
rather than the previously proposed three months. The MSRB has proposed 
the revisions included in Amendment No. 1 to provide a sufficient 
amount of time for dealers to effect any changes necessary to achieve 
compliance with the proposed rule change. As noted by the MSRB, 
Amendment No. 1 does not alter the substance of the original proposed 
rule change and only provides a lengthier implementation period to 
address a commenter's concern and ease the limited burden of the 
proposed rule change on dealers.
    For the foregoing reasons, the Commission finds good cause for 
approving the proposed rule change, as modified by Amendment No. 1, on 
an accelerated basis, pursuant to Section 19(b)(2) of the Act.

VIII. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\141\ that the proposed rule change (SR-MSRB-2017-03) be, and 
hereby is, approved.
---------------------------------------------------------------------------

    \141\ 15 U.S.C. 78s(b)(2).

    For the Commission, pursuant to delegated authority.\142\
---------------------------------------------------------------------------

    \142\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16213 Filed 8-1-17; 8:45 am]
 BILLING CODE 8011-01-P


