
[Federal Register Volume 83, Number 242 (Tuesday, December 18, 2018)]
[Notices]
[Pages 64907-64909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27281]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84809; File No. SR-MSRB-2018-08]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Granting Approval of a Proposed Rule Change Concerning 
Certain Data Elements on Form G-45 Under MSRB Rule G-45, on Reporting 
of Information on Municipal Fund Securities

December 12, 2018.

I. Introduction

    On October 15, 2018, 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 to amend Form G-45 under 
MSRB Rule G-45, on reporting of information on municipal fund 
securities,\3\ to clarify a data element concerning the program 
management fee, to add a data element concerning the investment option 
closing date, and to delete data elements concerning annualized three-
year performance information (the ``proposed rule change''). The 
proposed rule change was published for comment in the Federal Register 
on November 2, 2018.\4\ In the Notice of Filing, the MSRB requested 
that the proposed rule change become effective on June 30, 2019.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ MSRB Form G-45 is an electronic form on which submissions of 
the information required by Rule G-45 are made to the MSRB.
    \4\ Securities Exchange Act Release No. 84496 (October 29, 2018) 
(the ``Notice of Filing''), 83 FR 55214 (November 2, 2018).
    \5\ See Notice of Filing.
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    The Commission did not receive any comment letters on the proposed 
rule change.

II. Description of Proposed Rule Change

    In the Notice of Filing, the MSRB stated that the purpose of the 
proposed rule change is to refine and enhance certain of the investment 
option data that the MSRB collects under Rule G-45 from underwriters to 
529 savings plans \6\ and ABLE programs.\7\ Specifically, the MSRB 
stated that it proposes to amend Form G-45 to (i) clarify a data 
element concerning the program management fee, (ii) add a data element 
concerning the investment option closing date, and (iii) delete data 
elements concerning annualized three-year performance information.\8\ 
The MSRB also stated that the proposed rule change would provide 
information that would enhance the MSRB's and other regulators' ability 
to effectively and efficiently analyze 529 savings plans and ABLE 
programs to assess the impact of each 529 savings plan and ABLE program 
on the market, to evaluate trends and differences, and to gain an 
understanding of the aggregate risk taken by investors.\9\
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    \6\ Section 529 of the Internal Revenue Code of 1986, as amended 
(the ``Code'') established savings plans (``529 savings plans'') to 
encourage saving for future education costs. 26 U.S.C. 
529(b)(1)(A)(ii).
    \7\ ABLE programs are programs designed to implement Section 
529A to the Code. 26 U.S.C. 529A. Section 529A of the Code permits a 
state, or an agency or instrumentality thereof, to establish and 
maintain a tax-advantaged savings program to help support 
individuals with disabilities in maintaining health, independence, 
and quality of life. See Notice of Filing.
    \8\ See Notice of Filing.
    \9\ Id.
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    The MSRB stated that throughout the seven reporting periods during 
which the MSRB has analyzed data submitted on Form G-45, the MSRB has 
observed anomalies in the data submitted under Investment Option 
information.\10\ The MSRB stated that those anomalies related to the 
program management fee and to investment options that closed during the 
reporting period. Form G-45 requires that an underwriter report the 
program management fee (expressed as an annual percentage of 529 
savings plan or ABLE program assets) assessed by the 529 savings plan 
or ABLE program.\11\ The MSRB noted that the program management fee 
typically is a separately identifiable percentage that is shown in the 
fee table for the 529 savings plan or ABLE program, but for some 529 
savings plans and ABLE programs, this is not the case.\12\ The MSRB 
stated that instead for those 529 savings plans or ABLE programs, the 
program management fee is assessed by the underlying mutual fund in 
which the investment option invests and this is typically done through 
a 529 or ABLE share class of the mutual fund.\13\ The MSRB further 
noted that underwriters for those 529 savings plans or ABLE programs 
generally report the program management fee as zero on Form G-45, and 
then may add explanatory information in the notes section of the form 
about the fee.\14\ The MSRB stated that such explanatory information, 
however, may or may not actually disclose the program management fee in 
a format that is typically used for

[[Page 64908]]

comparison--i.e., as an annual percentage of 529 savings plan or ABLE 
program assets.\15\ The MSRB stated that the proposed rule change would 
clarify that the underwriter must report the program management fee as 
an annual percentage of assets (e.g., x.xx%) no matter whether the 
program management fee is assessed by the underlying mutual fund or by 
the 529 savings plan or ABLE program itself.\16\ The MSRB stated that 
the underwriter would not be able to report the program management fee 
as zero and then explain in a note that it is assessed by the 
underlying mutual fund.\17\ Thus, the MSRB stated, the proposed rule 
change would allow the MSRB, as well as other regulators, to analyze 
data in a uniform format that would facilitate (i) comparison among 529 
savings plans and ABLE programs, (ii) the evaluation of trends and 
differences, and (iii) the identification of potential risks to 
investors that may affect those 529 savings plans and ABLE 
programs.\18\
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    \10\ Id.
    \11\ Id.
    \12\ Id.
    \13\ Id.
    \14\ Id.
    \15\ Id.
    \16\ Id.
    \17\ Id.
    \18\ Id.
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    In the Notice of Filing, the MSRB noted that an investment option 
offered in a 529 savings plan may close to new investors, but allow 
current account owners who have allocated account value to an 
investment option to continue to invest in that ``closed'' investment 
option.\19\ Alternatively, the MSRB stated, the 529 savings plan may 
close an investment option completely.\20\ In either case, the MSRB 
stated that the investment option data submitted for that investment 
option on Form G-45 can be contrary to what the MSRB would have 
expected for the investment option when compared to prior reporting 
periods, and the MSRB may not be able to easily determine why such 
variance occurred.\21\ The MSRB stated that, to address this issue, the 
proposed rule change would add ``check-the-box'' items to Form G-45 
that would alert the MSRB about whether an investment option has closed 
to new investors, but allows current account owners to contribute 
funds, or whether the investment option has closed to all 
investors.\22\
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    \19\ Id.
    \20\ Id.
    \21\ Id.
    \22\ Id.
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    The MSRB sought public comment about providing additional data 
concerning the investment options offered in 529 savings plans and ABLE 
programs.\23\ In response, the MSRB received the suggestion that the 
MSRB no longer require that an underwriter submit three-year annualized 
performance information for an investment option on Form G-45.\24\
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    \23\ Id.
    \24\ Id.
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    Form G-45 requires that underwriters annually report (i) total 
returns, including sales charges, (ii) total returns, excluding sales 
charges, and (iii) benchmark return percent for specified periods, 
including annualized or annual three-year percent. The MSRB noted that 
at the time the MSRB approved Form G-45, the College Savings Plans 
Network's (``CSPN'') voluntary disclosure principles that provide 
recommendations to the state entities that establish and maintain 529 
savings plans (the ``disclosure principles'') and which commenters 
stated were the industry norm in other rulemakings, recommended that 
such disclosure be made.\25\ However, the MSRB noted, since that time, 
CSPN has updated the disclosure principles, and CSPN no longer 
recommends that a 529 savings plan include three-year performance 
information.\26\ Further, the MSRB noted that three-year annualized 
performance information is not required by the SEC for mutual 
funds.\27\
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    \25\ Id.
    \26\ Id.
    \27\ Id.
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    The MSRB has determined that Form G-45, even without the three-year 
performance data, would continue to provide the MSRB with sufficient 
performance information to assist the MSRB with its analysis of 529 
savings plans and ABLE programs.\28\ Therefore, the MSRB stated that 
because it believes that it will have sufficient performance 
information, it is no longer an appropriate regulatory burden and 
should be eliminated to avoid unnecessary costs.\29\
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    \28\ Id.
    \29\ Id.
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III. Discussion and Commission Findings

    The Commission has carefully considered the proposed rule change. 
The Commission finds that the proposed rule change is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to the MSRB.
    In particular, the proposed rule change is consistent with Section 
15B(b)(2)(C) of the Act.\30\ Section 15B(b)(2)(C) of the Act states 
that the MSRB's rules shall 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, and, in general, to 
protect investors, municipal entities, obligated persons, and the 
public interest.\31\ The Commission believes the proposed rule change 
is consistent with Section 15B(b)(2)(C) and necessary and appropriate 
to help the MSRB receive complete and reliable information about 529 
savings plans and ABLE programs. The MSRB can use the data elements 
collected on Form G-45 to monitor these municipal fund securities and 
detect potential investor harm. The Commission believes that, for that 
data set to be complete and reliable, such data should include accurate 
data about the fees and expenses associated with an investment in a 529 
savings plan or an ABLE program, including the program management fee, 
as provided in the proposed rule change. The Commission also believes 
that such data should include accurate information about the investment 
options available to existing and potential investors, as provided in 
the proposed rule change. The Commission believes the proposed rule 
change would help the MSRB to gather relevant data required to ensure 
the MSRB's regulatory scheme is sufficient and/or to determine whether 
additional rulemaking is necessary to protect investors and the public 
interest. Further, the Commission believes that the deletion in the 
proposed rule change of the requirement that 529 savings plans and ABLE 
programs provide three-year annualized performance information would 
better align Rule G-45 reporting requirements with industry reporting 
standards, and therefore would 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.
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    \30\ 15 U.S.C. 78o-4(b)(2)(C).
    \31\ 15 U.S.C. 78o-4(b)(2)(C).
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    The Commission believes that the proposed rule change would improve 
the MSRB's ability to analyze the market for 529 savings plans and ABLE 
programs as well as improve the MSRB's ability to evaluate trends and 
differences among 529 savings plans and ABLE programs. Further, the 
Commission believes that the MSRB, as well as other financial 
regulators

[[Page 64909]]

charged with enforcing the MSRB's rules, can use the information 
submitted on MSRB Form G-45 to enhance their understanding of, and 
ability to monitor, 529 savings plans and ABLE programs.
    In approving the proposed rule change, the Commission also has 
considered the impact of the proposed rule change on efficiency, 
competition, and capital formation.\32\ 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 
clarification regarding the collection of the program management fee 
information should reduce instances of the MSRB needing to have 
underwriters resubmit corrected information that is currently required 
to be submitted under Rule G-45. The Commission believes the deletion 
of the Rule G-45 requirement to report three-year annualized 
performance data for each investment option and any related benchmarks 
will better align Rule G-45 reporting requirements with industry 
reporting standards and will likely reduce Rule G-45 reporting burdens. 
Additionally, with regard to the proposed requirement to report 
investment option closing date information, the Commission understands 
that this information is readily available to underwriters and the cost 
of submission of such information would be minor. The Commission 
believes that the additional information required to be submitted by 
the proposed rule change would be submitted on an equal and non-
discriminatory basis, and the requirement would apply equally to all 
dealers that serve as underwriters to 529 savings plans and/or ABLE 
programs. Furthermore, the Commission believes that the potential 
burdens created by the proposed rule change are likely to be outweighed 
by the benefits.
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    \32\ 15 U.S.C. 78c(f).
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    For the reasons noted above, the Commission believes that the 
proposed rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\33\ that the proposed rule change (SR-MSRB-2018-08) be, and hereby 
is, approved.
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    \33\ 15 U.S.C. 78s(b)(2).

    For the Commission, pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27281 Filed 12-17-18; 8:45 am]
 BILLING CODE 8011-01-P


