[Federal Register Volume 60, Number 118 (Tuesday, June 20, 1995)]
[Notices]
[Pages 32186-32187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15040]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35846; File No. SR-MSRB-95-9]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Municipal Securities
Rulemaking Board Relating to Suitability, Transactions and
Discretionary Accounts
June 14, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), and Rule 19b-4 thereunder, notice is
hereby given that on June 1, 1995, the Municipal Securities Rulemaking
Board (``Board'' or ``MSRB'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change (File
No. SR-MSRB-95-9). The proposed rule change is described in Items I,
II, and III below, which Items have been prepared by the Board. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB is filing amendments to rule G-19 on suitability of
recommendations and transactions and discretionary accounts. In April
1994, the Commission approved an amendment designed to strengthen rule
G-19. The proposed rule change makes technical and clarifying changes
to rule G-19 concerning discretionary accounts. The Board requests that
the Commission set the effective date for 30 days after filing.
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 Board 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 Board has prepared summaries, set forth in Sections
(A), (B), and (C) below, of the [[Page 32187]] most significant aspects
of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On April 7, 1994, the Commission approved an amendment to rule G-
19, on suitability, designed to strengthen the rule.\1\ As part of that
amendment, the language of section (c) regarding suitability of
recommendations was amended to ensure that in making a recommendation
to customers, dealers must have reasonable grounds, based upon
information about the security as well as the customer, for believing
that the recommendation is suitable.
\1\ See Securities Exchange Act Release No. 33869 (April 7,
1994) 59 FR 17632.
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Section (d) of rule G-19 requires dealers effecting transactions
for discretionary accounts to have prior written authorization and to
make a suitability determination regarding the transaction, unless the
transaction is specifically directed by the customer. A review of rule
G-19 has indicated that a technical amendment to section (d) is
necessary to correct a cross reference to the new language of section
(c). The proposed rule change also clarifies the language of section
(d) to ensure that dealers understand their duty to make a suitability
determination before executing a transaction for a discretionary
account unless the transaction is specifically directed by the customer
without any recommendation having been made.
The Board believes the proposed rule change is consistent with
section 15(b)(2)(C) of the Act which provides that the Board's rules:
Be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, foster
cooperation with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating
transactions in municipal securities, to remove impediments to and
perfect the mechanism of a free and open market in municipal
securities, and, in general, to protect investors and the public
interest.
The proposed rule clarifies the responsibility of dealers to make
suitability determinations before executing transactions for
discretionary accounts and therefore the Board believes it will protect
investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Board 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Board has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
(3) was provided to the Commission for its review at least five days
prior to the filing date; and (4) does not become operative for thirty
days from the date of its filing on June 2, 1995, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the Act
and Rule 19b-4(e)(6) thereunder. In particular, the Commission believes
the proposal would qualify as a ``non-controversial filing'' because it
makes technical and clarifying changes to an existing MSRB rule. At any
time within sixty days of the filing of the proposed rule change, the
Commission may summarily abrogate 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 inspection and copying in the
Commission's Public Reference Room. Copies of the filing will also be
available for inspection and copying at the Board's principal offices.
All submissions should refer to File No. SR-MSRB-95-9 and should be
submitted by July 11, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\2\
\2\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-15040 Filed 6-19-95; 8:45 am]
BILLING CODE 8010-01-M
