[Federal Register Volume 64, Number 167 (Monday, August 30, 1999)]
[Notices]
[Pages 47209-47210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22429]
[[Page 47209]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41773; File No. SR-MSRB-99-7]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Proposed Rule Change Relating to an
Amendment to Rule G-16 on Periodic Compliance Examinations
August 20, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 13, 1999, the Municipal Securities Rulemaking Board
(``Board'' or ``MSRB'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') a proposed rule change as
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.
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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 Board is filing herewith a proposed rule change to Rule G-16,
on periodic compliance examination (hereinafter referred to as the
``proposed rule change''). The proposed rule change will revise the 24-
month examination in Rule G-16 to a two calendar year requirement.
Below is the text of the proposed rule change: \3\
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\3\$New language is italicized and deletions are in brackets.
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Rule G-16. Periodic Compliance Examination
At least once each [twenty-four months] two calendar years, each
broker, dealer and municipal securities dealer shall be examined in
accordance with Section 15B(c)(7) of the Act to determine, at a
minimum, whether such broker, dealer or municipal securities dealer
and its associated persons are in compliance with all applicable
rules of the Board and all applicable provisions of the Act and
rules and regulations of the Commission thereunder.
* * * * *
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 Section
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
Section 15B(c)(7)(A) \4\ of the Act provides that periodic
examinations of dealers for compliance with Board rules are to be
conducted by the National Association of Securities Dealers, Inc.
(``NASD'') with respect to securities firms and by the appropriate
federal bank regulatory agencies with respect to bank dealers. Rule G-
16 permits such examinations to be combined with other periodic
examinations of securities firms and bank dealers in order to avoid
unnecessary regulatory duplication and undue regulatory burdens for
such firms and bank dealers.
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\4\ 15 U.S.C. 78o-4(c)(7)(A).
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By letter dated April 28, 1999, NASD Regulation, Inc., (``NASDR'')
requested that the Board revise Rule G-16. The letter states that
because of NASDR's efforts to coordinate examination schedules, NASDR
believes there is a need for a change in Rule G-16. NASDR requested
that the Board change the 24-month requirement in Rule G-16 to a two
calendar year requirement.
NASDR states that the requirement in Rule G-16 that municipal
securities examinations commence within 24-months of the previous
examination takes precedence over all examinations when coordinating
examination schedules. NASDR uses the ``field work start date'' of a
firm's prior municipal securities examination to calculate the 24-month
period for the purposes of Rule G-16. Apply this methodology, NASDR
identifies all municipal securities examinations required in a given
calendar year. A determination is then made as to whether the
identified firms are also scheduled for a routine cycle examination
during the same year.
If a routine cycle examination is required of a firm that is
subject to a municipal inspection, the routine and municipal
examinations are combined. If a routine cycle examination is not
required, a separate ``off-cycle'' municipal examination may have to be
conducted on-site. Whenever a municipal securities examination is
accelerated, the due date for commencement of a subsequent examination
is moved to an earlier period; increasingly the first quarter. NASDR
states that this hampers both current and future examination planning
and coordination. NASDR states that without the rule change it may be
necessary to remove municipal securities examinations from the
coordinated examination programs.
The Board discussed the proposed rule change with representatives
from the Federal Deposit Insurance Corporation, the Federal Reserve
Board, and the Office of the Comptroller of the Currency (``the bank
regulators'') The bank regulators also examine dealers for compliance
with Board rules pursuant to Rule G-16. All of the bank regulators
responded favorably to the NASDR's request, stating that the requested
change would help bank regulators better coordinate examinations.
Coordination of on-site examinations eliminates unnecessary
regulatory duplication and is less intrusive for dealers without
negatively impacting investor protection. A formal Memorandum of
Understanding among the North American Securities Administrators
Association, Inc., SEC, NASDR and other securities industry self-
regulatory organizations reflects the joint commitment to coordinated
examinations. The Board believes that the proposed rule change will
permit more effective coordination of examinations with other
regulatory and self-regulatory organizations. It will also provide
operating flexibility in planning and scheduling NASDR's and the bank
regulators' overall examination program.
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 the Proposed Rule Change
Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve such proposed rule change, or
[[Page 47210]]
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
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. 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-
0609. 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-99-7 and should be
submitted by September 20, 1999.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-22429 Filed 8-27-99; 8:45 am]
BILLING CODE 8010-01-M
