MSRB NOTICE 2011-57 (OCTOBER 3, 2011)

SEC APPROVES MSRB PROPOSAL REGARDING BOARD COMPOSITION; CHANGES FILED TO ARTICLES OF INCORPORATION

On September 28, 2011, the Securities and Exchange Commission (“SEC”) approved[1] amendments by the Municipal Securities Rulemaking Board (“MSRB”) to Rule A-3, on membership on the Board of the MSRB, to establish a permanent Board structure of 21 Board members divided into three classes, each class being composed of seven members who would serve three year terms.

In addition, amended Rule A-3 includes a transitional provision, Rule A-3(h), applicable for the Board’s fiscal years commencing October 1, 2012 and ending September 30, 2014, which provides that Board members who were elected prior to July 2011 and whose terms end on or after September 30, 2012 may be considered for term extensions not exceeding two years, in order to facilitate the transition to three staggered classes of seven Board members per class. The transitional provision further provides that Board members be nominated for term extensions by a Special Nominating Committee formed pursuant to Rule A-6, on committees of the Board, and that the Board then vote on each proposed term extension. The selection of Board members whose terms would be extended would be consistent with ensuring that the Board is in compliance with the composition requirements of revised Section (a) of Rule A-3 during such extension periods.

On September 30, 2011, the MSRB filed with the SEC amendments to its Articles of Incorporation to conform them to amended Rule A-3.[2] These changes were effective upon filing.

Questions about this notice may be directed to Lawrence P. Sandor, Senior Associate General Counsel, at 703-797-6600.

October 3, 2011

* * * *

TEXT OF RULE AMENDMENT [3]

Rule A-3: Membership on the Board

(a) Number and Representation. The Board shall consist of 15 21 members who are knowledgeable of matters related to the municipal securities markets and are:

(i) Public Representatives. Eleven individuals who are independent of any municipal securities broker, municipal securities dealer, or municipal advisor, of which:

(1) at least one shall be representative of institutional or retail investors in municipal securities;

(2) at least one shall be representative of municipal entities; and

(3) at least one shall be a member of the public with knowledge of or experience in the municipal industry; and

(ii) Regulated Representatives. Ten individuals who are associated with a broker, dealer, municipal securities dealer, or municipal advisor, of which:

(1) at least one shall be associated with and representative of brokers, dealers or municipal securities dealers that are not banks or subsidiaries or departments or divisions of banks;

(2) at least one shall be associated with and representative of municipal securities dealers that are banks or subsidiaries or departments or divisions of banks; and

(3) at least one, and not less than 30 percent of the total number of regulated representatives, shall be associated with and representative of municipal advisors and shall not be associated with a broker, dealer or municipal securities dealer.

, at all times equally divided among the following groups:

(i) Public Representatives. Individuals who are not associated with any broker, dealer, or municipal securities dealer (other than by reason of being under common control with, or indirectly controlling, any broker or dealer which is not a broker, dealer or municipal securities dealer that effects municipal securities transactions), at least one of whom shall be representative of investors in municipal securities, and at least one of whom shall be representative of issuers of municipal securities;

(ii) Broker-Dealer Representatives. Individuals who are associated with and representative of brokers, dealers and municipal securities dealers which are not banks or subsidiaries or departments or divisions of banks;

(iii) Bank Representatives. Individuals who are associated with and representative of municipal securities dealers which are banks or subsidiaries or departments or divisions of banks.

(b) Increase or Decrease in Number. The total number of members of the Board may be increased or decreased from time to time by rule of the Board, but in no event shall the total number of members of the Board be less than 15. Any such increase or decrease shall be in multiples of six so that the total number of members of the Board shall always be an odd number, equally divided among the three groups of representatives enumerated in section (a) of this rule.

(b) (c) Nomination and Election of Members.

(i) Members shall be nominated and elected in accordance with the procedures specified by this rule. The 21 member Board shall be divided into three classes, each class being comprised of seven members who serve three year terms. The classes shall be as evenly divided in number as possible between public representatives and regulated representatives, and there shall be at least one municipal advisor representative per class that is not associated with a broker, dealer or municipal securities dealer. The terms will be staggered and, each year, one class shall be nominated and elected to the Board of Directors. The terms of office of all members of the Board shall commence on October 1 of the year in which elected and shall terminate on September 30 of the year in which their terms expire. Members may be elected to staggered terms. A member may not serve consecutive terms, unless special circumstances warrant that the member be nominated for a successive term or because the member served only a partial term as a result of filling a vacancy pursuant to section (d) (e) of this rule. No broker-dealer representative, bank representative, or municipal advisor representative may be succeeded in office by any person associated with the broker, dealer, municipal securities dealer, or municipal advisor with which such member was associated at the expiration of such member’s term except in the case of a Board member who succeeds himself or herself in office.

(ii) – (vii) No change

(c) (d) - (g) (h) No change

(h) (i) Transitional Provision for the Board’s Fiscal Years 20113 and 20124.

(i) Notwithstanding any other provision of this rule, for the Board’s fiscal years commencing October 1, 20102 and ending September 30, 20124, the Board shall transition to three staggered classes of seven Board members per class. During this transitional period, Board members who were elected prior to July 2011 and whose terms end on or after September 30, 2012 may be considered for term extensions not exceeding two years, in order to facilitate the transition to three staggered classes of seven Board members per class. Board members shall be nominated for term extensions by a Special Nominating Committee formed pursuant Rule A-6. The Board shall vote on each nominee for term extension prior to the end of fiscal year 2011. consist of 21 members who are knowledgeable of matters related to the municipal securities markets and are:

(A) Public Representatives. 11 individuals who are independent of any municipal securities broker, municipal securities dealer, or municipal advisor, of which:

(1) at least one shall be representative of institutional or retail investors in municipal securities;

(2) at least one shall be representative of municipal entities; and

(3) at least one shall be a member of the public with knowledge of or experience in the municipal industry; and

(B) Regulated Representatives. 10 individuals who are associated with a broker, dealer, municipal securities dealer, or municipal advisor, of which:

(1) at least one shall be associated with and representative of brokers, dealers or municipal securities dealers that are not banks or subsidiaries or departments or divisions of banks;

(2) at least one shall be associated with and representative of municipal securities dealers that are banks or subsidiaries or departments or divisions of banks; and

(3) at least one, and not less than 30 percent of the total number of regulated representatives, shall be associated with and representative of municipal advisors and shall not be associated with a broker, dealer or municipal securities dealer.

(ii) Prior to October 1, 2010, the Board shall elect 11 new Board members – eight public representatives and three municipal advisor representatives – with terms expiring on September 30, 2012. Prior to October 1, 2011, the Board shall elect five new Board members – two public representatives and three representatives associated with brokers, dealers, municipal securities dealers or municipal advisors – with terms expiring on September 30, 2014.

(iii) Notwithstanding any other provision of this rule, the Nominating Committee shall publish, or shall have published at any time on or after enactment of the Dodd-Frank Act, a notice in a financial journal having general national circulation among members of the municipal securities industry soliciting nominations for municipal advisor candidates for the Board for the fiscal years commencing on October 1, 2010 and ending September 30, 2012. The notice shall require that recommendations be accompanied by information concerning the background of the nominee. The Nominating Committee shall accept recommendations pursuant to such notice for a period of at least 14 days from the date of publication of the notice. Any interested member of the public, whether or not associated with a municipal advisor, may submit recommendations to the Nominating Committee. The names of all persons recommended to the Nominating Committee shall be made available to the public upon request.

(iv) On or after October 1, 2010 and prior to the formation of the Nominating Committee for purposes of nominating potential new members of the Board with terms commencing on October 1, 2011, the Board shall amend the provisions of section (c) of this rule relating to the composition and procedures of the Nominating Committee to:

(A) reflect the composition of the Board as provided under the Dodd-Frank Act;

(B) assure that the Nominating Committee shall be composed of a majority of public representatives and to assure fair representation of bank representatives, broker-dealer representatives and advisor representatives within the meaning of Section 975 of the Dodd-Frank Act; and

(C) reflect such other considerations consistent with the provisions of the Act and the Dodd-Frank Act as the Board shall determine are appropriate.

(v) The Board may take such actions as are necessary or appropriate pursuant to this section (i) prior to October 1, 2010 for the purpose of effectuating the provisions of Section 975(b) of the Dodd-Frank Act.

* * * *

TEXT OF AMENDED ARTICLES OF INCORPORATION

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MUNICIPAL SECURITIES RULEMAKING BOARD

1. – 4. No change.

5. Directors, Terms of Office.

(a) No change.

(b) Terms of Office. The Board of Directors shall be comprised of 21 members who shall be divided into three classes of equal size that serve three year, staggered terms; provided, however, that two Directors who commenced their terms in 2009 and two Directors who commenced their terms in 2010 shall serve four year terms, in order to transition the Board of Directors to three equally-sized classes. Directors shall be elected by a majority vote of the whole Board of Directors. Directors serving four year transitional terms shall be elected to such extended terms by a majority vote of the whole Board of Directors. Directors shall be elected by the Board and shall serve staggered terms, with eleven Directors elected for fiscal year 2011 serving two year terms, five Directors elected for fiscal year 2012 serving three year terms, and five Directors elected for fiscal year 2010 serving three year terms, as provided by the Corporation's By-Laws.

6. – 9. No change.

The effective date of this Amended and Restated Articles of Incorporation shall be October 1, 2011.

IN WITNESS THEREOF, I have signed my name this 30th day of September, 2011.

MUNICIPAL SECURITIES RULEMAKING BOARD



By: ________________________________________

Lynnette Kelly Hotchkiss
President
Municipal Securities Rulemaking Board



[1] See SEC Release No. 34-65424, File No. SR-MSRB-2011-11 (September 28, 2011).

[2] File No. SR-MSRB-2011-18. Comments on the amendments to the Articles of Incorporation should be submitted to the SEC and should reference this file number.

[3] Underlining indicates additions; strikethrough denotes deletions.