[Federal Register Volume 63, Number 102 (Thursday, May 28, 1998)]
[Rules and Regulations]
[Pages 29092-29094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14016]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 10
[Docket No. 98-08]
RIN 1557-AB62
Municipal Securities Dealers
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is issuing
a final rule 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: The final rule is effective June 29, 1998.
FOR FURTHER INFORMATION CONTACT: Joseph W. Malott, National Bank
Examiner, Treasury and Market Risk (202) 874-5670; Donald Lamson,
Assistant Director, Securities and Corporate Practices (202) 874-5210;
or Ursula Pfeil, Attorney, Legislative and Regulatory Activities (202)
874-5090.
SUPPLEMENTARY INFORMATION:
Background and Discussion of Final Rule
The OCC is issuing a final rule to revise its Municipal Securities
Dealers regulation to remove unnecessary provisions. The OCC had
previously published a notice of proposed rulemaking on January 16,
1998, and at that time requested comment on the
[[Page 29093]]
changes. 63 FR 2640. The OCC received no comments and, therefore, is
now issuing a final rule unchanged from its proposed rule.
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 Final Rules
This section identifies the entities and individuals covered by
part 10. Section 10.1 of the final 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 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.
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 final rule removes this section.
Section 10.4 of Current Rule/Sec. 10.2 of Final 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 final 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, 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 final 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) each have 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 final 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
[[Page 29094]]
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 final 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 final rule retains
the requirement, at 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.
Regulatory Flexibility Act
The OCC hereby certifies that this rule 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 rule will, therefore,
reduce the regulatory burden on national banks, regardless of size. No
new burden is added by the changes.
Executive Order 12866
The OCC has determined that this final rule is not a significant
regulatory action under Executive Order 12866.
Unfunded Mandates Act of 1995
The OCC has determined that the final rule 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 as would otherwise be required
by the Unfunded Mandates Act of 1995.
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 revises 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 Sec. 10.1(b). A national bank receiving a completed MSD-4
form from a person identified in 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: May 9, 1998.
Julie L. Williams,
Acting Comptroller of the Currency.
[FR Doc. 98-14016 Filed 5-27-98; 8:45 am]
BILLING CODE 4810-33-P
