[Federal Register Volume 63, Number 11 (Friday, January 16, 1998)]
[Proposed Rules]
[Pages 2640-2642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-815]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 /
Proposed Rules
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 10
[Docket No. 98-01]
RIN 1557-AB62
Municipal Securities Dealers
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) proposes
to revise its Municipal Securities Dealers regulation to remove
unnecessary provisions. This change would not have any substantive
effect on the operations of national banks, but would simplify the
OCC's rule regarding bank municipal securities dealers (MSDs) by
removing a redundant restatement of rules found elsewhere.
DATES: Comments must be received by March 17, 1998.
ADDRESSES: Comments should be directed to: Office of the Comptroller of
the Currency, Communications Division, 250 E Street, SW, Washington, DC
20219, Attention: Docket No. 98-01. Comments will be available for
public inspection and photocopying at the same location. In addition,
comments may be sent by facsimile transmission to FAX number (202) 874-
5274 or by electronic mail to regs.comments@occ.treas.gov.
FOR FURTHER INFORMATION CONTACT: Joe Malott, National Bank Examiner,
Capital Markets (202) 874-5070; Donald Lamson, Assistant Director,
Securities and Corporate Practices; or Ursula Pfeil, Attorney,
Legislative and Regulatory Activities (202) 874-5090.
SUPPLEMENTARY INFORMATION:
Background and Discussion of Proposal
Section 15B(b) of the Securities Exchange Act of 1934 (Exchange
Act) (15 U.S.C. 78o-4(b)) created the Municipal Securities Rulemaking
Board (MSRB) and mandated that the MSRB adopt rules that establish
qualification criteria for municipal securities brokers or dealers and
associated persons. To implement section 15B(b), the MSRB adopted Rule
G-7 (Information Concerning Associated Persons) (Rule G-7).1
Rule G-7 requires, among other things, that municipal securities
principals and representatives associated with a bank MSD file with the
bank either (a) Form MSD-4 (Uniform Application for Municipal
Securities Principal or Municipal Securities Representative Associated
with a Bank Municipal Securities Dealer) or (b) a similar form
prescribed by the bank's primary regulator. A national bank MSD is in
turn required by Rule G-7 to submit to the OCC the form that the bank's
associated municipal securities principals and representatives file
with it. Rule G-7 also requires bank MSDs to update information as
necessary, to retain records for specified periods of time, and to file
with the appropriate banking agency ``such of the information
prescribed by [Rule G-7] as such * * * agency * * * shall by rule or
regulation require.'' Rule G-7(g).
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\1\ The MSRB rules may be obtained by contacting the Municipal
Securities Rulemaking Board by telephone at (202) 223-9347 or by
mail at 1150 18th Street, NW., Suite 400, Washington, DC 20036-3816.
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Shortly after the MSRB adopted Rule G-7, the OCC adopted part 10 in
order to prescribe the information and forms that national bank MSDs
are to submit. (42 FR 16813 (March 30, 1977)). Part 10 currently sets
out the scope of the rule (Sec. 10.1); definitions used therein
(Sec. 10.2); information about where and how to file the appropriate
forms (Sec. 10.3); and requirements governing the submission and
retention of Form MSD-4 and Form MSD-5 (Uniform Termination Notice for
Municipal Securities Principal or Municipal Securities Representative
Associated with a Bank Municipal Securities Dealer) (Sec. 10.4).
As explained in the following section-by-section analysis, much of
current part 10 either is substantively identical to the requirements
contained in Rule G-7 or is otherwise unnecessary.
Section-by-Section Analysis
Section 10.1 of Current and Proposed Rules
This section identifies the entities and individuals covered by
part 10. Section 10.1 of the proposed rule clarifies that subsidiaries
of national banks are not covered by the rule. This clarification is
consistent with MSRB Rule G-7, which states that ``bank dealers'' are
to comply with the rules and requirements adopted by the appropriate
bank regulatory agency. The term ``bank dealer'' is defined in Rule D-8
of the MSRB's rules to include ``a municipal securities dealer which is
a bank or a separately identifiable department or division of a bank as
defined in rule G-1 of the [Municipal Securities Rulemaking] Board.''
Subsidiaries of banks are not included in the definition of ``bank
dealer,'' and are, therefore, governed directly by the MSRB's filing
requirements. The proposed change to Sec. 10.1 reflects this fact. It
does not, however, affect the content of what these subsidiaries are to
file or who regulates their municipal securities
activities.2
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\2\ Subsidiaries of national banks that engage in municipal
securities activities must register with the NASD and are regulated
by NASD Regulation, Inc., the subsidiary of NASD charged with
regulating the securities industry and the Nasdaq Stock Market.
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Section 10.2 of Current Rule
The terms defined in current Sec. 10.2 are not used in part 10 as
proposed. Accordingly, this section is removed.
Section 10.3 of Current Rule
Section 10.3 provides information about the mechanics of filing the
MSD-4 and MSD-5 forms with the OCC. This information is unnecessary in
light of the filing instructions that accompany these forms. Therefore,
the proposed rule removes this section.
Section 10.4 of Current Rule/Sec. 10.2 of Proposed Rule
Section 10.4(a)(1) of the current rule states that Form MSD-4 is an
appropriate means of carrying out the purposes of Rule G-7(b). Two
provisions in Rule G-7 make it appropriate for the proposed rule to
retain a provision identifying which form national bank MSDs are to use
and what information is to be submitted in order to comply with Rule G-
7. First,
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paragraph (b) of Rule G-7 states that ``in the case of a bank dealer a
completed Form MSD-4 or similar form prescribed by the appropriate
regulatory agency for such bank dealer, containing the foregoing
information [i.e., the information listed in Rule G-7(b)(i)-(x)], shall
satisfy the requirements of this paragraph [(b)].'' Given that Rule G-
7(b) provides bank regulators the option of using a form other than
Form MSD-4, there remains a need for the OCC to clarify which form
national banks should use. Second, as previously noted, paragraph (g)
of Rule G-7 states that bank MSDs are to file with their appropriate
regulatory agency ``such of the information prescribed by this rule
[i.e., Rule G-7] as such * * * agency * * * shall by rule or regulation
require.'' Repealing all of part 10 arguably would create an unintended
gap in the filing requirements for bank MSDs, because there would be no
rule or regulation requiring national banks to file.
In light of paragraphs (b) and (g) of Rule G-7, the proposed rule
retains a requirement, at Sec. 10.2(a), stating that a national bank is
to use Form MSD-4 to submit the information required by Rule G-7(b)(i)-
(x) to be obtained from a person identified in Sec. 10.1(b). Section
10.2(a) also states that a national bank receiving completed MSD-4
forms must submit these forms to the OCC before permitting any person
to be associated with it as a municipal securities principal or a
municipal securities representative. Should the MSRB amend Rule G-7 to
remove the reference to rules or regulations issued by the banking
agencies, the OCC will revisit the need for a continued reference to
the MSRB rules in part 10.3
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\3\ The Board of Governors of the Federal Reserve System (Board)
and Federal Deposit Insurance Corporation (FDIC) recently published
proposed amendments to each agency's MSD regulation. See 62 FR 15272
(March 31, 1997) (Board) and 62 FR 26994 (May 16, 1997) (FDIC). Both
the Board and the FDIC propose to repeal their MSD rules altogether.
However, both agencies intend for banks within their respective
jurisdictions to continue filing the MSD-4 and MSD-5 forms with
those agencies. Accordingly, the OCC, Board, and FDIC intend to
impose substantively identical requirements on bank MSDs. The
stylistic differences between the OCC's proposed rule and those of
the Board and FDIC reflect the OCC's view that it is necessary and
helpful to national bank MSDs for the OCC's rule to address those
areas identified in Rule G-7 where bank dealers are to look to the
rules of their primary regulator.
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Section 10.4(a)(2) of the current rule repeats filing requirements
found in Rule G-7 and, therefore, is removed.
Section 10.4(b) of the current rule instructs national bank MSDs
regarding how they should proceed if a Form MSD-4 contains materially
inaccurate or incomplete information. This section is unnecessary,
given that paragraph (c) of Rule G-7 requires that the information
required to be submitted must remain accurate and complete. A national
bank MSD receiving updated information from an associated municipal
securities representative or municipal securities principal is
obligated pursuant to Rule G-7 to submit the amended information to the
OCC in order to ensure that the individuals are properly registered.
Accordingly, the proposed rule removes current Sec. 10.4(b).
Current Sec. 10.4(c) requires national bank MSDs to file Form MSD-5
within 30 days of terminating a person's association with the bank as a
municipal securities representative or principal. This requirement does
not appear in Rule G-7. In order to facilitate the effective
supervision of MSD activity by national banks, the proposal retains the
requirement, at proposed Sec. 10.2(b), that a termination notice be
submitted.
Finally, current Sec. 10.4(d)(1) restates record retention
requirements found in Rule G-7(e) while Sec. 10.4(d)(2) states that the
MSD-4 and MSD-5 forms are covered by section 32(a) of the Exchange Act
(15 U.S.C. 78ff). These provisions in current Sec. 10.4 are unnecessary
and are, therefore, removed.
Comments
The OCC invites general comments on all aspects of this proposal,
including specific comments on the proposed changes.
Regulatory Flexibility Act
It is hereby certified that this proposal will not have a
significant economic impact on a substantial number of small entities.
Accordingly, a regulatory flexibility analysis is not required.
As noted earlier, the OCC has only eliminated unnecessary
provisions that appear in the current rule. This proposal will,
therefore, reduce the regulatory burden on national banks, regardless
of size. No new burden is added by the proposed changes.
Executive Order 12866
The OCC has determined that this proposal is not a significant
regulatory action under Executive Order 12866.
Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Act of 1995 (Unfunded Mandates
Act) requires that an agency prepare a budgetary impact statement
before promulgating a proposal likely to result in a rule that includes
a Federal mandate that may result in the annual expenditure of $100
million or more in any one year by State, local, and tribal
governments, in the aggregate, or by the private sector. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
requires an agency to identify and consider a reasonable number of
alternatives before promulgating a proposal.
The OCC has determined that the proposal, if adopted, will not
result in expenditures by State, local, and tribal governments, or by
the private sector, of more than $100 million in any one year.
Accordingly, the OCC has not prepared a budgetary impact statement or
specifically addressed the regulatory alternatives considered.
List of Subjects in 12 CFR Part 10
National banks, Reporting and recordkeeping requirements,
Securities.
Authority and Issuance
For the reasons set out in the preamble, the OCC proposes to revise
part 10 of chapter I of title 12 of the Code of Federal Regulations as
set forth below:
PART 10--MUNICIPAL SECURITIES DEALERS
Sec.
10.1 Scope.
10.2 Filing requirements.
Authority: 5 U.S.C. 93a, 481, and 1818; 15 U.S.C. 78o-4(c)(5)
and 78q-78w.
Sec. 10.1 Scope.
This part applies to:
(a) Any national bank, District bank, and separately identifiable
department or division of either (collectively, a national bank) that
acts as a municipal securities dealer, as that term is defined in
section 3(a)(30) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(30)); and
(b) Any person who is associated or to be associated with a
national bank in the capacity of a municipal securities principal or a
municipal securities representative, as those terms are defined in Rule
G-3 of the Municipal Securities Rulemaking Board (MSRB).1
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\1\ The MSRB rules may be obtained by contacting the Municipal
Securities Rulemaking Board at 1150 18th Street, NW., Suite 400,
Washington, DC 20036-3816.
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Sec. 10.2 Filing requirements.
(a) A national bank shall use Form MSD-4 (Uniform Application for
Municipal Securities Principal or Municipal Securities Representative
Associated with a Bank Municipal Securities Dealer) for obtaining the
information required by MSRB Rule G-7(b)(i)-(x) from a person
identified in
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Sec. 10.1(b). A national bank receiving a completed MSD-4 form from a
person identified in Sec. 10.1(b) must submit this form to the OCC
before permitting the person to be associated with it as a municipal
securities principal or a municipal securities representative.
(b) A national bank must submit Form MSD-5 (Uniform Termination
Notice for Municipal Securities Principal or Municipal Securities
Representative Associated with a Bank Municipal Securities Dealer) to
the OCC within 30 days of terminating a person's association with the
bank as a municipal securities principal or municipal securities
representative.
(c) Forms MSD-4 and MSD-5, with instructions, may be obtained by
contacting the OCC at 250 E Street, SW., Washington, DC 20219,
Attention: Bank Dealer Activities.
Dated: December 1, 1997.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 98-815 Filed 1-15-98; 8:45 am]
BILLING CODE 4810-33-P
