
[Federal Register Volume 82, Number 198 (Monday, October 16, 2017)]
[Notices]
[Pages 48135-48140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22262]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81841; File No. SR-MSRB-2017-07]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change to MSRB Rule A-11, on Assessments for Municipal Advisor 
Professionals, To Amend the Annual Municipal Advisor Professional Fee

October 10, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on September 29, 2017 the Municipal 
Securities Rulemaking Board (``MSRB'' or ``Board'') filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the MSRB. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

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

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to amend 
MSRB Rule A-11, on assessments for municipal advisor professionals, to 
increase the annual municipal advisor professional fee from $300 to 
$500 and make other technical changes (the ``proposed rule change''). 
The MSRB has designated the proposed rule change for immediate 
effectiveness. The MSRB will send the first invoice at the new fee 
level to firms in April 2018 for payment by April 30, 2018.
    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2017-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified

[[Page 48136]]

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.

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

1. Purpose
    The purpose of the proposed rule change is to increase the existing 
annual municipal advisor professional fee assessment to help defray the 
costs and expenses of operating and administering the MSRB, 
particularly the MSRB's regulatory and related activities in connection 
with municipal advisors. In the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010 (``Dodd-Frank Act''),\3\ Congress 
charged the Commission and the MSRB with the regulation of municipal 
advisors and specifically granted the MSRB authority to charge 
municipal advisors reasonable fees to defray the costs of the operation 
of the MSRB.\4\ In its exercise of authority granted by Congress, the 
MSRB has since developed a comprehensive regulatory framework for 
municipal advisors.\5\ To help defray the costs of this and related 
activities, in 2014, the MSRB adopted Rule A-11, on assessments for 
municipal advisor professionals.
---------------------------------------------------------------------------

    \3\ Public Law No. 111-203, 124 Stat. 1376 (2010).
    \4\ See 15 U.S.C. 78o-4(b)(2)(J).
    \5\ In furtherance of this framework, the MSRB developed a 
professional qualification exam, adopted new rules for municipal 
advisors and extended existing rules to municipal advisors that 
previously applied only to brokers, dealers and municipal securities 
dealers (collectively, ``dealers.'') These include, but are not 
limited to: Rule G-44 regarding the supervisory and compliance 
obligations of municipal advisors, see Release No. 34-73415 (October 
23, 2014), 79 FR 64423 (October 29, 2014) (File No. SR-MSRB-2014-06) 
(SEC order approving Rule G-44); Rule G-42 regarding the duties of 
non-solicitor municipal advisors, see Release No. 34-76753 (December 
23, 2015), 80 FR 81614 (December 30, 2015) (File No. SR-MSRB-2015-
03) (SEC order approving Rule G-42); amendments to Rule G-20, on 
gifts, gratuities and non-cash compensation, to extend provisions of 
the rule to municipal advisors, see Release No. 34-76381 (November 
6, 2015), 80 FR 70271 (November 13, 2015) (File No. SR-MSRB-2015-09) 
(SEC order approving amendments to Rule G-20); amendments to Rule G-
37, on political contributions and prohibitions on municipal 
securities business, to extend its provisions to municipal advisors, 
see Release No. 34-76763 (December 23, 2015), 80 FR 81710 (December 
30, 2015) (File No. SR-MSRB-2015-14) (Notice of filing of proposed 
amendments to Rule G-37); and amendments to Rule G-3 to establish 
registration and professional qualification requirements for 
municipal advisors, see Release No. 34-74384 (February 26, 2015), 80 
FR 11706 (March 4, 2015) (File No. SR-MSRB-2014-08) (SEC order 
approving registration and professional qualification requirements 
for municipal advisor representatives and municipal advisor 
principals).
---------------------------------------------------------------------------

    Pursuant to Rule A-11, each municipal advisor firm that is 
registered with the Commission is required to pay to the Board a 
recurring annual fee equal to $300 for each Form MA-I filed with the 
Commission by such municipal advisor as of January 31 of each year. 
Rule A-11 also provides for late fees on assessments that are not paid 
in full, and includes a transitional provision that, at the time of 
Rule A-11's adoption, was necessary to take into account the timing of 
the phased-in compliance period for the SEC's permanent municipal 
advisor registration process.
    The proposed rule change would amend Rule A-11(a) to provide that 
each municipal advisor that is registered with the Commission shall pay 
to the Board a recurring annual fee, equal to $500 for each person 
associated with the municipal advisor who is qualified as a municipal 
advisor representative in accordance with Rule G-3 and for whom the 
municipal advisor has on file with the Commission a Form MA-I as of 
January 31 of each year (``covered persons'').\6\ Amended Rule A-11(a) 
would increase the amount of the current assessment from $300 to $500 
and delete a now-outdated reference to the fiscal year for which the 
annual municipal advisor professional fee first became due. In 
addition, a minor amendment to section (a) would help streamline the 
rule by deleting the unnecessary clause ``and shall be payable'' from 
the final sentence in that section. Lastly, amendments to Rule A-11(a) 
would provide that the assessment payable would be determined based on 
the number of Form MA-Is on file with the Commission (as it is 
currently determined) and based on the number of associated persons 
qualified as a municipal advisor representative in accordance with Rule 
G-3. A person is qualified as a municipal advisor representative in 
accordance with Rule G-3(d) when such person has taken and passed the 
Municipal Advisor Representative Qualification Examination (the 
``Series 50 exam'').\7\
---------------------------------------------------------------------------

    \6\ While the MSRB has designated the proposed rule change for 
immediate effectiveness, by its terms, the assessment at the $500 
per covered person rate would be based on covered persons as of 
January 31 of each year. As noted above, the MSRB will send the 
first invoice at the new fee level (measured as of January 31, 2018) 
to firms in April 2018 for payment by April 30, 2018.
    \7\ As of September 12, 2017, only an associated person of a 
municipal advisor firm who has passed the Series 50 exam may engage 
in municipal advisory activities on behalf of the municipal advisor 
firm. Additionally, municipal advisor principals must likewise 
qualify as a municipal advisor representative by passing the Series 
50 exam. See MSRB Notice 2017-09, MSRB Reminds Municipal Advisors 
that the Series 50 Exam Deadline is September 12, 2017 (May 8, 
2017). Because all municipal advisor principals must also qualify as 
a municipal advisor representative, the $500 assessment would 
equally apply to municipal advisor principals.
---------------------------------------------------------------------------

    An amendment to Rule A-11(b) would provide that a municipal advisor 
that fails to timely pay in full ``the total'' annual municipal advisor 
professional fee due under section (a) shall pay a monthly late fee 
equal to $25 for such failure, while another amendment would delete the 
reference to the monthly fee being payable ``for each $300 assessment 
not paid in full.'' Together, these amendments to section (b) are 
intended to make clear that a separate $25 monthly late fee would not 
be due for each covered person for which the $300 fee was not timely 
paid. Rather, a municipal advisor firm would be required to pay only 
one $25 monthly late fee (regardless of the number of its covered 
persons for which the per professional fee was not timely paid) if it 
fails timely to pay in full the total fee due under section (a).\8\ 
Finally, the proposed rule change would delete Rule A-11(c) because 
that provision pertains to a transitional municipal advisor 
professional fee that no longer has application. A related minor 
technical amendment to Rule A-11(b) would delete a reference to Rule A-
11(c).
---------------------------------------------------------------------------

    \8\ This late fee would be in addition to a late fee on the 
total overdue balance based on the Prime Rate.
---------------------------------------------------------------------------

    The MSRB believes that the proposed fee increase reflected in the 
proposed amendments to Rule A-11(a) is reasonable as well as necessary 
and appropriate to help defray the costs of operating and administering 
the MSRB. It is also a step towards achieving the MSRB's strategic goal 
of promoting long-term financial stability by assessing fair and 
equitable fees, and diversifying funding sources. The MSRB believes the 
proposed rule change will help the organization provide for assessments 
that are increasingly more fairly and equitably apportioned among all 
registrants. The MSRB notes that, consistent with the Board's long-
standing prohibition on charging or otherwise passing through to 
issuers the fees required under Rule A-13,\9\ municipal advisors 
similarly would be prohibited from charging or otherwise passing 
through the fees required under Rule A-11 to issuers.
---------------------------------------------------------------------------

    \9\ See Release No. 34-81264 (July 31, 2017), 82 FR 36472, n. 18 
(August 4, 2017) (File No. SR-MSRB-2017-05) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change to Assess an 
Underwriting Fee on Dealers That Are Underwriters of Primary 
Offerings of Plans).

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

[[Page 48137]]

The Board's Holistic Review of MSRB Fees
    The MSRB assesses dealers and municipal advisors (collectively, 
``regulated entities'') various fees designed to defray the costs of 
its operations and administration, including rulemaking, market 
transparency, and educational and market outreach initiatives that 
fulfill its Congressional mandate to, among other things, protect 
investors, state and local governments and other municipal entities, 
obligated persons and the public interest and promote a fair and 
efficient municipal securities market.\10\ Section 15B(b)(2)(J) of the 
Act \11\ provides, in pertinent part, that each regulated entity shall 
pay to the Board such reasonable fees and charges as may be necessary 
or appropriate to defray the costs of operating and administering the 
Board, and that the MSRB shall have rules specifying the amount of such 
fees. The current fees so specified by MSRB rules are:
---------------------------------------------------------------------------

    \10\ See Section 15B(b)(2) of the Act (15 U.S.C. 78o-4(b)(2)) 
(in relevant part, requiring the Board to propose and adopt rules 
for 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).
    \11\ 15 U.S.C. 78o-4(b)(2)(J).
---------------------------------------------------------------------------

1. Municipal Advisor Professional Fee (Rule A-11)
    $300 annually per Form MA-I on file with the SEC by the municipal 
advisor;
2. Late Fee (Rules A-11 and A-12)
    $25 monthly late fee and a late fee on the overdue balance 
(computed according to the prime rate) until paid on balances not paid 
within 30 days of the invoice date by the dealer or municipal advisor;
3. Initial Registration Fee (Rule A-12)
    $1,000 one-time registration fee to be paid by each dealer to 
register with the MSRB before engaging in municipal securities 
activities and by each municipal advisor to register with the MSRB 
before engaging in municipal advisory activities;
4. Annual Registration Fee (Rule A-12)
    $1,000 annual fee to be paid by each dealer and municipal advisor 
registered with the MSRB;
5. Underwriting Fee (Rule A-13)
    $.0275 per $1,000 of the par value paid by a dealer, on all 
municipal securities purchased from an issuer by or through such 
dealer, whether acting as principal or agent as part of a primary 
offering, except in limited circumstances; and in the case of an 
underwriter (as defined in Rule G-45) of a primary offering of certain 
municipal fund securities, $.005 per $1,000 of the total aggregate 
assets for the reporting period; \12\
---------------------------------------------------------------------------

    \12\ Beginning in May 2018, the Board will invoice underwriters 
of a primary offering of certain municipal fund securities for the 
assessments due. See Release No. 34-81264 (July 31, 2017), 82 FR 
36472 (August 4, 2017) (File No. SR-MSRB-2017-05) (Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change to Assess an 
Underwriting Fee on Dealers That Are Underwriters of Primary 
Offerings of Plans).
---------------------------------------------------------------------------

6. Transaction Fee (Rule A-13)
    .001% ($.01 per $1,000) of the total par value to be paid by a 
dealer, except in limited circumstances, for inter-dealer sales and 
customer sales reported to the MSRB pursuant to Rule G-14(b), on 
transaction reporting requirements;
7. Technology Fee (Rule A-13)
    $1.00 paid by a dealer per transaction for each inter-dealer sale 
and for each sale to customers reported to the MSRB pursuant to Rule G-
14(b); and
8. Professional Qualification Examination Fee (Rule A-16)
    $150 test development fee assessed per candidate for each MSRB 
professional qualification examination.\13\
---------------------------------------------------------------------------

    \13\ In addition, the MSRB charges data subscription and service 
fees for subscribers, including regulated entities, seeking direct 
electronic delivery of municipal trade data and disclosure documents 
associated with municipal bond issues. However, this information is 
available without direct electronic delivery on the EMMA Web site 
without charge.
---------------------------------------------------------------------------

    Initiated in 2015, the Board's holistic review of fees that the 
Board assesses on regulated entities continues. The Board evaluates 
those fees with the goal of better aligning revenue sources with 
operating expenses and all capital needs. The Board strives to 
diversify funding sources among regulated entities and other entities 
that fund MSRB activities in a manner that ensures long-term 
sustainability, while continuing to strike an equitable balance among 
regulated entities and a fair allocation of the expenses of the 
regulatory activities, systems development and operational activities 
undertaken by the MSRB. In determining the fair allocation of the cost 
of MSRB regulation to regulated entities, the Board considers, among 
other things: Registration to engage in municipal securities or 
municipal advisory activities; the level of dealer market activity; and 
the number of associated persons engaged in municipal advisory 
activities on behalf of a municipal advisor. Recognizing that in any 
given year there could be more or less activity by a particular class 
of regulated entities, the Board, as it has historically, seeks to 
maintain a fee structure that results in a balanced and reasonable 
contribution over time from all regulated entities to defray costs and 
expenses of operating and administering the MSRB.
    As part of the Board's ongoing review and examination of fees, the 
Board reviewed the amount of the $300 per professional fee charged 
under Rule A-11. This fee was originally established in 2014 as a 
reasonable initial starting amount to help defray the costs and 
expenses of operating and administering the MSRB, particularly the 
MSRB's regulatory and related activities in connection with municipal 
advisors.\14\
---------------------------------------------------------------------------

    \14\ See Release No. 34-72019 (April 25, 2014), 79 FR 24798, 
24798 (May 1, 2014) (File No. SR-MSRB-2014-03) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change Consisting of New 
Rule A-11, on Assessments for Municipal Advisor Professionals); see 
also MSRB Notice 2014-09, MSRB to Implement New MSRB Rule A-11 
Establishing Fees for Municipal Advisor Professionals (April 17, 
2014).
---------------------------------------------------------------------------

    These regulatory activities include the development and 
implementation of a comprehensive regulatory framework for municipal 
advisors, including: The extension to municipal advisors of rules that 
previously only applied to dealers on the subject of fair dealing and 
specified forms of conflicts of interest; \15\ the adoption of new 
rules for municipal advisors that establish the core standards of 
conduct for non-solicitor municipal advisors and that establish 
supervisory and compliance obligations for municipal advisor firms; 
\16\ the creation of new municipal advisor recordkeeping requirements 
and municipal advisory client education and protection provisions; \17\ 
and the development and implementation of professional standards for 
municipal advisors to help ensure that all

[[Page 48138]]

municipal advisors are competent and qualified.\18\ As part of the 
implementation of this latter category of rules, the MSRB also 
established the Series 50 exam, a baseline test of a municipal 
advisor's competency and knowledge of applicable rules.
---------------------------------------------------------------------------

    \15\ See Rule G-17, Conduct of Municipal Securities and 
Municipal Advisory Activities; Rule G-20, Gifts Gratuities, Non-Cash 
Compensation and Expenses of Issuance; and Rule G-37, Political 
Contributions and Prohibitions on Municipal Securities Business and 
Municipal Advisory Business available at http://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx.
    \16\ See Rule G-42, Duties of Non-Solicitor Municipal Advisors; 
Rule G-44, Supervisory and Compliance Obligations of Municipal 
Advisors available at http://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx.
    \17\ See Rule G-8, Books and Records to be Made by Brokers, 
Dealers, and Municipal Securities Dealers and Municipal Advisors; 
and Rule G-10, Investor and Municipal Advisory Client Education and 
Protection available at http://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx. Effective October 13, 2017, current Rule G-10, 
Delivery of Investor Brochure, will be replaced in its entirety by 
new Rule G-10.
    \18\ See Rule G-2, Standards of Professional Qualification; and 
Rule G-3, Professional Qualification Requirements available at 
http://msrb.org/Rules-and-Interpretations/MSRB-Rules.aspx.
---------------------------------------------------------------------------

    To assist municipal advisors in understanding and complying with 
this new regulatory framework, the MSRB has undertaken considerable 
education, outreach and compliance activities. These include, but are 
not limited to: The creation of educational documents, resources and 
compliance-oriented notices and communications; \19\ the development of 
educational webinars and the organization of, and participation in, 
outreach events; \20\ and the launch of an expanded on-demand education 
program, MuniEdPro[supreg], which was designed, in part, to serve the 
education needs of regulated entities.
---------------------------------------------------------------------------

    \19\ For example, the MSRB supports regulatory compliance by 
municipal advisors by providing resources about MSRB requirements, 
as well as more general educational material. Municipal advisors may 
access these resources and others, including the Municipal Advisor 
Review, the MSRB's quarterly newsletter for municipal advisors at 
http://www.msrb.org/Regulated-Entities/Resources.aspx. In addition, 
the MSRB has published several regulatory notices for municipal 
advisors to help keep market participants informed of regulatory 
changes and to provide guidance on the application of existing 
rules. See e.g., MSRB Notice 2017-08, Application of MSRB Rules to 
Solicitor Municipal Advisors (May 4, 2017); MSRB Notice 2017-13, 
MSRB Provides Guidance on Duties of Non-Solicitor Municipal Advisors 
in Conduit Financing Scenarios (July 13, 2017).
    \20\ For example, the MSRB provides free education and training 
webinars on municipal market topics, regulatory and compliance 
issues, and the use of MSRB market transparency systems. Municipal 
advisors may register for new webinars and access on-demand 
webinars, including some webinars that provide CPE credit at http://www.msrb.org/Regulated-Entities/Webinars.aspx.
---------------------------------------------------------------------------

    Looking forward to Fiscal Year 2018, the MSRB expects to continue 
its many activities relating to municipal advisors, including its 
significant education, outreach and compliance initiatives. The MSRB 
will also be developing a new municipal advisor principal-level 
professional qualification examination--the Series 54--for anticipated 
availability as a pilot in 2019.\21\
---------------------------------------------------------------------------

    \21\ Once the Series 54 exam is permanently available, municipal 
advisor principals will be required to take the Series 54 exam in 
addition to the Series 50 exam. See FAQs on Municipal Advisor 
Professional Qualification and Examination Requirements, at n. 1 
available at http://www.msrb.org/msrb1/pdfs/FAQ-MSRB-Series-50-Exam.pdf.
---------------------------------------------------------------------------

    In an August 2015 fee filing associated with the Board's holistic 
review of fees,\22\ the MSRB explained that, at that time, it was not 
modifying the $300 municipal advisor per professional fee to provide 
municipal advisors with additional time for the municipal advisor 
regulations and business models to more fully develop. However, the 
MSRB explained that the targeted revenue to be generated from the 
municipal advisor professional fee of approximately $2 million at that 
time, or approximately 5% of total MSRB revenues, was not yet being met 
and the per professional fee would need to be increased in the future. 
The proposed rule change is the next step towards moving closer to that 
revenue target.\23\
---------------------------------------------------------------------------

    \22\ See Release No. 34-75751 (August 24, 2015), 80 FR 52352, 
52355 (August 28, 2015) (File No. SR-MSRB-2015-08) (Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Consisting of 
Amendments to MSRB Rule A-12, on Registration, and MSRB Rule A-13, 
on Underwriting and Transaction Assessments for Brokers, Dealers and 
Municipal Securities Dealers).
    \23\ The MSRB expects that the municipal advisor professional 
fee, at the dollar amount set forth in the proposed rule change, 
would generate approximately 4% of the MSRB's Fiscal Year 2018 
revenue. The MSRB will release and make publicly available its 
budget for Fiscal Year 2018 in October 2017. See MSRB Monthly Update 
(September 2017) available at https://content.govdelivery.com/accounts/VAORGMSRB/bulletins/1b497b6.
---------------------------------------------------------------------------

2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(J) of the Act \24\ which states that the MSRB's rules 
shall:
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78o-4(b)(2)(J).

provide that each municipal securities broker, municipal securities 
dealer, and municipal advisor shall pay to the Board such reasonable 
fees and charges as may be necessary or appropriate to defray the 
costs and expenses of operating and administering the Board. Such 
rules shall specify the amount of such fees and charges, which may 
include charges for failure to submit to the Board, or to any 
information system operated by the Board, within the prescribed 
timeframes, any items of information or documents required to be 
---------------------------------------------------------------------------
submitted under any rule issued by the Board.

    The MSRB believes that its rules, as amended by the proposed rule 
change, provide for reasonable dues, fees, and other charges among 
regulated entities. The MSRB believes that the proposed rule change is 
necessary and appropriate to fund the operation and administration of 
the Board and satisfies the requirements of Section 15B(b)(2)(J).\25\ 
The MSRB believes the proposed rule change is necessary because it will 
help defray the costs of the Board's significant rulemaking, market 
transparency, educational and market outreach initiatives, market 
leadership, professional qualifications examination development and 
other activities relating to municipal advisors. As discussed above, 
the MSRB has engaged in significant rulemaking to put into place a 
regulatory framework for municipal advisors and has engaged in 
considerable activities to assist municipal advisors in understanding 
their obligations and comply with the applicable rules. In addition, 
because the MSRB does not have any examination or enforcement 
authority, the MSRB has enhanced its coordination with the regulatory 
authorities charged with the authority to examine for compliance with 
and enforce MSRB rules. The MSRB frequently provides rule 
interpretations, training related to the market and MSRB rules, and 
access to municipal market information in support of the municipal 
advisor examination and enforcement activities of these regulatory 
authorities. The MSRB expects to continue its many activities relating 
to municipal advisors, with a focus on education, outreach and 
compliance. In addition, as noted above, the MSRB will be working to 
develop the Series 54 professional qualification exam. The proposed 
rule change will assist in defraying some of the costs associated with 
these activities and will help ensure the MSRB is funding these 
regulatory activities in a financially responsible way.
---------------------------------------------------------------------------

    \25\ Id.
---------------------------------------------------------------------------

    The MSRB believes the proposed rule change is appropriate because 
it moves towards a more equitable balance of fees among regulated 
entities and hence a fairer allocation of the expenses of the 
regulatory activities, systems development, and operational activities 
undertaken by the MSRB. However, even with the fee increase in the 
proposed rule change, the proposed fees would only defray a small 
portion of the MSRB's overall costs of operating and administering the 
MSRB--generating approximately 4% of Fiscal Year 2018 revenue.\26\
---------------------------------------------------------------------------

    \26\ See n. 23 and accompanying text.
---------------------------------------------------------------------------

    MSRB operations are funded primarily by assessments and fees on 
regulated entities. In fact, 80% of the Fiscal Year 2018 budgeted 
revenue is based on market activity (that is, municipal securities 
trading and underwriting volume). Due to the accumulated historical 
variances between actual and budgeted revenue, the MSRB has excess 
reserves. This is largely due to the MSRB's appropriately conservative 
approach to budgeting revenues that are primarily market-based and 
inherently volatile. While the MSRB's current reserve levels exceed 
targets, the MSRB budget for Fiscal Year 2018 has a deficit, as do the 
pro forma

[[Page 48139]]

budgets for Fiscal Years 2019 through 2020. The MSRB anticipates that 
in the future, based on assumptions reviewed and agreed upon by the 
MSRB, excess reserves will be eroded by Fiscal Year 2020 (even with the 
increased municipal advisor professional fee and new underwriting fee 
on underwriters of 529 college savings plans). Further, the MSRB's 
budget for Fiscal Year 2018 anticipates that the MSRB will 
strategically spend some of its reserves. Finally, the MSRB believes, 
as a matter of principle, that it is inherently unfair to allow certain 
regulated entities to pay a disproportionate share of the cost of 
operating the MSRB. The MSRB therefore regularly evaluates fees and 
adjusts them, as needed, to ensure that all regulated entities that 
benefit from functioning in a fair, efficient and transparent market 
pay their fair share.

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

    Section 15B(b)(2)(C) of the Act \27\ 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 \28\ provides that MSRB rules ``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.''
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78o-4(b)(2)(C).
    \28\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
---------------------------------------------------------------------------

    The Board's policy on the use of economic analysis in rulemaking 
\29\ limits its application regarding those rules for which the Board 
seeks immediate effectiveness. However, an internal analysis is still 
conducted to gauge the economic impact, with an emphasis on the burden 
on competition involving regulated entities. Guided by these aspects of 
the policy, the Board has reviewed the proposed rule change. The Board 
believes the proposed rule change is necessary and appropriate to 
ensure that MSRB registrants that are municipal advisors equitably 
contribute to defraying the costs and expenses of operating and 
administering the MSRB. The MSRB has considered the economic impact of 
the proposed rule change. The MSRB 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 
since it will apply equally to all municipal advisors based on the 
number of persons qualified as municipal advisor representatives 
associated with the municipal advisor and the number of Forms MA-I 
filed by each firm.
---------------------------------------------------------------------------

    \29\ The scope of the Board's policy on the use of economic 
analysis in rulemaking provides that: [t]his Policy addresses 
rulemaking activities of the MSRB that culminate, or are expected to 
culminate, in a filing of a proposed rule change with the SEC under 
Section 19(b) of the Exchange Act, other than a proposed rule change 
that the MSRB reasonably believes would qualify for immediate 
effectiveness under Section 19(b)(3)(A) of the Exchange Act if filed 
as such or as otherwise provided under the exception process of this 
Policy.
    Policy on the Use of Economic Analysis in MSRB Rulemaking, 
available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. For those rule changes for which the MSRB 
seeks immediate effectiveness, the MSRB usually focuses its 
examination exclusively on the burden on competition of regulated 
entities.
---------------------------------------------------------------------------

    The MSRB believes the current fee structure is fair and equitable 
among municipal advisors of differing size. The existing per firm 
annual fee ($1,000) helps cover the fixed costs of regulating any firm, 
regardless of size; while the existing annual professional fee 
assessment results in smaller municipal advisors paying less than 
larger municipal advisors. The proposed fee increase will further 
expand the current spread paid between large versus small firms. The 
MSRB notes that other self-regulatory organizations and independent 
oversight and rulemaking boards, such as the Financial Industry 
Regulatory Authority (``FINRA''), the Public Company Accounting 
Oversight Board (``PCAOB''), National Futures Association (``NFA'') and 
the Financial Accounting Standards Board (``FASB''), all have some 
annual fee assessment structure that is based on the size of firms 
under regulation.\30\
---------------------------------------------------------------------------

    \30\ For example, FINRA's annual registration fee and new member 
application fee assessments for broker-dealers are based on the 
number of branch offices and the number of registered persons, the 
PCAOB's annual fee assessment is based on the number of issuer audit 
clients and the number of personnel within each public accounting 
firm, NFA's annual member dues for swap dealers and Forex dealers 
are based on the tier size of member firms, and FASB's accounting 
support fees are allocated based on the average market 
capitalization of each issuer.
---------------------------------------------------------------------------

    The MSRB believes that the fee increase will not impose an 
unnecessary or inappropriate regulatory burden on small municipal 
advisors. The total amount of the assessment payable by each municipal 
advisor will be dependent on the number qualified associated persons 
for whom Forms MA-I are filed by the municipal advisor \31\ and, 
therefore, will result in lower relative assessments for smaller firms. 
Being based on the number of persons engaging in municipal advisory 
activities on behalf of a firm, the total fee will bear a reasonable 
relationship to the level of regulated municipal advisory activities 
that are undertaken by each firm.
---------------------------------------------------------------------------

    \31\ The MSRB understands that the Form MA-I on file should be 
withdrawn for any person who fails to qualify as a municipal advisor 
representative in accordance with Rule G-3. See Registration of 
Municipal Advisors Frequently Asked Questions at Question 16.1, 
available at https://www.sec.gov/info/municipal/mun-advisors-faqs.shtml.
---------------------------------------------------------------------------

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

    The Board did not solicit comment on the proposed change. 
Therefore, there are no comments on the proposed rule change received 
from members, participants or others.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \32\ and paragraph (f) of Rule 19b-4 
thereunder.\33\ 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.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(3)(A).
    \33\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2017-07 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-2017-07. 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

[[Page 48140]]

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-2017-07 and should be submitted on 
or before November 6, 2017.

    For the Commission, pursuant to delegated authority.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22262 Filed 10-13-17; 8:45 am]
BILLING CODE 8011-01-P


