[Federal Register Volume 85, Number 191 (Thursday, October 1, 2020)]
[Notices]
[Pages 62001-62003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21659]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89998; File No. SR-MSRB-2020-05]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change Consisting of Amendments to MSRB Rules A-3 and A-4 Relating to 
Board Quorum, Meeting, and Voting Requirements

September 25, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on September 15, 2020 the Municipal Securities 
Rulemaking Board (``MSRB'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described

[[Page 62002]]

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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change 
consisting of amendments to MSRB Rules A-3 and A-4 (the ``proposed rule 
change'') relating to Board quorum, meeting, and voting requirements. 
The MSRB has designated the proposed rule change as ``concerned solely 
with the administration of the self regulatory organization'' under 
Section 19(b)(3)(A)(iii) \3\ of the Act and Rule 19b-4(f)(3) \4\ 
thereunder, which renders the proposal effective upon filing with the 
Commission. As described below, the draft amendments would:
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    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(3).
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     Revise the Board's quorum requirement by replacing the 
specific Board category representation requirements with a more general 
requirement that a majority of the Board's public representatives and a 
majority of the Board's regulated members be present;
     Modify the voting requirement for the Board to remove a 
member for cause by replacing the requirement for the vote to include 
the affirmative vote of members from specified Board categories with a 
requirement that the vote include the affirmative vote of a majority of 
the Board's public representatives and a majority of the Board's 
regulated members;
     Add an express statement that the Board may meet through 
the use of any means of communication by which all persons 
participating may simultaneously hear each other (including through the 
use of captioning or other similar transcription means) during the 
meeting;
     Update the requirement for taking Board action without a 
meeting; and
     Move the provision on Board resolutions into its own 
subsection and rephrase the provision on special meetings of the Board 
to clarify its meaning.
    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2020-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

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

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

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

1. Purpose
MSRB Quorum and Cause Removal Voting Requirements
    MSRB Rule A-4(c) currently provides that a quorum consists of 
``two-thirds of the members of the whole Board (at least one of whom 
shall be a public representative, one a broker-dealer representative, 
one a bank representative and one a municipal advisor representative) . 
. . .'' MSRB Rule A-3(c) uses the same formulation when describing the 
vote required to remove a Board member for cause.\5\ The proposed rule 
change includes parallel amendments to both of these provisions. 
Specifically, the amendments would replace the specific category 
representation requirements in both rules with a requirement that there 
be a majority of the public representatives and a majority of the 
regulated representatives.
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    \5\ MSRB Rule A-3(c) provides, ``In the event the Board shall 
find that any member has willfully violated any provision of the 
Act, any rule or regulation of the Commission thereunder, or any 
rule of the Board or has abused his or her authority or has 
otherwise acted, or failed to act, so as to affect adversely the 
public interest or the best interests of the Board, the Board may, 
upon the affirmative vote of two-thirds of the whole Board (which 
shall include the affirmative vote of at least one public 
representative, one broker-dealer representative, one bank 
representative and one municipal advisor representative), remove 
such member from office.'' The Commission recently approved 
amendments to Rule A-3 that are effective on October 1, 2020. See 
Exchange Act Release No. 89484 (Aug. 5, 2020); 85 FR 48579 (Aug. 11, 
2020) (File No. SR-MSRB-2020-04). The approved amendments include 
minor wording changes to the language quoted above but do not modify 
the substance.
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    The purpose of these amendments is twofold. First, requiring a 
majority of the public representatives and a majority of the regulated 
representatives would provide additional assurance of the Board's 
commitment to balanced representation on the Board, including the 
substantial participation of both public and regulated representatives 
in Board decisions. Second, eliminating the more specific category 
requirements would mitigate the risk, increased by the Board's 
impending reduction in size,\6\ that the absence of a single Board 
member (or a small group of Board members) could prevent the Board from 
meeting the quorum requirement or the voting requirement for removal 
for cause even if the other requirements are met.
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    \6\ See Exchange Act Release No. 89484 (Aug. 5, 2020), 85 FR 
48579 (Aug. 11, 2020) (File No. SR-MSRB-2020-04) (approving 
amendments to MSRB Rule A-3 that reduce the Board's size to 17 
members for fiscal year 2021 and 15 members thereafter).
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    In addition, the proposed rule change would move two sentences in 
MSRB Rule A-4(c) that relate to Board resolutions into a new 
subsection, A-4(e). Locating the provision on resolutions in its own 
subsection, rather than in the subsection on the Board's quorum 
requirement, will improve the overall organization of the rule.
Board Meetings and Board Action Without a Meeting
    MSRB Rule A-4(a) requires the Board to meet at least quarterly and 
governs the conduct of regular and special meetings. In practice, the 
Board generally meets in person each quarter and by conference call 
more frequently. While the Board's power to conduct meetings 
telephonically or otherwise remotely has never been in doubt, the 
proposed rule change includes an amendment to MSRB Rule A-4(a) 
expressly providing that meetings may be held through the use of any 
communications method by means of which all persons participating in 
the meeting can hear each other (including through the use of 
captioning or other similar transcription means). This amendment is 
intended to provide additional assurance to the public that the Board 
is able to conduct business even when circumstances prevent it from 
meeting in person. The proposed rule change also includes an amendment 
to rephrase the sentence in MSRB Rule A-4(a) on special meetings of the 
Board to clarify its meaning.
    MSRB Rule A-4 also sets forth the requirements for the Board to 
take action without a meeting. The Board takes action without a meeting 
infrequently, generally when a matter requires prompt attention in 
between scheduled meetings and circumstances preclude convening a 
special meeting. MSRB Rule A-4(d) provides that such action may be 
taken by written consent or by telephone or email poll of all

[[Page 62003]]

members of the Board. The proposed amendments to MSRB Rule A-4(d) are 
intended to simplify the rule and more clearly describe the process for 
taking action without a meeting under the Virginia Nonstock Corporation 
Act,\7\ pursuant to which the Board is organized. As amended, the rule 
would no longer provide that action without a meeting may be taken by 
telephone or email poll, but rather that it must be taken by unanimous 
written consent of the Board members.\8\
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    \7\ Va. Code Ann. Sec. Sec.  13.1-801 et seq.
    \8\ Articles 3 and 4 of the Bylaws of the MSRB (``Bylaws'') 
restate MSRB Rules A-3 and A-4, respectively. The MSRB will update 
the Bylaws to mirror amended MSRB Rules A-3 and A-4, as well as 
amended MSRB Rule A-6, which the Commission recently approved. See 
Exchange Act Release No. 89484 (Aug. 5, 2020), 85 FR 48579 (Aug. 11, 
2020) (File No. SR-MSRB-2020-04).
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    The proposed rule change will become operative on October 1, 2020, 
the effective date for the recently-approved amendments to MSRB Rule A-
3 that, among other things, reduce the Board's size.\9\
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    \9\ See id.
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2. Statutory Basis
    The MSRB has adopted the proposed rule change pursuant to Section 
15B(b)(2)(I) of the Exchange Act,\10\ which provides that the MSRB's 
rules shall:
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    \10\ 15 U.S.C. 78o-4(b)(2)(I).

provide for the operation and administration of the Board, including 
the selection of a Chairman from among the members of the Board, the 
compensation of the members of the Board, and the appointment and 
compensation of such employees, attorneys, and consultants as may be 
necessary or appropriate to carry out the Board's functions under 
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this section.

    The amendment to MSRB Rule A-3 would modify the existing voting 
requirement to remove a Board member for cause by requiring the vote to 
include the affirmative vote of a majority of the public 
representatives and a majority of the regulated representatives. 
Similarly, the proposed rule change would modify the existing quorum 
requirement in MSRB Rule A-4(c) to require that a majority of the 
public representatives and a majority of the regulated representatives 
be present. As such, these amendments provide for the operation and 
administration of the Board and are therefore consistent with Section 
15B(b)(2)(I) of the Exchange Act.\11\
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    \11\ Id.
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    The amendments to MSRB Rule A-4 also would include an express 
statement that the Board may meet remotely, update the Board's 
requirements for taking Board action without a meeting, relocate the 
existing provision governing Board resolutions, and clarify an existing 
sentence regarding special meetings of the Board. Accordingly, these 
amendments also provide for the operation and administration of the 
Board and are therefore consistent with Section 15B(b)(2)(I) of the 
Exchange Act.\12\
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    \12\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Exchange Act requires that MSRB rules 
not be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.\13\ The 
proposed rule change relates only to the administration of the Board 
and would not impose requirements on dealers, municipal advisors or 
others. Accordingly, the MSRB does not believe that the proposed rule 
change would result in any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Exchange Act.
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    \13\ 15 U.S.C. 78o-4(b)(2)(C).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received on the 
proposed rule change.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \14\ and paragraph (f) of Rule 19b-4 
thereunder.\15\ 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.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f).
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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-2020-05 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-2020-05. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MSRB-2020-05 and should be submitted on 
or before October 22, 2020.

    For the Commission, pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-21659 Filed 9-30-20; 8:45 am]
BILLING CODE 8011-01-P


