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MSRB NOTICE 2007-31 (October 16, 2007)
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On October 16, 2007, the Municipal Securities Rulemaking Board (“MSRB”) filed with the Securities and Exchange Commission (“SEC”) proposed amendments to Rule G-40, on e-mail contacts, that would more fully conform MSRB requirements to Financial Industry Regulatory Authority (“FINRA”) requirements relating to contact information.[1] The MSRB has proposed that the amendments become effective on December 31, 2007 to coincide with the effective date of recently-approved FINRA requirements.[2] In 2002, the MSRB adopted Rule G-40, on e-mail contacts, to establish a reliable method for electronic communication with brokers, dealers and municipal securities dealers (collectively, “dealers”).[3] The rule requires, among other things, that dealers use Form G-40 to appoint a “Primary Contact” for purposes of electronic communication between the dealer and the MSRB. The Primary Contact must be either a Series 53-registered municipal securities principal or a Series 51-registered municipal fund securities limited principal.[4] Dealers are required to submit their original forms and any subsequent changes electronically through their electronic G-40 account using the appropriate user ID and password. The rule also requires that each dealer maintain an Internet electronic mail account to permit communication with the MSRB, and to review and, if necessary, update its Primary Contact information within 17 business days after the end of each calendar quarter. Rule G-40 was based on similar NASD (now FINRA) requirements.[5] The MSRB attempts, whenever possible, to adopt rule provisions and language similar to FINRA rules in order to facilitate dealer understanding of and compliance with such provisions, as well as inspection and enforcement. The Commission recently approved a FINRA proposal, which becomes effective December 31, 2007, that: (i) changes the quarterly review/update requirement to an annual requirement; (ii) requires firms to update their required contact information promptly but not later than 30 days following any change in such information; and (iii) requires firms to comply with any FINRA request for such information promptly but not later than 15 days following such request, or such longer period that may be agreed to by FINRA staff.[6] The MSRB has determined to similarly amend Rule G-40 to ensure a coordinated regulatory approach in this area. Thus, the proposed amendments to Rule G-40 would require dealers to: (i) promptly update any change in the required information for their Primary Contact but not later than 30 days following such change; (ii) review and, if necessary, update required information on their Primary Contact within 17 business days after the end of each calendar year; and (iii) promptly comply with any request by the appropriate regulatory agency (as defined in Section 3(a)(34) of the Act) for such information but not later than 15 days following such request, or such longer period that may be agreed to by the appropriate regulatory agency. The MSRB believes that by substantially conforming Rule G-40 to comparable FINRA requirements relating to e-mail contact information, the proposed rule change will promote regulatory consistency by facilitating dealer compliance with such requirements, as well as the inspection and enforcement thereof. Questions concerning this notice should be directed to Jill C. Finder, Associate General Counsel. October 16, 2007
* * * * * TEXT OF AMENDMENTS [7] Rule G-40: Electronic Mail Contacts (a) – (b)(i) No change.
(c)(i) Each broker, dealer or municipal securities dealer shall [must] review and, if necessary, update information on its Primary Electronic Mail Contact and submit such information electronically to the MSRB within 17 business days after the end of each calendar year [quarter].
(d) Each broker, dealer or municipal securities dealer shall promptly comply with any request by the appropriate regulatory agency (as defined in Section 3(a)(34) of the Act) for required Primary Electronic Mail Contact information, but in any event not later than 15 days following any such request, or such longer period that may be agreed to by the appropriate regulatory agency. [1] File Number SR-MSRB-2007-04. Comments on the proposal should be submitted to the SEC and should reference this file number. [2] SEC Release No. 34-56179 (August 1, 2007). [3] In adopting the rule, the MSRB stated that the events of September 11, 2001 and the weeks that followed, emphasized the importance of, and need for an efficient and reliable means of official communication between regulators and the industry, and that establishing a reliable method for electronic communication was necessary to allow the MSRB to efficiently alert dealers to official communications, including time-sensitive developments, rule changes, notices, etc., as well as to facilitate dealers’ internal distribution of such information. The MSRB also noted that it had discontinued publication of MSRB Reports in 2002 (since that time, all MSRB notices have been available exclusively on the MSRB web site at www.msrb.org.). The rule was approved in SEC Release No. 34-46043 (June 6, 2002). [4] Dealers may also appoint an “Optional Contact” and this person does not have to be a registered principal. [5] Those NASD requirements (set forth in Article IV, Section 3 of the NASD By-Laws) required member firms to appoint and certify one “executive representative” to, among other things, serve as the official contact person between the firm and NASD; the executive representative was required to be a member of the firm’s senior management and a registered principal of the member, and was required to maintain an Internet e-mail account for communication with NASD. In addition, NASD Rule 1150 (Executive Representative) required each member firm to review and, if necessary, update its executive representative information within 17 business days after the end of the each calendar quarter. [6] In its filing (File No. SR-NASD-2007-034 and Amendment No. 1 thereto), NASD proposed to adopt new Rule 1160 (Firm Contact Information) regarding the reporting of designated contact information to NASD and the annual review of such information. NASD also proposed amendments to, among other things, Rule 1150 (Executive Representative) to eliminate the requirement that members review and update, at the end of each calendar quarter, the contact information required by that rule. In its filing, NASD noted that, for many firms, the designated contact persons seldom change. Thus, its proposal was designed to eliminate any unnecessary burden that firms may incur in conducting quarterly reviews of their required contact information while at the same time ensuring that such information is kept current and provided to NASD promptly upon request. In approving NASD’s proposal, the Commission noted that the proposal sets forth a reasonable approach for member firms to provide and keep current required contact information, which should reduce unnecessary burdens on firms by eliminating the requirement that firms review and update the contact information on a quarterly basis; instead, firms would be required to conduct such reviews on an annual basis as well as to promptly update the information following any change. See SEC Release No. 34-56179 (August 1, 2007). [7] Underlining indicates new language; brackets indicate deletions. |
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