Bankers Association, dated February 21, 2011 (noting the discrepancy
between the municipal advisor registration regime for municipal
securities dealers that are banks, in that the Dodd-Frank Act did
not provide for registration of SIDs).
    \908\ See supra note 900.
    \909\ See Section 202(a)(11)(A).
     The Commission notes that the Investment Advisers Act excepts
from the definition of ``investment adviser'' ``a bank, or any bank
holding company as defined in the Bank Holding Company Act of 1956,
which is not an investment company,'' but provides that the
exception does not apply to ``any bank or bank holding company to
the extent that such bank or bank holding company serves or acts as
an investment adviser to a registered investment company.'' The
Investment Advisers Act also provides that ``if in the case of a
bank, such services or actions are performed through a separately
identifiable department or division, the department or division, and
not the bank itself, shall be deemed to be the investment adviser''
See Section 202(a)(11) of the Investment Advisers Act.
---------------------------------------------------------------------------

    The Commission has carefully considered issues raised by commenters
on its proposal and is adopting Rule 15Ba1-1(d)(4) to permit a SID that
meets the requirements of the rule to register as a municipal advisor
instead of the bank. The Commission agrees with commenters that it is
appropriate to treat banks performing municipal advisory activities
through a SID in a manner consistent with their treatment under the
investment adviser and municipal securities dealer registration
regimes.\910\ Thus, to the extent a bank provides advice with respect
to a municipal derivative or engages in any other non-exempted
municipal advisory activity, if such advice is provided through a SID
that meets the requirements of Rule 15Ba1-1(d)(4), the SID, rather than
the bank itself, shall be deemed to be the municipal advisor.\911\ The
Commission believes that permitting SIDs to register is in the public
interest, because it will ensure that municipal entities and obligated
persons receive the regulatory protection intended by the statute,
while addressing commenters' general concerns about duplicative
regulation for banks and the impact of imposing the municipal advisor
registration regime on banks in general.\912\
---------------------------------------------------------------------------

    \910\ One commenter stated that, ``given the dispersion of
municipal advisory activities throughout the bank, banks may not be
able to consolidate the activities in a single department or
division as is contemplated in the analogous language for municipal
dealer SIDs'' and, as a result, does ``not think the referenced
language is workable.'' This commenter also stated that the
Commission should not dictate the structure of a bank's municipal
business. See American Bankers Association Letter I.
     The Commission notes that it is not requiring banks to
consolidate their municipal advisory activities into a SID. Rather,
to the extent that a bank does not otherwise qualify for an
exclusion or exemption (such as the exemption for banks with respect
to certain activities described above), the bank may choose to
consolidate its municipal advisory activities into a SID. In such
case, only the SID, and not the bank itself, would be required to
register as a municipal advisor. Also, as discussed further below,
Rule 15Ba1-1(d)(4) would not preclude a finding that a bank has a
SID if the bank's municipal advisory activities are conducted in
more than one geographic organizational or operational unit, so long
as all such units are identifiable and otherwise meet the
requirements of the rule with respect to each such unit.
    \911\ See Rule 15Ba1-1(d)(4).
    \912\ See, e.g., notes 874-889 and accompanying text.
---------------------------------------------------------------------------

    Specifically, as adopted, Rule 15Ba1-1(d)(4) provides that ``[i]f a
bank engages in municipal advisory activities through a separately
identifiable department or division that meets the requirements of
[Rule 15Ba1-1(d)(4)], the determination of whether those municipal
advisory activities cause any person to be a municipal advisor may be
made separately for such department or division. In such event, that
department or division, rather than the bank itself, shall be deemed to
be the municipal advisor.'' For purposes of Rule 15Ba1-1(d)(4), a SID
of a bank is defined as ``that unit of the bank which conducts all of
the municipal advisory activities of the bank'' provided that certain
specific requirements are met. In the Proposal, the Commission
suggested defining SID as such term is defined in Section 3(a)(30) of
the Exchange Act. To

provide additional clarity, however, the Commission is eliminating the
specific reference to Section 3(a)(30) of the Exchange Act in the
definition of SID that it is adopting because, while based on that
definition, Section 3(a)(30) relates specifically to activities of
municipal securities dealers, as opposed to municipal advisory
activities. The Commission is also clarifying, consistent with the
definition for SIDs suggested in the Proposal, that the fact that
directors and senior officers of the bank may from time to time set
broad policy guidelines affecting the bank as a whole and which are not
directly related to the day-to-day conduct of the bank's municipal
advisory activities, shall not disqualify such unit or require that
such directors or officers be considered as part of such unit. Further,
the fact that the bank's municipal advisory activities are conducted in
more than one geographic organizational or operational unit of the bank
shall not preclude a finding that the bank has a separately
identifiable department or division for purposes of Rule 15Ba1-1(d)(4),
provided, however, that all such units are identifiable and that the
requirements of Rule 15Ba1-1(d)(4) are met with respect to each such
unit. All such geographic, organizational or operational units of the
bank shall be considered in the aggregate as the separately
identifiable department or division of the bank for purposes of this
paragraph Rule 15Ba1-1(d)(4).\913\ With the exception of the reference
to Section 3(a)(30) and the removal from the rule text of the
Commission's guidance with respect to the activities of directors and
senior officers and multiple geographic locations, the other applicable
requirements are substantively identical to those suggested in the
proposal and based on the rules applicable to municipal securities
dealer SIDs.\914\
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    \913\ The Commission notes that it is not including this
clarification in Rule 15Ba1-1(d)(4) itself as suggested in the
Proposal. See supra note 902.
    \914\ See Rule 15Ba1-1(d)(4)(i)(A)-(B). See also supra note 902
and accompanying text. The other differences between the definition
suggested in the Proposal and the adopted definition are technical
and organizational in nature.
---------------------------------------------------------------------------

2. Rule 15Ba1-2
a. Application for Municipal Advisor Registration
    Section 15B(a)(1)(B) of the Exchange Act provides that it shall be
unlawful for a municipal advisor to provide advice to or on behalf of a
municipal entity or obligated person with respect to municipal
financial products or the issuance of municipal securities, or to
undertake a solicitation of a municipal entity or obligated person,
unless the municipal advisor is registered in accordance with the
relevant provisions of the statute. A ``municipal advisor'' is defined
in Section 15B(e)(4) of the Exchange Act to mean, with certain
exceptions, ``a person'' that ``provides advice to or on behalf of a
municipal entity or obligated person . . . . or undertakes a
solicitation of a municipal entity.'' \915\ In the Proposal, the
Commission indicated that the type of information it should gather from
firms versus individuals for registration purposes may be
different.\916\ As such, the Commission proposed two different
registration forms: Form MA for ``municipal advisory firms'' and Form
MA-I for ``natural person municipal advisors.'' \917\
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    \915\ See supra Section III.A.1.a. (discussing the definition of
the term ``municipal advisor'').
    \916\ Id.
    \917\ Id. A ``municipal advisory firm,'' as defined in the
Glossary of Terms for the forms and used hereinafter, is ``any
organized entity that is a municipal advisor, including sole
proprietors.'' A ``natural person municipal advisor,'' as was
defined in the Glossary, as proposed, and used hereinafter, is ``any
natural person that is a municipal advisor, including sole
proprietors,'' with the further clarification that ``[a] sole
proprietor that is a municipal advisor is also a municipal advisory
firm.'' See also infra notes 918 and 919.
---------------------------------------------------------------------------

    In connection with these forms, the Commission also proposed Rule
15Ba1-2(a) and 15Ba1-2(b) for the registration of municipal advisory
firms and natural person municipal advisors, respectively. Rule 15Ba1-
2(a), as proposed, required a ``person, other than a natural person,
including a sole proprietor'' \918\ applying for registration with the
Commission as a municipal advisor to complete Form MA in accordance
with the instructions to the form and to file the form electronically
with the Commission. Rule 15Ba1-2(b), as proposed, required a ``natural
person (including a sole proprietor)'' \919\ applying for registration
with the Commission as a municipal advisor to complete Form MA-I in
accordance with the instructions to the form and to file the form
electronically with the Commission. This proposed requirement applied
to, among others, each individual employee of a firm who meets the
definition of municipal advisor. The two proposed provisions read
together required a sole proprietor to complete both Form MA and Form
MA-I.
---------------------------------------------------------------------------

    \918\ This language in proposed paragraph 15Ba1-2(a) is
equivalent to the simpler term, ``municipal advisory firm'' used in
the forms and herein, see supra note 917. The formulation of the
rule language was intended to preclude any misinterpretation of the
word ``firm'' as excluding sole proprietors.
    \919\ The category to which proposed paragraph 15Ba1-2(b)
applied is identical to the ``natural person municipal advisor''
defined above. See supra note 917. The formulation of the rule
language was intended to preclude any misinterpretation that would
exclude sole proprietors.
---------------------------------------------------------------------------

    The Commission requested comments on proposed Rule 15Ba1-2(a) and
Form MA. The Commission received no comments directly on proposed Rule
15Ba1-2(a) and is adopting this provision substantively \920\ as
proposed.\921\
---------------------------------------------------------------------------

    \920\ The adopted rule, however, is phrased differently. Rule
15Ba1-2(a), as adopted, provides: ``A person applying for
registration with the Commission as a municipal advisor pursuant to
section 15B of the Act (15 U.S.C. 78o-4) must complete Form MA (17
CFR 249.1300) in accordance with the instructions in the Form and
file the Form electronically with the Commission.''
    The adopted rule no longer includes the phrase ``person, other
than a natural person, including a sole proprietor'' to describe the
person subject to registration on Form MA. As discussed below, under
the adopted rules, natural persons that engage in municipal advisory
activities solely on behalf of a firm with which they are associated
(generally, as employees) are exempted from registration. Thus, such
persons do not need to be excluded from Rule 15Ba1-2(a), which
applies to municipal advisors ``applying for registration.'' In
addition, sole proprietors do not need to be identified specifically
among the persons who are required to complete Form MA.
    \921\ As discussed in the Proposal at 76 FR 838, Rule 15Ba1-2(a)
requires firms that are currently registered on Form MA-T to
register anew on Form MA.
---------------------------------------------------------------------------

    The Commission also requested comments on proposed Rule 15Ba1-2(b)
and Form MA-I. Specifically, the Commission solicited comments on the
effects of a separate registration requirement for natural persons and
firms and the relative advantages and disadvantages for firms,
municipal advisor employees, municipal entities, obligated persons,
investors, and regulators, of requiring separate registration for
natural person municipal advisors.\922\ The Commission also asked, if
the Commission were to only require registration of municipal advisory
firms, would inclusion of information regarding the firm's employees on
the firm's Form MA cause confusion for municipal entities, obligated
persons, and investors.\923\ Finally, the Commission also asked what,
if any, legal ramifications may result for firms, and/or for natural
persons, based on a registration regime that allows natural person
municipal advisors that are employees of a municipal advisory firm to
be registered by their firms as opposed to separate registration.\924\
---------------------------------------------------------------------------

    \922\ See Proposal, 76 FR 851.
    \923\ Id.
    \924\ Id.
---------------------------------------------------------------------------

    The Commission received several comment letters regarding the
proposed requirement for individual registration of natural person
municipal advisors on

Form MA-I.\925\ One commenter asserted that the Commission should not
require individuals to register separately on Form MA-I.\926\ This
commenter stated such requirement would not only impose significant
burden and costs on municipal advisory firms and their individual
associated persons but also would ``force the SEC to devote substantial
resources to processing many individual applications for registration''
in addition to processing municipal advisory firms' registrations on
Form MA.\927\ This commenter noted that the Commission expected
approximately 21,800--if not more--individuals to register as municipal
advisors on Form MA-I \928\ and that ``[t]he sheer number of
registrations would place significant strain on the SEC's budget and
personnel, especially if it plans to review all applications for
municipal advisors that are filed under the permanent registration
program.'' \929\ The commenter questioned ``whether the incremental
regulatory benefit (which [the commenter] does not believe would be
significant) stemming from the public availability of the information
that would be produced by a system of individual registration would
justify this massive resource commitment by both applicants and the
SEC.'' \930\ Another commenter also suggested that the Commission
eliminate individual registration of registrants' employees.\931\
---------------------------------------------------------------------------

    \925\ See, e.g., Deloitte Letter; JPMorgan Chase & Co. Letter;
MSRB Letter I; and SIFMA Letter I.
    \926\ SIFMA Letter I. The commenter also argued that the
separate registration requirement would be ``excessively burdensome
and costly.'' Although this description was made primarily in the
context of the commenter's belief that the information requested by
Form MA-I regarding individuals ``largely duplicates Form MA's
disclosures regarding a municipal advisor's associated persons,''
the Commission believes that the commenter also intended it as a
reason to eliminate individual registration regardless of the extent
of the information required on the form. Regarding the commenter's
concern about duplication, see infra notes 1171-1173 and
accompanying discussion.
    \927\ See SIFMA Letter I.
    \928\ Id. The commenter added that ``[t]his would be in addition
to the 800 municipal advisory firms that have already registered
with the SEC on Form MA-T and would be required to re-register on
Form MA, and at least 200 additional firms that are also expected to
register.'' For the basis of the referenced Commission's estimate,
see Proposal, 76 FR 865.
    \929\ See SIFMA Letter I.
    \930\ Id.
    \931\ See JPMorgan Chase & Co. Letter. This commenter also
advocated the ``simplification of Form MA'' and more broadly
criticized the scope of the proposed rules.
---------------------------------------------------------------------------

    Two commenters argued that the statute does not require individual
registration of natural person municipal advisors.\932\ One of these
commenters asserted that the statute appears to intend that
registration of municipal advisors be limited to entities (including
partnerships, unincorporated organizations, and sole proprietors).\933\
This commenter also stated that such entities would provide the
critical information about individuals (including associated persons of
the municipal advisor entity) during the registration process.\934\
---------------------------------------------------------------------------

    \932\ See SIFMA Letter I (asserting that ``the registration of
individuals in the manner proposed by the SEC is not called for in
any respect by Section 975'') and MSRB Letter I.
    \933\ See MSRB Letter I.
    \934\ Id. The commenter further maintained that forms relating
to individuals at municipal advisor firms should be viewed as
officially submitted by the municipal advisor entity. (To clarify,
however, the commenter was questioning why individuals within a firm
that is itself acting as a registered municipal advisor should be
viewed as municipal advisors rather than as associated persons of a
municipal advisor.)
---------------------------------------------------------------------------

    Another commenter believed that ``dual reporting'' on Forms MA and
MA-I ``could lead to confusion'' and that ``there could be inadvertent
inconsistencies in the information.'' \935\ In particular, the
commenter noted that, under the Proposal, natural persons would be
required to maintain and comply with recordkeeping and inspection
requirements, which, in the commenter's view, would be ``a significant
burden'' without ``any meaningful benefit.'' The commenter suggested
that the Commission eliminate registration for natural persons
altogether, or at least require natural persons to register as
``registered representatives,'' without recordkeeping and inspection
requirements.\936\ Similarly, another commenter believed that, rather
than introducing a new Form MA-I to provide for registration of natural
persons, FINRA's Form U4 should be adapted to allow for registration of
individuals.\937\
---------------------------------------------------------------------------

    \935\ Deloitte Letter. This letter, like SIFMA Letter I, see
supra note 926, tied the argument against separate registration for
individuals to its belief that ``separate registration for natural
persons is largely redundant.''
    \936\ See id.
    \937\ See Financial Services Roundtable Letter. See also infra
note 992 and accompanying text for information concerning Form U4
and further discussion.
---------------------------------------------------------------------------

    The Commission has carefully considered the issues raised by
commenters on the Proposal. In response to these comments, the
Commission is modifying its approach in the final rules and is not
adopting Rule 15Ba1-2(b) and Form MA-I as proposed. Specifically, the
Commission is exempting certain natural persons from the requirement to
register as municipal advisors \938\ and is modifying Rule 15Ba1-2(b)
and Form MA-I accordingly. Rule 15Ba1-3, as adopted, exempts from
municipal advisor registration natural persons who are associated
persons of a registered municipal advisor and who engage in municipal
advisory activities solely on behalf of a registered municipal
advisor.\939\ In practical terms, this exemption means that employees
of municipal advisory firms who do not engage in municipal advisory
activities independently of their firms (e.g., by engaging in municipal
advisory activities on the side as a sole proprietor) will not be
required to register as municipal advisors.
---------------------------------------------------------------------------

    \938\ See Rule 15Ba1-3, as adopted, which provides: ``A natural
person municipal advisor shall be exempt from section 15B(a)(1)(B)
of the Act (15 U.S.C. 78o-4(a)(1)(B)) if he or she: (a) [I]s an
associated person of an advisor that is registered with the
Commission pursuant to section 15B(a)(2) of the Act (15 U.S.C. 78o-
4(a)(2)) and the rules and regulations thereunder; and (b) [e]ngages
in municipal advisory activities solely on behalf of a registered
municipal advisor.''
    \939\ This exemption does not include sole proprietors, who must
register as a municipal advisor on Form MA and also file a Form MA-
I.
---------------------------------------------------------------------------

    While the Commission is not requiring municipal advisor
registration for these natural persons, the Commission is requiring
municipal advisory firms to provide the Commission with information
relating to these exempted natural persons. In this regard, Rule 15Ba1-
2(b), as adopted, requires the municipal advisor to complete and file
with the Commission Form MA-I for each of its natural persons who are
associated with the municipal advisor and engaged in municipal advisory
activities on its behalf.\940\ While Form MA-I, as adopted, is not a
form for individual registration of natural persons, adopted Form MA-I
requires municipal advisory firms to provide similar information
regarding its associated natural persons as proposed Form MA-I required
(with some modifications, as discussed below).
---------------------------------------------------------------------------

    \940\ See Rule 15Ba1-2(b), as adopted, which provides: ``(1) A
person applying for registration or registered with the Commission
as a municipal advisor pursuant to section 15B of the Act (15 U.S.C.
78o-4) must complete Form MA-I (17 CFR 249.1310) with respect to
each natural person who is a person associated with the municipal
advisor (as defined in section 15B(e)(7) of the Act (15 U.S.C. 78o-
4(e)(7))) and engaged in municipal advisory activities on its behalf
in accordance with the instructions in the Form and file the Form
electronically with the Commission. (2) A natural person applying
for registration with the Commission as a municipal advisor pursuant
to section 15B of the Act (15 U.S.C. 78o-4), in addition to
completing and filing Form MA pursuant to paragraph (a), must
complete Form MA-I (17 CFR 249.1310) in accordance with the
instructions in the Form and file the Form electronically with the
Commission.''
---------------------------------------------------------------------------

    The Commission believes that the information obtained from Form MA-
I is necessary and appropriate to assist

the Commission in assuring compliance with Section 15B of the Exchange
Act and the rules thereunder. The Commission believes that exempting
certain natural persons from registration and requiring municipal
advisors to complete and file a Form MA-I for certain exempted natural
persons retains the benefits of individual registration discussed in
the Proposal while also addressing the concerns raised by commenters.
Specifically, the final rules and forms mitigate commenters' concerns
about imposing registration obligations upon the large number of
individuals without negating the important disclosures and other
benefits that the Commission believes would be obtained through Form
MA-I.\941\ For example, as discussed in the Proposal, the information
provided by Form MA-I would help the Commission (i) manage its
regulatory and examination programs by assisting the Commission in
identifying municipal advisors and understanding their business
structures; (ii) prepare for its inspection and examination of
municipal advisors; and (iii) oversee the municipal securities market
and investigate possible wrongdoing.\942\ This approach would also
provide municipal entities, obligated persons, investors, and other
regulators with information that would inform them as to the relevant
municipal advisory experience and history of each natural person for
whom the municipal advisor completed and filed a Form MA-I.\943\
---------------------------------------------------------------------------

    \941\ See, e.g., SIFMA Letter I.
    \942\ See Proposal, 76 FR 850.
    \943\ See id., at 851.
---------------------------------------------------------------------------

    This approach also would help to streamline the manner of gathering
pertinent information, reduce confusion in the disclosure process, and
reduce inconsistencies in the information reported because the
municipal advisory firm will be required to complete and file Form MA
and Form MA-I for each of the associated natural persons engaged in
municipal advisory activities on its behalf.\944\ Indeed, commenters
observed that a registered municipal advisory firm should provide
critical information about its employees who engage in municipal
advisory activities, rather than require the individual's separate
registration.\945\ Accordingly, as adopted, Rule 15Ba1-2(b), Rule
15Ba1-3, and Form MA-I will serve this purpose. Finally, the Commission
also believes that eliminating the requirement for individual municipal
advisors to separately register addresses commenters' concerns
regarding regulatory efficiency, as it will allow the Commission to
direct resources that would have otherwise been required to review many
thousands of these individuals' applications to other regulatory
matters.
---------------------------------------------------------------------------

    \944\ This approach does not address the argument of commenters
that Form MA-I is redundant of Form MA. That issue is addressed in
the discussion below regarding the information requested in Form MA-
I. See infra notes 1171-1173 and accompanying text.
    \945\ See, e.g., MSRB Letter I.
---------------------------------------------------------------------------

    As stated above, one commenter argued against individual
registration, claiming that, under the Proposal, natural persons would
be required to maintain and comply with recordkeeping and inspection
requirements, which, in the commenter's view, would be ``a significant
burden'' without ``any meaningful benefit.'' \946\ The Commission
notes, however, that the recordkeeping obligations imposed by the
Proposal always applied only to municipal advisory firms.\947\
---------------------------------------------------------------------------

    \946\ See id.
    \947\ As proposed, the text of Rule 240.15Ba1-7(a) provided:
``Every person, other than a natural person, including sole
proprietors, registered or required to be registered under Section
15B of the Securities Exchange Act . . . shall make and keep true,
accurate, and current the following books and records relating to
its municipal advisory activities . . . . '' (emphasis added). See
Proposal, 76 FR 883. The highlighted language is retained in the
recordkeeping rule, as adopted, which has been renumbered as Rule
240.15Ba1-8. See infra Section III.C.
---------------------------------------------------------------------------

    The Commission recognizes that the rule, as adopted, places on
municipal advisory firms an obligation to file a Form MA-I for each
individual employee that acts as a municipal advisor on its behalf. The
Commission notes that, in the context of broker-dealer regulation, Form
U4, which is required of individual employees and asks for much the
same information as Form MA-I, is generally filed by the employees'
firms.\948\ Indeed, commenters appeared to favor a regime in which
firms submit information regarding their employees rather than one in
which each employee submits information separately.\949\
---------------------------------------------------------------------------

    \948\ The Commission notes, moreover, that Form U4 is used for
registration. Under the rules as adopted Form MA-I is not a
registration form. It is a form to obtain information about persons
who engage in municipal advisory activities on behalf of the firm.
    \949\ See, e.g., MSRB Letter I and citation at supra note 934.
See also Deloitte Letter, stating: ``Alternatively, if the SEC does
not eliminate separate registration for natural persons, the
Commission should require such persons to register as registered
representatives of municipal advisors, as is done in the broker-
dealer context, rather than as municipal advisors.'' Although the
commenter is suggesting an alternative kind of registration for
natural persons, and does not specifically state that the
applications for registration of such persons would be filed by
their firms, the analogy to the broker-dealer context suggests that
the proposed alternative would operate in a similar manner, where
firms file an individual's Form U4.
---------------------------------------------------------------------------

    The Commission notes further that, as described below,\950\ the
information that firms will need to obtain to complete Form MA-I is
primarily the individual's full legal and other names, social security
number, and employment and residential history, other business
activities in which the employee is engaged, and his or her
disciplinary history. The Commission notes that, in any case, a firm
generally must obtain information regarding any relevant criminal,
regulatory, or civil judicial history concerning any of its associated
persons \951\ in order to accurately complete Form MA for purposes of
its own registration.\952\ In addition, to help ensure adequate
regulatory oversight, aid the prosecution of wrongdoing, and benefit
municipal entities and investors, the final Form MA-I collects
substantially the same information as required under the proposed
form.\953\ Moreover, although under the adopted rules employees of
municipal advisory firms are not required to register independently,
they are otherwise not exempt from any other provision relating to
municipal advisors.
---------------------------------------------------------------------------

    \950\ See infra Section III.A.2.c., ``Information Requested in
Form MA-I.''
    \951\ See infra note 1054 for the meaning of ``associated
persons'' in this context.
    \952\ See infra Section III.A.2.b., under ``Item 9: Disclosure
Information and Related DRPs.'' Thus, for purposes of completing an
employee's Form MA-I, a firm will additionally need to obtain the
information required by the form concerning investigations of the
employee; customer complaints, arbitration, and civil litigation
relating to municipal advisor-related or investment-related matters
involving the employee; terminations of the employee; and
outstanding judgments or liens against the employee. This
information is substantially the same as required by Form MA-I under
the Proposal, with the modifications discussed below. See infra
Section III.A.2.c., ``Information Requested in Form MA-I.''
    \953\ See id.
---------------------------------------------------------------------------

    The Commission received no comments on the requirement, under the
Proposal, for a sole proprietor to file both Form MA and Form MA-I.
Accordingly, the Commission is retaining this requirement in the rules,
although, in view of the other changes described above, a provision has
been added to set forth explicitly that a natural person applying for
registration must file Form MA-I in addition to Form MA.\954\
---------------------------------------------------------------------------

    \954\ See Rule 15Ba1-2(b)(2) of the adopted rules, 17 CFR
240.15Ba1-2(b)(2), which provides: ``A natural person applying for
registration with the Commission as a municipal advisor pursuant to
section 15B of the Act (15 U.S.C. 78o-4), in addition to completing
and filing Form MA pursuant to paragraph (a), must complete Form MA-
I (17 CFR 249.1310) in accordance with the instructions in the Form
and file the Form electronically with the Commission.'' The addition
of Rule 15Ba1-2(b)(2), which relates to sole proprietors, was
necessary because Rule 15Ba1-2(b)(1), as adopted, is worded
specifically to require municipal advisors that are firms to file
Form MA-I with respect to associated persons who engage in municipal
advisory activities on their behalves, and would not by definition
apply to sole proprietors.

---------------------------------------------------------------------------

    The Commission stated in the Proposal that it was considering
whether Form MA and Form MA-I should be submitted through the
Commission's Electronic Data Gathering, Analysis, and Retrieval System
(``EDGAR'') or otherwise.\955\ The Commission requested comment on
whether the electronic registration system to be established should
have the ability to cross-check other electronic systems, such as IARD
and CRD, and whether requiring the filing of forms on EDGAR would be an
appropriate means to make the requested information available.\956\
---------------------------------------------------------------------------

    \955\ See Proposal, 76 FR 839.
    \956\ See id.
---------------------------------------------------------------------------

    Two commenters favored the use of FINRA's electronic registration
system for CRD and IARD or some similar system for the registration of
municipal advisors.\957\ One commenter stated that this system would
``allow regulators to easily find filings for firms and individuals, as
well as cross reference between the CRD and IARD systems.'' \958\ The
commenters believed that use of FINRA's system would allay concerns
that EDGAR would subject registration information to ``unnecessary
public scrutiny'' \959\ and ``compromise the confidentiality of
operating performance data for privately held Municipal Advisors.''
\960\
---------------------------------------------------------------------------

    \957\ See NASAA Letter and letter from Gary Kimball, President,
Specialized Public Finance, Inc., dated February 22, 2011
(``Specialized Public Finance Letter'').
    \958\ See NASAA Letter.
    \959\ See Specialized Public Finance Letter. In this regard, the
commenter mentioned specifically social security numbers.
    \960\ Id.
---------------------------------------------------------------------------

    After carefully considering the comments, the Commission has
determined to require the forms to be submitted through EDGAR.\961\
Although EDGAR is known primarily as the vehicle through which public
companies file their annual and quarterly reports and other
disclosures, the Commission has adapted EDGAR for other information
gathering purposes.\962\ Further, collecting information regarding
municipal advisors through EDGAR should enable the Commission to
efficiently retrieve and analyze data in a cost-effective manner to
carry out its oversight of municipal advisors and their municipal
advisory activities. The Commission notes that, while IARD, which is an
electronic filing system that facilitates investment adviser
registration, is funded through user fees,\963\ there is no comparable
provision in Section 975 of the Dodd-Frank Act authorizing the
Commission to charge municipal advisors (or to authorize another entity
to collect) registration fees. Accordingly, the Commission has
determined to leverage its existing technology to serve as a mechanism
by which municipal advisors can register with the Commission. The
Commission further notes that EDGAR is a widely utilized resource that
is already familiar to investors and other interested parties seeking
information about public companies, and believes that municipal
entities, investors, other regulators, and members of the public
seeking information about municipal advisors should not have difficulty
learning how to use the system.
---------------------------------------------------------------------------

    \961\ As discussed in the Proposal, because the registration
forms will be required to be submitted through EDGAR, the electronic
filing requirements of Regulation S-T will apply. See generally 17
CFR 232 (governing the electronic submission of documents filed with
the Commission). The Commission will provide, in the municipal
securities area of its Web site, full instructions on how applicants
for municipal advisor registration that are not currently EDGAR
filers can acquire authorized codes to access the system. These
instructions have now also been added to the General Instructions
for the Form MA series. General information about EDGAR is available
at http://www.sec.gov/info/edgar.shtml, where the EDGAR Filer Manual
can also be accessed. The Commission recommends that applicants read
this filer manual before they begin using the system.
    \962\ Most recently, for example, the Commission determined to
adapt EDGAR to accept Form 13H filings required under the ``Large
Trader Reporting'' regime established by new Rule 13h-1 under
Section 13(h) of the Exchange Act. See Securities Exchange Act
Release No. 64976 (July 27, 2011), 76 FR 46960 (August 3, 2011).
    \963\ See Section 204(c) of the Advisers Act, which permits the
Commission to charge fees associated with filings and the
maintenance of a filing system.
---------------------------------------------------------------------------

    Regarding the comment that the use of FINRA's CRD and IARD systems
would be preferable because it would allow regulators to cross
reference the information in Forms MA and MA-I with information in
those other systems, the Commission notes that, as discussed further
below, Form MA requires a municipal advisor that has been assigned a
number either under the CRD system or the IARD system (a ``CRD
Number'') to provide that number in completing the form.\964\ In
addition, Form MA asks an applicant specifically whether it is
registered with the Commission in various other capacities (e.g.,
municipal securities dealer, government securities broker-dealer, or
other category that the applicant must specify) and, if so, to provide
the relevant file numbers.\965\ In a similar fashion, an applicant is
required to supply file numbers for any registrations it has with
another federal agency or state or other U.S. jurisdiction.\966\ Form
MA-I requires the municipal advisory firm filing the form to provide
the relevant individual's CRD Number, if registered on the CRD or IARD
system; list any other names by which the individual is known or has
been known; and provide the name, registration number, and the firm's
EDGAR CIK (Central Index Key) number.\967\ These identifying numbers
should assist municipal entities, regulators, and the public to access
any other publicly available information about the municipal advisor.
Although EDGAR will not automatically provide an electronic link to the
information on the CRD and IARD systems, these systems are nevertheless
readily accessible to regulators, municipal entities, and to the
public.
---------------------------------------------------------------------------

    \964\ See infra Section III.A.2.b., ``Information Requested in
Form MA,'' discussion of Item 1, ``Identifying Information.'' See
also infra note 1007.
    \965\ See infra Section III.A.2.b.
    \966\ Id.
    \967\ See infra Section III.A.2.c., ``Information Requested in
Form MA-I,'' discussion of Items 1 and 2, ``Identifying Information
and Other Names.''
---------------------------------------------------------------------------

    With respect to commenters' concerns regarding privacy, the
Commission notes that, while information required in Form MA and Form
MA-I generally will not be confidential, some information, such as
social security numbers, will be kept confidential (subject to the
provisions of applicable law).\968\ The EDGAR system will block

the relevant information in these forms in the versions that will be
made public.
---------------------------------------------------------------------------

    \968\ The Proposal specified that social security numbers would
not be made public. See Proposal, 76 FR 867, 868, and 869. The
forms, as adopted, specify additional instances in which responses
will be kept confidential subject to the provisions of applicable
law. See, e.g., Item 8 of Schedule A of Form MA (advising applicants
that social security numbers, foreign identity numbers, and dates of
birth will not be publicly disseminated) and Item 3 of Form MA-I, as
adopted (advising that private residential addresses disclosed in
completing the residential history section of the form will not be
included in publicly available versions). The Commission has
determined that it is appropriate to block this information from
public view, as well. To make this clear, in the forms, as adopted,
in each place where an applicant is asked for a social security
number, foreign identity number, private residential address, or a
date of birth, guidance has been added stating that the information
will not be included in publicly available versions of the form. In
addition, at various other places in the forms that ask for an
address, the filer is asked to indicate whether the address provided
in response is a private residence and is advised that, if so, the
address will not be included in publicly available versions of the
form. One of the DRPs in Form MA-I, which asked whether the docket
or case number of a particular case is the municipal advisor's
social security number, bank card number, or personal identification
number, has been deleted as unnecessary.
---------------------------------------------------------------------------

    One commenter argued that information relating to operating
performance of privately held municipal advisors should be kept
confidential.\969\ The commenter did not specify which particular
questions in the forms it considered problematic. The Commission
believes, however, that the public interest in making the information
available--to allow municipal entities to better evaluate candidates
for service in municipal advisory roles and to provide investors in
municipal securities with clearer knowledge of who may be influencing
the use and outcome of their investments--outweighs this type of
confidentiality concern.\970\
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    \969\ See supra note 960.
    \970\ Form ADV, upon which Form MA was substantially modeled
(see text accompanying infra note 975), requires a similar level of
disclosure. The Commission would make this information publicly
available regardless of the electronic registration system that is
used. See also infra notes 1046 and 1048 and accompanying text.
---------------------------------------------------------------------------

    The Commission received no comments on the requirement in proposed
Rules 15Ba1-2(a) and (b) that Forms MA and MA-I, respectively, must be
filed electronically, and is adopting this requirement as proposed. The
Commission also received no comments on paragraph (c) of proposed Rule
15Ba1-2, which provided that the forms would be considered filed with
the Commission ``upon acceptance by the [applicable electronic
system].'' However, the Commission is adopting the rule with
modifications.
    As proposed, Rule 15Ba1-2 provides that Forms MA and MA-I ``shall
be considered filed with the Commission upon acceptance by the
[applicable electronic system].'' As adopted, the rule instead provides
that the forms are considered filed upon ``submission of a completed
Form MA, together with all additional required documents, including all
required filings of Form MA-I (17 CFR 249.1310) . . .'' The Commission
is modifying the rule to state that the form is considered filed upon
``submission'' to EDGAR rather than upon ``acceptance'' to align the
rule with the terminology used by the EDGAR system. Further, the
Commission is modifying the rule to provide that Form MA will be
considered filed upon submission of a ``completed Form MA, together
with all additional required documents,'' to clarify that, if a Form MA
is not considered complete, the Commission's statutory forty-five day
review period will not commence.\971\ Moreover, because a municipal
advisor applying for registration under the final rules is responsible
for submitting Form MA-I for each associated person engaging in
municipal advisory activities on its behalf, the Commission believes it
appropriate to stipulate that the firm's application for registration
will be considered filed only if the firm has submitted all requisite
Form MA-Is.
---------------------------------------------------------------------------

    \971\ If a Form MA is complete and all additional required
documents are attached, the form is considered filed and the forty-
five day period for the Commission to act upon the application
(i.e., either approve or institute proceedings to determine whether
it should be denied) begins.
---------------------------------------------------------------------------

    When an applicant attempts to transmit its Form MA electronically,
EDGAR performs the initial automated checks to determine whether
questions that require responses have been answered and to detect, in
certain instances, defective responses. For example, if an applicant
indicates that it has three Web sites but provides, contrary to
instructions, only two corresponding Web site addresses, EDGAR will
detect the deficiency.\972\ In such instance, EDGAR will not permit the
applicant's submission. However, if a form passes EDGAR's automated
checks, EDGAR will display a message indicating that the submission was
successfully transmitted and will provide an ``accession number,''
which permits the applicant to enter the system to check the status of
its application. At this point, the applicant is also advised that its
application is not ``accepted,'' which is an EDGAR term for not
``approved,'' and EDGAR will display the status of the application as
``In Progress.''
---------------------------------------------------------------------------

    \972\ See infra note 1003 for more examples.
---------------------------------------------------------------------------

    Once an application passes EDGAR's initial automated check and is
successfully transmitted, the Commission staff will check the
application for the types of deficiencies that may not be detected
through automation, and if the Form MA is considered incomplete, the
applicant will receive by email an EDGAR-generated notice of
suspension. The notice will inform the applicant that the transmission
has been suspended and the reason for the suspension. The notice will
also instruct the applicant to make corrections and re-transmit the
application to the Commission in its entirety.
    The Commission notes that, within forty-five days of the date a
complete Form MA is considered filed, the Commission shall by order
grant registration or institute proceedings to determine whether
registration should be denied. The Commission also notes that the
statutory review period for a filed Form MA may be longer if the
applicant consents to a longer time period. If the Commission
determines to grant registration, an EDGAR-generated email will be sent
to inform the applicant that the filing has been ``accepted'' and the
Commission will issue a formal order of approval separately.
    The Proposed paragraph (d) of Rule 15Ba1-2 provided that Forms MA
and MA-I constitute ``reports'' within the meaning of Sections 15B(c),
17(a), 18(a), 32(a) (15 U.S.C. 78o-4(c), 78q(a), 78r(a), 78ff(a)) and
other applicable provisions of the Exchange Act.\973\ The Commission
received no comments on paragraph (d) and is adopting this provision as
proposed. As a consequence, it is unlawful for a municipal advisor to
willfully make or cause to be made, a false or misleading statement of
a material fact or omit to state a material fact in Form MA or Form MA-
I.
---------------------------------------------------------------------------

    \973\ See Rule 15Ba1-2(d).
---------------------------------------------------------------------------

b. Information Requested in Form MA
    Municipal advisors that are municipal advisory firms (including
sole proprietors) must submit Form MA to register with the Commission.
The Commission received several comments, as discussed further below,
on the information it proposed to require from applicants in completing
Form MA.\974\ After carefully considering the comments, the Commission
is adopting Form MA substantially as proposed, with some modifications,
as discussed below.
---------------------------------------------------------------------------

    \974\ See infra notes 979-987.
---------------------------------------------------------------------------

    Form MA is modeled primarily on Form ADV (Part 1),\975\ which is
used for the registration of investment advisers with the Commission,
with appropriate changes made to reflect the differences in the
activities of municipal advisors and the markets that they serve. The
information that applicants are required to provide on the form is
described in detail below. As discussed in the Proposal, the items in
Form MA were drafted broadly to apply to the different types of
municipal advisors that may register with the Commission.\976\
---------------------------------------------------------------------------

    \975\ See 17 CFR 279.1. See also Proposal, 76 FR 840.
    \976\ See Proposal, 76 FR 840.
---------------------------------------------------------------------------

    Form MA asks for information about the municipal advisor and
persons associated with the advisor. The Commission believes it
necessary to obtain the requested information to manage the
Commission's regulatory and examination programs and to make such
information available to the MSRB

to better inform its regulation of municipal advisors. The information
will assist the Commission in identifying municipal advisors, their
owners, and their business models, and in determining whether a
municipal advisor might present sufficient concerns as to warrant the
Commission's further attention in order to protect the municipal
advisor's clients. In addition, the information will assist the
Commission in understanding the kinds of activities in which the
applicant participates. The information will also be useful to the
Commission in tailoring any requests for additional information that
the Commission may send to a municipal advisor. Furthermore, the
required information will assist the Commission in the preparation of
the Commission's inspection and examination of municipal advisors and
the MSRB in determining what regulations for municipal advisors may be
necessary or appropriate and how such regulations might be best
implemented.\977\
---------------------------------------------------------------------------

    \977\ See id., at 841.
---------------------------------------------------------------------------

    Moreover, the Commission believes that the information sought will
enable municipal entities and potential obligated persons to better
assess the experience and background of municipal advisors in deciding
whether to engage the services of, or do business with, any particular
municipal advisor. Similarly, information about the persons serving as
municipal advisors can be important to investors in deciding whether to
purchase specific municipal securities. In determining what information
should be disclosed, the Commission also considered the broader public
interest in the availability of information about municipal advisors to
the public.\978\
---------------------------------------------------------------------------

    \978\ See id.
---------------------------------------------------------------------------

    The Commission received several comments regarding the extent and
kind of information sought on Form MA, as a general matter, and the
impact that the requirement to provide this information will have on
municipal advisors.\979\ While one commenter generally approved of the
content of the questions, most of the commenters on this subject
believed that the scope of information sought was too broad, that the
form should ask different questions for different kinds of municipal
advisors, or that providing the answers would be too burdensome.
---------------------------------------------------------------------------

    \979\ See, e.g., Acacia Financial Group Letter; Financial
Services Roundtable Letter; JP Morgan Chase Letter; Managed Funds
Association Letter; MSRB Letter I; NAESCO Letter; SIFMA Letter I;
Specialized Public Finance Letter.
---------------------------------------------------------------------------

    Specifically, one commenter stated its belief that the information
requested was ``generally appropriate'' and that it would assist the
Commission in its examination and enforcement activities as well as
assist its rulemaking activities.\980\ Another commenter stated that it
does not object in principle to requiring municipal advisors to make
disclosures similar to the disclosures required of registered
investment advisers, but urged that the Commission ``tailor carefully''
any disclosure document to ``ensure that the information to be
disclosed relates only to the municipal advisor activities of the
provider, rather than broadly requiring companies to disclose
information unrelated to municipal advisory activities.'' \981\ Another
commenter suggested that the forms be tailored for various categories
of advisors, instead of a ``one-size-fits-all'' approach.\982\
According to another commenter, ``the disclosures required for
investment advisers on Form ADV, on which proposed Form MA is based,
are, in many cases, not relevant to municipal advisors.'' \983\ The
commenter maintained that many of the other questions drawn from Form
ADV are ``not likely to obtain useful responses from municipal
advisors'' and that the Commission ``has not articulated a convincing
purpose for much of the information.'' \984\
---------------------------------------------------------------------------

    \980\ See MSRB Letter I. The MSRB also expressed the hope that
the Commission would receive ``significant meaningful feedback from
small municipal advisors regarding the potential burdens the Rule
Proposal would impose, and give due weight to such feedback in light
of the Congressional intent regarding regulatory burden on small
municipal advisors.'' At the same time, the MSRB believed that the
information gleaned from the forms will ``help the MSRB to better
gauge the parameters of what should be considered a small municipal
advisor and to structure its rules to effectuate the intent of
Section 15B(b)(2)(L)(iv) [of the Exchange Act],'' which requires
that the MSRB ``not impose a regulatory burden on small municipal
advisors that is not necessary or appropriate in the public interest
and for the protection of investors, municipal entities, and
obligated persons, provided that there is robust protection of
investors against fraud.''
    \981\ See NAESCO Letter.
    \982\ See Acacia Financial Group Letter.
    \983\ See SIFMA Letter I.
    \984\ See id. The commenter cited in particular in this regard
the proposed disclosure requirements in Form MA relating to a
municipal advisor's clients; compensation arrangements; other
business activities; financial industry affiliations; proprietary
and sales interests in its municipal advisory clients' transactions;
and investment or brokerage discretion. The Commission believes that
information in each of these areas can shed light on the possible
conflicts of interest that a municipal advisor may have when
providing advice. See also infra notes 1065, 1087, and 1119 and
accompanying text, regarding this commenter's comments relating
specifically to disclosures about affiliates and other associated
persons.
---------------------------------------------------------------------------

    Some commenters additionally believed that supplying the
information requested on the proposed forms would be too burdensome on
certain firms and individuals, but varied on the specifics.\985\ On the
one hand, some commenters believed, as one commenter expressed, that
``the scope of the proposed information to be collected'' in Form MA
``is exhaustive and could place a burden on small municipal advisors.''
\986\ On the other hand, one commenter believed that large
organizations would incur ``significant time, burden, and expense in
identifying personnel involved in activities that would subject them to
registration.'' \987\
---------------------------------------------------------------------------

    \985\ See, e.g., Acacia Financial Group Letter, SIFMA Letter I.
    \986\ See Acacia Financial Group Letter.
    \987\ See SIFMA Letter I.
---------------------------------------------------------------------------

    In considering these comments, the Commission carefully analyzed
each aspect of Form MA as set forth in the Proposal, consulting with
and drawing on the experience and expertise of Commission's enforcement
and examination staffs. As already stated, the Commission had paid
conscious and due attention in developing Form MA to the differences
between the activities of investment advisers and those of municipal
advisors. The Commission has analyzed proposed Form MA in the light of
the comments received, specifically with an eye to making any possible
further adjustments to reflect the field of municipal advisory
activities and to remove any proposed elements of Form MA that are not
appropriate to the regulation of municipal advisors or valuable for
such regulation in consideration of the burdens of completing the form.
    The Commission continues to believe that the information requested
will be valuable in establishing and maintaining effective oversight of
municipal advisors. The various purposes to which the Commission
intends to put the information to use, as well as its value for
municipal entities and investors, have been broadly described above.
The decision to model Form MA on Form ADV was based, in part, on the
Commission's belief that the level of information sought in Form ADV is
important, appropriate, and not unduly burdensome for participants
engaged in providing investment advice, bearing in mind the goal of
protection of investors and the public interest. The Commission
believes that the regulation of municipal advisors warrants obtaining a
similar level of information as pertinent to municipal advisors.\988\

The Commission notes that the MSRB, the statutorily mandated rulemaking
body for the municipal securities market, believes that the information
obtained generally will contribute to the Commission's and its own
regulatory activities.\989\
---------------------------------------------------------------------------

    \988\ For example, knowledge of the kind of clients that a
municipal advisor serves may be useful to a municipal entity in
determining whether that advisor has the background and expertise
necessary to provide advice regarding the issuance that the entity
is contemplating. Similarly, information regarding the advisor's
compensation arrangements generally may help a municipal entity
evaluate the advisor's proposed compensation arrangements for the
issuance under consideration. Such information can also be valuable
to regulators in uncovering irregularities when questions are raised
regarding a municipal advisor's motives and/or business conduct with
respect to a particular transaction. The information that a
municipal advisor provides regarding its other business activities,
its financial industry affiliations, the proprietary and sales
interests it may have in its municipal advisory clients'
transactions, and the investment or brokerage discretion that it is
granted in carrying out its services may help municipal entities,
investors in municipal securities, and regulators assess whether
conflicts of interest may affect the advice that the firm provides
or may have influenced its advice in a transaction under
investigation. The Commission believes that obtaining such
information is consistent with the intent of the Dodd-Frank Act in
establishing a regulatory framework for municipal advisory
activities.
    \989\ See MSRB Letter I. The MSRB also commented that the
Commission ``should give due weight to feedback from small municipal
advisors regarding the potential burdens in light of the
Congressional intent regarding regulatory burden on small municipal
advisors.'' See id. The Commission addresses the burden for smaller
municipal advisory firms in the Final Regulatory Flexibility
Analysis below. See infra Section IX.
---------------------------------------------------------------------------

    Some commenters believed that the information sought by Form MA
with respect to many municipal advisors is information already
available to the Commission through other registrations and that the
proposed disclosures would therefore be redundant.\990\ One commenter
argued that ``adding new layers of regulation in this area will not
serve to enhance the protection of municipal entities or investors.''
\991\ Another commenter contended that it would be ``more efficient for
the SEC to leverage existing registration forms, which have years of
interpretive guidance behind them, than to create a new form seeking
much of the same information as required by Forms BD and U4.'' \992\ To
address this issue, some suggested that the Commission allow persons
that are already registered with the Commission--such as broker-
dealers, investment advisers, and municipal securities dealers--to
check an additional box on their primary registration forms already
filed with the Commission or to provide them with a short-form
registration process.\993\ Short of this, commenters urged that, if
such persons must complete Form MA, they should be allowed to
incorporate by reference on Form MA any information that is included on
another registration form and be required to provide on Form MA only
such additional information as deemed essential regarding municipal
advisory activities.\994\
---------------------------------------------------------------------------

    \990\ See, e.g., JP Morgan Chase Letter; SIFMA Letter I; and
Specialized Public Finance Letter. See also Financial Services
Roundtable Letter (maintaining that, for registered broker-dealers,
``Form MA is largely duplicative of Form BD''); and Managed Funds
Association Letter (maintaining that proposed Form MA, ``but for
items specifically relating to municipal advisory activities,'' is
``substantially similar to Form ADV'').
    \991\ See JP Morgan Chase Letter. This view was expressed
particularly with respect to traditional banking products and
services. See also supra Section III.A.1.c.viii., regarding banks.
    \992\ See Financial Services Roundtable Letter. Form U4 is the
Uniform Application for Securities Industry Registration or
Transfer, available at http://www.finra.org/web/groups/industry/@ip/<EMAIL_ADDRESS>    \993\ See SIFMA Letter I. See also Managed Funds Association
Letter, Financial Services Roundtable Letter.
     Also, one commenter suggested that, instead of registering a
second time as a municipal advisor, an investment adviser should be
permitted to amend its Form ADV to reflect the fact that it engages
in municipal advisory activities. This commenter also suggested
permitting state-registered investment advisers to register as
municipal advisors by amending their Forms ADV. See ABA Letter.
    \994\ See SIFMA Letter I, ABA Letter.
---------------------------------------------------------------------------

    The Commission notes that Form MA, both as proposed and adopted,
allow for incorporation by reference of certain information that
already has been submitted on certain other forms by the applicant, any
of its associated persons, or another entity pursuant to the
requirements of other regulatory regimes. Specifically, each of the
Disclosure Reporting Pages (``DRPs'') of Form MA permits incorporation
by reference to DRPs that are already on file with regulators.\995\ The
DRPs are generally where the most significant amount of information is
requested on Form MA and on which applicants will likely need to expend
the most time and effort.
---------------------------------------------------------------------------

    \995\ As explained below, Item 9 of Form MA requires an
applicant to provide certain information concerning any criminal,
regulatory, and civil judicial actions relating to the applicant or
any of its associated persons. For each action reported in Item 9,
the applicant is required to complete a DRP by providing for further
details, such as the court where the charges were filed and when, a
description of the charge and the circumstances relating to it (in
the case of criminal actions); the authority that initiated the
action and a description of the allegations and the product-type (in
the case of regulatory actions); or the initiator of the court
action, the relief sought, and the product type (in the case of
civil judicial actions). The information sought in the DRPs of Form
MA is similar to information sought in DRPs that must be filed, as
applicable, with Forms BD, ADV, and U4.
---------------------------------------------------------------------------

    Form MA, as adopted, more prominently highlights the option to
incorporate information by reference. Part A of each DRP asks for basic
information regarding the person(s) or entity(ies) concerning whom the
DRP must be filed. Immediately thereafter, in Part B, the form asks if
there is another DRP or other disclosure already on file in the IARD,
CRD, or EDGAR system containing the information required by the DRP. If
the answer is ``Yes,'' the form asks the applicant to identify where
the disclosures may be found. In addition, for the benefit of
regulators, municipal entities, and other interested parties, the DRPs
ask for information that will enable such parties to locate the
referenced document easily, by requiring the applicant to provide the
name of the registrant on the referenced document, the relevant
registration number, and other identifying information. Thus, for all
persons for whom disclosures of criminal, regulatory, and civil
judicial actions must be made, Form MA already allows for incorporation
by reference. The Commission believes that the accommodation of
incorporation by reference for these disclosures will eliminate a
significant amount of redundancy to which the commenters refer.
    The Commission believes that commenters' suggestion to allow
applicants already registered with the Commission under other
regulatory regimes to check an additional box on their primary
registration forms \996\ would not achieve the aim of the municipal
advisor registration regime. Specifically, the Commission believes that
persons seeking to compile, compare, and analyze data pertaining to
registered municipal advisors, as well as regulators overseeing
compliance with rules and regulations applicable to registered
municipal advisors, should generally be able to easily access within
one system relevant information about municipal advisors.
---------------------------------------------------------------------------

    \996\ See supra note 993.
---------------------------------------------------------------------------

    The Commission notes that the vast majority of applicants
registering under the permanent registration regime would be new
Commission registrants.\997\ As such, the majority of all information
pertaining to municipal advisors will be centralized in EDGAR. On the
other hand, the Commission acknowledges that, because disclosures
required by Form MA DRPs and Form MA-I DRPs may be incorporated by
reference from other forms, some

information will reside outside EDGAR. However, the Commission notes
that, under the temporary registration regime, only about 15% of
applicants on Form MA-T indicated a history of criminal, regulatory, or
civil judicial action that would require the submission of DRPs under
the permanent registration regime. Moreover, not all 15% of municipal
advisors indicating such a history would have DRPs on file elsewhere,
as many may not be broker-dealers or investment advisers and thus would
not be required to file Form BD or Form ADV. Accordingly, the
Commission believes that fewer than 15% of municipal advisors should
have DRP information stored outside EDGAR, with the majority of
information collected under the permanent municipal advisor regime
centralized in EDGAR. The Commission also notes that, if applicants
that are already registered with the Commission under other regulatory
regimes can register as municipal advisors by only checking an
additional box on their primary registration form, a municipal entity
or investor seeking information about a municipal advisor may not
realize that the information they seek is available on a Form BD or
ADV, rather than a Form MA or MA-I.
---------------------------------------------------------------------------

    \997\ According to MA-T data as of December 31, 2012, there were
approximately 1,110 Form MA-T registrants. Of these Form MA-T
registrants, 226 were also registered with the Commission as broker-
dealers; 39 were also registered with the Commission as investment
advisers; and 65 were registered with the Commission as both broker-
dealers and investment advisers. Therefore, the vast majority of
Form MA-T registrants were new Commission registrants.
---------------------------------------------------------------------------

Description of the Form: Introduction
    As previously noted, in addition to considering the comments, the
Commission analyzed the entire proposed Form MA and its appended
schedules and disclosure pages to make any necessary adjustments. The
discussion below describes Form MA, as adopted, and notes the
substantive changes to the proposed form. At the outset, the Commission
notes that it is making some revisions to clarify questions asked in
Form MA. Other revisions are intended to elicit additional information.
The Commission believes that the additional required data should make
the information provided by registrants more useful to examiners,
investigators, and other regulatory authorities and/or to municipal
entities and investors.\998\
---------------------------------------------------------------------------

    \998\ Although some commenters believed, generally, that the
forms, as proposed, required too much information, the Commission
believes that the modifications it has made to the forms that ask
for additional information will elicit information that can be of
significant use to regulators and municipal entities. The discussion
below includes the reasons why, in each significant case, the
Commission has made the revision. See, e.g., infra notes 1028-1030.
---------------------------------------------------------------------------

    As noted below, the Commission made some revisions to the form to
eliminate unnecessary disclosure requirements. Other changes involve a
reorganization of the requested information. In general, the Commission
intends to improve the picture that municipal entities, investors, and
regulators will be able to obtain from Form MAs, whether regarding
municipal advisors, in particular, or regarding municipal advisory
activities, as a whole. For example, while the proposed DRPs required
information generally regarding the disposition of criminal charges or
resolution of regulatory or civil proceedings, in the DRPs, as adopted,
the questions are more specific and require certain additional
details.\999\
---------------------------------------------------------------------------

    \999\ See further the discussion below regarding Item 9 of Form
MA.
---------------------------------------------------------------------------

Format of Form MA
    Form MA, as proposed, required the applicant to provide information
describing itself and its business through a series of fill-in-the-
blank, multiple choice, and the check-the-box questions.\1000\ In the
form, as adopted, these questions have been adapted to an electronic,
web-based format,\1001\ with minor revisions to the text as necessary
or appropriate for online completion.\1002\ As stated above, EDGAR is
designed to detect certain failures to respond to mandatory questions
and, to detect, in certain instances, defective responses.\1003\
---------------------------------------------------------------------------

    \1000\ No comments were received on the format of the form.
    \1001\ For example, where the paper form asked a Yes or No
question and, if the answer is Yes, other questions must be
answered, in the electronic form those additional questions will
appear only if the applicant selected Yes. In the paper form, in
some instances when the applicant answers Yes, the form instructs
the applicant to supply additional information in Schedule D of the
form. In the electronic form, a pop-up screen appears that
immediately enables the applicant to complete the additional
information. Filers will be able to obtain a paper version of the
form at any time through the electronic system, which should help
them anticipate in advance the information they will need to gather
to complete on the online form. In addition, filers will be able to
print out a hard copy version of the form with their responses
included in their appropriate places on the form.
    \1002\ Certain documents, such as a signed and notarized Form
MA-NR (required of certain non-residents as discussed below) or
copies of court orders required as part of a DRP will need to be
converted into a portable document file (PDF) meeting the
specifications set forth in the EDGAR Filer Manual, supra note 961,
and attached to the electronic submission.
    \1003\ Some examples: If an applicant provides an EDGAR CIK
number, the name of the company will be pre-populated in the
electronic form with the name assigned to that CIK number and the
applicant will not be permitted to list a different name. When an
applicant indicates that it is registered under another Commission
regulatory regime but supplies a registration number for that
regulatory regime that cannot be valid because it is not in the
correct numbering format, the system will prevent the applicant from
filing the form. If an applicant answers affirmatively to a question
that asks whether it only engages in solicitation and does not
advise clients, it will not be possible to indicate in response to
another question that it advises clients and does not solicit. If an
applicant indicates that it has three Web sites but provides the
addresses of only two, the system will not permit submission of the
form. If an applicant discloses that it or an associated person has
been involved in a criminal, regulatory, or civil judicial action,
the system will prevent the applicant from filing the form if the
appropriate DRP is not completed. If the principal address of a firm
in Form MA or the residence of an individual reported in Form MA-I
is in a foreign country (which the system can detect because states
and countries are indicated by selecting the appropriate name in a
drop-down box), the system will not permit submission of the form
unless, at the appropriate step in the form, a Form MA-NR is
attached.
---------------------------------------------------------------------------

    Form MA also contains several supplemental schedules that must be
completed, where applicable, each of which is discussed further below:
Schedule A asks for information about the municipal advisor's direct
owners and executive officers; Schedule B asks for information about
the municipal advisor's indirect owners; Schedule C is used to amend
information on either Schedule A or Schedule B; and Schedule D asks for
additional information when an applicant answers in the affirmative
regarding certain questions in the form and also provides space for any
explanations that a filer may wish to add to its application. Form MA
also contains DRPs, which require further details about events and
proceedings involving the municipal advisor and/or the municipal
advisor's associated persons that the applicant was required to report
in Item 9 of the main body of the form, and are discussed in the
context of Item 9 below.
    Form MA, as proposed, first required a municipal advisor to
indicate whether it is submitting the form for initial registration as
a municipal advisor or submitting an annual update or an amendment
(other than an annual update) to a registration as a municipal
advisor.\1004\ In the electronic form, as adopted, Form MA asks the
applicant to indicate, upon entry, whether it is filing an initial
form, an annual update, or amendment. Once an initial form is
submitted, when a filer subsequently enters the system and selects the
choice of annual update or amendment, the most recently submitted
version of the form will appear, pre-populated with the responses as
completed at that time. Thus, the filer will need only to amend the
outdated information.
---------------------------------------------------------------------------

    \1004\ Amendments to Form MA are discussed further below. See
infra Section III.A.5.
---------------------------------------------------------------------------

Item 1: Identifying Information
    The Commission proposed Item 1 of Form MA to require essential
identifying information regarding the applicant. For the reasons
discussed

below and in the Proposal,\1005\ the Commission is adopting Item 1
substantially as proposed but with the minor modifications discussed
below.
---------------------------------------------------------------------------

    \1005\ See Proposal, 76 FR 841.
---------------------------------------------------------------------------

    As proposed and adopted, Items 1-A and B of Form MA require a
municipal advisor to indicate the full legal name of the municipal
advisor and, if different, the name under which it primarily conducts
its municipal advisor-related business.\1006\ As adopted, Item 1-A also
asks for the municipal advisor's CRD Number, if it has one.\1007\ Item
1-C of Form MA as proposed and adopted requires a municipal advisor
also to provide its Employer Identification Number (or ``EIN,'' a
number used with respect to Internal Revenue Service matters) or, if
the applicant (such as a sole proprietor) does not have an EIN, a
social security number.\1008\
---------------------------------------------------------------------------

    \1006\ As proposed and adopted, Item 1-B requires any additional
names under which the applicant conducts municipal advisor-related
business and the jurisdictions in which they are used to be listed
in Schedule D.
    \1007\ Obtaining a municipal advisor's CRD Number, if it has
one, enables regulators, municipal entities, and investors in a most
basic way to research the background of a registrant. See, e.g.,
supra text accompanying note 964.
    \1008\ As discussed in the Proposal, the Commission is asking
for the social security number of sole proprietors to permit the
electronic filing system to distinguish between persons who share
the same name. This information is necessary in connection with the
Commission's enforcement and examination functions pursuant to
Section 15B(c) of the Exchange Act (15 U.S.C. 78o-4(c)). See
Proposal, 76 FR 840, note 176. See also supra note 968.
---------------------------------------------------------------------------

    In Item 1-D, as proposed and adopted, if the municipal advisor is
also registered with the Commission as an investment adviser, broker,
dealer, or municipal securities dealer, or if it has previously
registered with the Commission as a municipal advisor on Form MA-T,
such municipal advisor is required to provide its related SEC file
number or numbers. Further, if the municipal advisor is a broker-dealer
or an investment adviser and has a CRD Number assigned to it either
under the CRD system or the IARD system, it is required to provide its
CRD Number.
    As proposed and adopted, Item 1-D also requires an applicant to
indicate whether it is a state-registered investment adviser. In such
case, as adopted, Item 1-D additionally requires the applicant to
identify the state (or states) with which it is registered,\1009\ and
adds to this category other U.S. jurisdictions where the applicant is
registered.\1010\
---------------------------------------------------------------------------

    \1009\ Requiring the place(s) of registration directly on Form
MA can be helpful to regulators, municipal entities, and investors
while imposing little burden upon the applicant. The omission of
this disclosure requirement in the proposed version of the form was
unintentional.
    \1010\ The revision to include other U.S. jurisdictions in
addition to states has been made throughout the forms.
---------------------------------------------------------------------------

    Item 1-D, as adopted, additionally requires a municipal advisor to
indicate if it is an ``exempt reporting adviser'' with respect to
investment adviser registration and, if so, to provide the SEC file
number and CRD Number. The category of exempt reporting advisers,
discussed in Section III.A.1.c.v. herein, was created by Commission
rule after Form MA was proposed. Because exempt reporting advisers are
not exempt from municipal advisor registration, if applicable, the
Commission believes that the information that such advisers must report
to the Commission, and the identifying numbers necessary to ease access
to such information, is no less important to regulators of the
municipal market, municipal entities, and investors than the equivalent
information available regarding municipal advisors who are registered
investment advisers.\1011\
---------------------------------------------------------------------------

    \1011\ As proposed and adopted, an applicant is further asked in
Item 1-D whether it is a government securities broker-dealer, and,
if so, to provide the SEC file number and bank identifier; whether
it has any other SEC registration, and, if so, to specify which
registration and the file number; and whether it is registered with
another federal or state regulator, and, if so, to specify the
regulator's name and the applicant's registration number. As
adopted, Item 1-D asks whether the applicant has any additional
registrations that were not already reported, and, if so, to list
the regulator and the applicant's registration number in Schedule D.
The addition of this last question clarifies that if there are
additional registrations, the applicant must list all of them.
---------------------------------------------------------------------------

    The information provided in response to Item 1-D will allow the
Commission to more effectively cross-reference those entities applying
for registration as municipal advisors to those who are registered as
brokers, dealers, municipal securities dealers, investment advisers, or
otherwise registered \1012\ with the Commission. As discussed in the
Proposal, the ability to cross-reference will allow the Commission to
assemble more complete information concerning a municipal advisor to
inform the Commission's decision to approve or institute proceedings to
deny an application for registration as a municipal advisor. The
ability to cross-reference will also permit the Commission or any
designee \1013\ to plan for, and carry out, efficient and effective
examinations of registered municipal advisors. By obtaining all of an
applicant's regulatory file numbers, the Commission will be able to
cross-reference disciplinary information in the CRD or IARD systems
with the information on Form MA. This ability would provide the
Commission with a more complete understanding of a municipal advisor's
structure and business.
---------------------------------------------------------------------------

    \1012\ For example, as the Commission noted in the Proposal,
pursuant to Section 764 of the Dodd-Frank Act, security-based swap
dealers will be required to register with the Commission. See
Section 764(a) of the Dodd-Frank Act and 15 U.S.C. 78o-8(a). See
Proposal, 76 FR 841, note 178.
    \1013\ See 15 U.S.C. 78o-4(c)(7)(A)(iii) (providing that
examinations of municipal advisors shall be conducted by the
Commission or its designee).
---------------------------------------------------------------------------

    Item 1-E asks for the address of applicant's principal office and
place of business \1014\ and the telephone and fax numbers at that
location. As proposed, Item 1-E of Form MA required an applicant to
list on Schedule D any additional names under which it conducts
municipal advisor-related business and the offices at which such
business is conducted. In consideration of comments, generally, that
the form is too burdensome,\1015\ in Item 1-E, as adopted, the
Commission has determined to require information pertaining only to the
five largest offices.
---------------------------------------------------------------------------

    \1014\ Rule 15Ba1-1(l) defines principal office and place of
business to mean: ``the executive office of the municipal advisor
from which the officers, partners, or managers of the municipal
advisor direct, control, and coordinate the activities of the
municipal advisor.'' See also Glossary. In addition, the municipal
advisor must supply its mailing address, if it is different from its
principal office and place of business.
    \1015\ See, e.g., supra note 979 and accompanying text and text
following note 987.
---------------------------------------------------------------------------

    Item 1-F of Form MA, as proposed, asked whether the applicant has
one or more Web sites, and, if so, to list them in Schedule D of the
form. As adopted, Item-F continues to require an applicant to list all
its Web sites, but also requires the address of its principal Web site
on the main part of the form and any additional Web site addresses on
Schedule D.\1016\
---------------------------------------------------------------------------

    \1016\ The Commission believes that identification of the
applicant's principal Web site out of possibly many will increase
the benefit of the information to regulators, municipal entities,
and investors without adding any unreasonable burden on the
applicant.
---------------------------------------------------------------------------

    Item 1-G of Form MA, as proposed, required applicants to supply the
name, address, email address, and telephone and fax numbers of its
Chief Compliance Officer, if it has such an officer, and to list any
other title(s) the officer holds. Item 1-H, as proposed, asked for the
title of, and similar contact information for, any other person whom
the municipal advisor has authorized to receive information and respond
to questions about the registration (the ``contact person''). Items 1-G
and 1-H are being adopted, as proposed, with a clarification to advise
applicants that they must provide the name and contact

information for only one person (i.e., either a Chief Compliance
Officer or another contact person). The intent of the Proposal was for
the applicant to provide one or the other, and the form, as adopted,
makes this clearer. The added note also advises, however, that
information for both may be provided if the applicant so chooses. As
discussed in the Proposal, the Commission is requesting the identifying
and contact information in Item 1-G and/or 1-H to assist the Commission
and the staff in evaluating applications for registration and
overseeing registered municipal advisors.\1017\
---------------------------------------------------------------------------

    \1017\ See also Proposal, 76 FR 841.
---------------------------------------------------------------------------

    As proposed and adopted, Item 1-I of Form MA requires the applicant
further to state whether it maintains, or intends to maintain, some or
all of its books and records required to be kept under MSRB or
Commission rules somewhere other than at its principal office and place
of business and, if so, to provide (on Schedule D) information about
the other location(s).
    Item 1-J of Form MA, as proposed and adopted, requires an applicant
to answer whether it is registered with any foreign financial
regulatory authority,\1018\ and, if so, to provide the name (on
Schedule D) of each such authority and the country. Item 1-J is being
adopted as proposed, with the additional requirement to provide the
applicant's registration number under the foreign authority.\1019\
---------------------------------------------------------------------------

    \1018\ An added instruction in Item 1-J, as adopted, makes clear
that an applicant should answer ``No'' to this question even if it
is affiliated with a business that is registered with a foreign
financial regulatory authority.
    \1019\ Schedule D relating to Item 1-J, as adopted, clarifies
that both the name of the country and the name of the authority must
be provided in English, which may not have been evident in the
proposed version. In general, throughout the forms, as adopted, when
the name of a foreign country and/or authority is required, the
filer is instructed that answers must be provided in English.
---------------------------------------------------------------------------

    Item 1-K, as proposed and adopted, requires an applicant to
disclose whether it is affiliated with any other business entity, and,
if so, to disclose on Schedule D the name and registration number of
each such affiliate.\1020\ As discussed in the Proposal, this
information will help inform the Commission as to the structure of the
municipal advisor's business, which will help staff prepare for
examinations of the municipal advisor.\1021\
---------------------------------------------------------------------------

    \1020\ The text of Item 1-K has been revised to make explicit
that ``business entity'' refers to any domestic or foreign entity.
Similarly, the related questions in Schedule D, which, as proposed,
asked only for ``any federal or state registration'' has been
revised to include foreign registrations, as well. These revisions
have been made in accordance with the description of this disclosure
item in the Proposal, which included foreign affiliates among the
required disclosures. See Proposal, 76 FR 842.
    \1021\ See id.
---------------------------------------------------------------------------

Item 2: Form of Organization
    The Commission proposed Item 2 of Form MA to require information
about a municipal advisor's form of organization. The Commission
received no comments regarding Item 2 and is adopting this item
substantially as proposed. Item 2 requires a municipal advisor to
specify whether it is organized as a corporation, partnership, sole
proprietorship, limited liability company, limited liability
partnership, limited partnership, or other form of organization that
the municipal advisor must specify; the month of its annual fiscal year
end; the date on which it was organized; and the state or other U.S.
jurisdiction \1022\ or foreign jurisdiction where it was organized. As
discussed in the Proposal, this information will assist the Commission
in evaluating the applications for registration and overseeing
registered municipal advisors.\1023\
---------------------------------------------------------------------------

    \1022\ Proposed Item 2 did not specifically mention U.S.
jurisdictions other than states. The Item, as adopted, makes clear
that such jurisdictions are included. See supra note 1010 and
accompanying text.
    \1023\ See Proposal, 76 FR 842.
---------------------------------------------------------------------------

    Item 2 also requires an applicant to specify whether it is a public
reporting company under Section 12 or 15(d) of the Exchange Act and, if
so, to provide its Commission-assigned EDGAR CIK number. As discussed
in the Proposal, the information that an applicant is a public
reporting company will provide a signal that additional public
information is available about the municipal advisor and/or its control
persons.\1024\
---------------------------------------------------------------------------

    \1024\ See id.
---------------------------------------------------------------------------

Item 3: Successions
    The Commission proposed Item 3 of Form MA to require applicants to
disclose whether they are succeeding to the business of a registered
municipal advisor and, if so, the date of succession. Further, Item 3
requires, on Schedule D, the name of, and registration information for,
the firm the applicants are succeeding.\1025\ The Commission received
no comments regarding Item 3 and is adopting this item as proposed. As
discussed in the Proposal, this information will assist the Commission,
among other things, in overseeing registered municipal advisors and in
determining whether there has been a change in control of a municipal
advisor.\1026\
---------------------------------------------------------------------------

    \1025\ As discussed elsewhere in this release, depending on
whether the succession is a result of a merger or acquisition, or a
reorganization, the succeeding firm will be able to register by
either submitting a new Form MA or amending the Form MA of its
predecessor. See infra note 1318 and accompanying text and infra
Section III.A.7. (discussing Rule 15Ba1-7 regarding registration of
a successor to a municipal advisor).
    \1026\ See id. See also Proposal, 76 FR 842.
---------------------------------------------------------------------------

Item 4: Information About Applicant's Business
    The Commission proposed Item 4 to require certain information about
the applicant's business. The Commission received several comments
relating to Item 4, which are discussed below.\1027\ The Commission is
adopting Item 4 substantially as proposed, with certain modifications
as discussed in the description of the item below.
---------------------------------------------------------------------------

    \1027\ See infra notes 1040-1046 and accompanying text.
---------------------------------------------------------------------------

    As proposed and adopted, subparts A to C of Item 4 require an
applicant to provide information regarding the approximate number of
employees it has, approximately how many of those employees engage in
municipal advisory activities, and approximately how many are
registered representatives of a broker-dealer or investment adviser
representatives.
    Item 4-D, as proposed and adopted, requires an applicant to state
approximately how many firms, or other persons (that are not employees
or otherwise associated persons of the applicant) solicit municipal
advisory clients on the applicant's behalf. As proposed, an applicant
is required to disclose on Schedule D the names, addresses, and phone
numbers of firms that solicit on its behalf. As adopted, Item 4-D
additionally requires the applicant to disclose on Schedule D the same
information for other persons who are not employed by, or otherwise
associated persons of, the applicant but who solicit on its
behalf.\1028\ In addition, to make the information more useful, the
Commission has determined to require an applicant also to provide the
EDGAR CIK and/or individual CRD Number, if any, of the soliciting firm
or other person.
---------------------------------------------------------------------------

    \1028\ Upon review of the form as proposed, the Commission
determined that requiring a firm to list the names of all persons
who solicit on its behalf will provide potentially valuable and more
fulsome information, as it may yield the names of persons who are
providing such services without themselves registering.
---------------------------------------------------------------------------

    Further, Item 4-E, as proposed, required an applicant to state
whether it has any employees that also do business independently on the
applicant's behalf as affiliates of the applicant and, if so, to
disclose in related Section 4-E of Schedule D the names of such
employees.\1029\ In the form, as adopted,

Section 4-E of Schedule D requires the applicant, in addition, to
provide the address, telephone and fax number, EDGAR CIK (if any) and
individual CRD Number (if any) of each such employee.\1030\
---------------------------------------------------------------------------

    \1029\ This category of employee includes persons who do not
necessarily engage in municipal advisory activities on behalf of the
firm, and for whom a Form MA-I would thus not be required. Regarding
employees who do also engage in municipal advisory activities on
behalf of the firm, the applicant must in any case obtain the
information requested in Section 4-E, as adopted, to complete a Form
MA-I for each such employee. See also infra note 1030.
    \1030\ The Commission believes that these additional details in
Schedule D will further serve the purposes for which Item 4 is
designed and that an applicant firm should be able to provide such
information about employees that do business on its behalf. Item 4-
E, as adopted, asks the applicant to state the number of employees
of this kind. This does not require an applicant to search for any
additional information, because each such employee must be named in
Schedule D. However, it can serve as a helpful cross-check to the
filer as well as to regulators, and is also a useful number for
interested parties who do not need the additional details.
---------------------------------------------------------------------------

    Item 4-F, as proposed and adopted, requires the applicant also to
approximate the number of clients it served in the context of its
municipal advisory activities in the past fiscal year and to specify by
checking the appropriate box(es) whether its clients include: municipal
entities, non-profit organizations (e.g., 501(c)(3) organizations) who
are obligated persons, corporations or other businesses not listed
previously who are obligated persons, or other types of entities (and
specify which other types of entities); or whether the applicant
engages only in solicitation and does not serve clients in the context
of its municipal advisory activities.
    As proposed and adopted, applicants also are required, in Item 4-
G,\1031\ to specify approximately the number of municipal entities or
obligated persons that were solicited by the applicant on behalf of a
third-party during its most recently completed fiscal year, including
any clients that it solicits in addition to serving them in the context
of its municipal advisory activities. However, Item 4-G, as adopted,
requires the applicant to provide the numbers separately for municipal
entities and obligated persons.\1032\
---------------------------------------------------------------------------

    \1031\ The section of Item 4 that relates to solicitations of
municipal entities and obligated persons has been restructured in
Form MA, as adopted, into two parts. Item 4-G is the first part of
Item 4-G as proposed, which requires the applicant to state the
number of municipal entities and obligated persons that the
applicant solicited on behalf of a third party, as described above.
New Item 4-H is comprised of the questions regarding the types of
persons solicited by the applicant that constituted the rest of Item
4-G as proposed. Hereinafter, subparts 4-H, I, J, and K of the
Proposal will be referred to by their numbers in the adopted form,
i.e., 4-I, J, K, and L, respectively.
    \1032\ The Commission believes that the information requested
will be more useful for regulatory purposes, and for gaining an
understanding of municipal advisory activities in general, when
broken down in this manner. Municipal entities and other interested
parties can also benefit from this breakdown in assessing the
specific experience of a municipal advisor.
---------------------------------------------------------------------------

    Further, as proposed and adopted, applicants must indicate, in Item
4-H,\1033\ whether they solicit public pension funds, 529 Savings
Plans, local or state government investment pools, hospitals, colleges,
or other types of municipal entities or obligated persons (and to
specify which other types). Alternatively, an applicant is able to
indicate that the question is inapplicable, because it serves only
clients and does not engage in solicitation in the context of its
municipal advisory activities.
---------------------------------------------------------------------------

    \1033\ Item 4-H was a part of Item 4-G as proposed. See supra
note 1031.
---------------------------------------------------------------------------

    As proposed and adopted, applicants are also required to disclose,
in Item 4-I,\1034\ whether they are compensated for their advice to or
on behalf of municipal entities or obligated persons by hourly charges,
fixed fees (not contingent on the success of solicitations), contingent
fees, subscription fees (for a newsletter or other publications), or
otherwise.\1035\ If the applicant checks ``other,'' the other kind of
arrangement must be described. Item 4-J,\1036\ as proposed and adopted,
asks for similar information about compensation for solicitation
activities. Item 4-K,\1037\ as proposed and adopted, asks whether the
applicant receives compensation, in the context of its municipal
advisory activities, from anyone other than clients, and, if so, to
provide an explanation.
---------------------------------------------------------------------------

    \1034\ Item 4-I was Item 4-H as proposed. See supra note 1031.
    \1035\ An applicant may alternatively state that the question is
inapplicable because the applicant engages only in solicitation.
    \1036\ Item 4-J was Item 4-I as proposed. See supra note 1031.
    \1037\ Item 4-K was Item 4-J as proposed. See supra note 1031.
---------------------------------------------------------------------------

    As discussed in the Proposal, disclosure of information relating to
the number of a municipal advisor's employees and compensation
arrangements will provide the Commission with a clearer understanding
of the business structure of registered municipal advisors, including
the size of each advisor, the number of its employees that engage in
municipal advisory activities, and in what capacity these employees
engage in such activities. Information about compensation arrangements
also will identify possible conflicts of interest that the municipal
advisor may have with its clients.\1038\
---------------------------------------------------------------------------

    \1038\ See Proposal, 76 FR 843.
---------------------------------------------------------------------------

    The Commission received several comments regarding the five
categories of compensation arrangements.\1039\ One commenter believed
that the Commission should ``refrain from utilizing this limited
information in making a determination as to the existence of conflicts
of interest with respect to compensation'' and that ``a more
comprehensive analysis of compensation arrangements and the rationale
for such fees should be considered prior to making any determination as
to the appropriateness of a particular fee arrangement.'' \1040\
Another commenter believed that, because investment advisers generally
have ``a completely different business model, approach to business and
compensation model,'' as well as ``scale of business,'' than municipal
advisors, Form ADV is ``not a good model in this element of
registration.'' \1041\
---------------------------------------------------------------------------

    \1039\ See Joy Howard WM Financial Strategies Letter; Public FA
Letter; and Fiscal Advisors and Marketing Letter, Inc., dated
February 21, 2011 (``Fiscal Advisors and Marketing Letter'').
    \1040\ See Joy Howard WM Financial Strategies Letter.
    \1041\ See Public FA Letter. Another commenter stated that most
municipal advisors ``charge on a project or transaction specific
basis and not on an annual all encompassing service basis'' and thus
believed that Form ADV is not a relevant document that would help in
understanding ``the nature of an `Independent Municipal Advisor,'
its corporate makeup, nor the fee relationship'' and ``does not
afford any basis for analyzing potential conflict of interest.'' See
Fiscal Advisors and Marketing Letter.
---------------------------------------------------------------------------

    The five choices from among which applicants are asked to select
are not intended to give an exhaustive picture of a municipal advisor's
business model, but the Commission does believe that receiving
responses regarding compensation, at least on the level of specificity
requested in this item, will enable Commission staff to ask more
targeted questions on routine examinations and may highlight
relationships that should be more closely examined. Furthermore, the
Commission notes that in addition to the five choices, an applicant may
also check ``Other'' to describe its compensation arrangements. If
selected, the applicant is required to specify the nature of such
arrangements.
    Item 4-L,\1042\ as proposed and adopted, also requires the
municipal advisor to indicate the general types of municipal advisory
activities in which it engages.\1043\ The Commission

understands that the listed activities are those in which the municipal
advisors engage and are derived from the definition of municipal
advisor in Exchange Act Section 15B(e)(4) \1044\ or closely related to
the activities included within that definition. As discussed in the
Proposal, this information will help the Commission understand the
scope of activities in which a municipal advisor engages and identify
possible conflicts of interest and in preparing for examinations, and
will also provide the Commission with data useful to making regulatory
policy.\1045\
---------------------------------------------------------------------------

    \1042\ Item 4-L was Item 4-K as proposed. See supra note 1031.
    \1043\ The following eleven activities are listed: (1) Advice
concerning the issuance of municipal securities (including, without
limitation, advice concerning the structure, timing, terms and other
similar matters, such as the preparation of feasibility studies, tax
rate studies, appraisals and similar documents, related to an
offering of municipal securities), (2) advice concerning the
investment of the proceeds of municipal securities (including,
without limitation, advice concerning the structure, timing, terms
and other similar matters concerning such investments), (3) advice
concerning municipal escrow investments (including, without
limitation, advice concerning their structure, timing, terms and
other similar matters), (4) advice concerning the investment of
other funds of a municipal entity or obligated person (including,
without limitation, advice concerning the structure, timing, terms
and other similar matters concerning such investments), (5) advice
concerning guaranteed investment contracts (including, without
limitation, advice concerning their structure, timing, terms and
other similar matters), (6) advice concerning the use of municipal
derivatives (including, without limitation, advice concerning their
structure, timing, terms and other similar matters), (7)
solicitation of investment advisory business from a municipal entity
or obligated person (including, without limitation, municipal
pension plans) on behalf of an unaffiliated person or firm (e.g.,
third party marketers, placement agents, solicitors and finders),
(8) solicitation of business other than investment advisory business
from a municipal entity or obligated person on behalf of an
unaffiliated broker, dealer, municipal securities dealer, municipal
advisor or investment adviser (e.g., third party marketers,
placement agents, solicitors and finders), (9) advice or
recommendations concerning the selection of other municipal advisors
or underwriters with respect to municipal financial products or the
issuance of municipal securities, (10) brokerage of municipal escrow
investments, or (11) other. Applicants who check ``other''
activities will be required to provide a narrative description of
such activities.
    \1044\ See 15 U.S.C. 78o-4(e)(4).
    \1045\ See Proposal, 76 FR 843.
---------------------------------------------------------------------------

    One commenter believed that, due to competitive concerns, a
municipal advisor should not be required to disclose the names and
contact information of persons that solicit municipal clients on its
behalf.\1046\ The Commission notes that the definition of municipal
advisor under the Exchange Act includes, specifically, persons who
undertake solicitation of municipal entities and obligated persons. The
Commission thus believes that requiring an applicant to provide
information about persons who solicit clients on its behalf will help
it carry out its oversight responsibilities with respect to the full
range of persons who are municipal advisors. For example, as already
stated,\1047\ such information may yield the names of persons who are
engaged in such activities without themselves registering. Moreover, as
stated in the Proposal, the Commission believes that information
requested in Item 4-L is important for discerning possible conflicts of
interest.\1048\ The Commission further notes that the requirement that
a municipal advisor disclose all persons who solicit clients on its
behalf applies equally to all applicants for registration. The
Commission believes that such universal disclosure serves to mitigate
the competitive concerns raised by the commenter.
---------------------------------------------------------------------------

    \1046\ See SIFMA Letter I.
    \1047\ See supra note 1028.
    \1048\ See supra note 1038 and accompanying text.
---------------------------------------------------------------------------

Item 5: Other Business Activities
    The Commission proposed Item 5 to require information about the
applicant's other business activities. The Commission received no
comments regarding Item 5 and is adopting Item 5 substantially as
proposed, with minor modifications as discussed below.
    As proposed and adopted, Item 5 requires applicants to indicate
whether they are actively engaged any one of an enumerated list of
businesses.\1049\ In Item 5, as adopted, the applicant is required
additionally to indicate, for each other business in which it is
engaged, whether this is its primary business.\1050\ As proposed and
adopted, Item 5 requires an applicant also to state whether it is
actively engaged in any other business that is not one of those
enumerated above and whether that other business is its primary
business. It also is required to describe the other business on
Schedule D to Form MA. As discussed in the Proposal, this information
will assist the Commission, among other things, in identifying
conflicts of interest for municipal advisors and preparing for
inspections and examinations of municipal advisors. The information
also will assist the Commission and the MSRB in understanding municipal
advisors in the context of their activities for regulatory
purposes.\1051\
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    \1049\ Specifically, in Item 5, as adopted, an applicant is
asked whether it is actively engaged in business in, or as, a (1)
broker-dealer, municipal securities dealer or government securities
broker or dealer, (2) registered representative of a broker-dealer,
(3) commodity pool operator (whether registered or exempt from
registration), (4) commodity trading advisor (whether registered or
exempt from registration), (5) futures commission merchant, (6)
major swap participant, (7) major security-based swap participant,
(8) swap dealer, (9) security-based swap dealer, (10) trust company,
(11) real estate broker, dealer, or agent, (12) insurance company,
broker, or agent, (13) banking or thrift institution (including a
separately identifiable department or division of a bank), (14)
investment adviser (including financial planners), (15) attorney or
law firm, (16) accountant or accounting firm, (17) engineer or
engineering firm, or (18) other financial product advisor (and, if
so, to specify the type). Minor differences in this multiple choice
list from the list, as proposed, are that engineer is now included,
in addition to engineering firm (as in Item 6 as proposed and
adopted), and swap dealer and security-based swap dealer are now two
distinct categories.
    \1050\ Although this specific question was not included in the
proposed form, the Commission notes that in the next subpart of Item
5, as proposed, if the applicant identifies any other businesses in
which it is engaged that are not included in the list of choices
described above, it is further asked whether this is its primary
business. See infra note 1051.
    \1051\ See Proposal, 76 FR 844.
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Item 6: Financial Industry and Other Activities of Associated Persons
\1052\
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    \1052\ The title of Item 6, which, as proposed, was ``Financial
Industry Affiliations of Associated Persons,'' has been changed in
Form MA as adopted to better reflect the range of activities that
the item concerns--all of which may be a source of conflict of
interest for the municipal advisor--and to avoid any possible
confusion that could be caused by the use of the term
``affiliations'' in the title.
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    The Commission proposed Item 6 to require an applicant to disclose
financial industry affiliations of its associated persons. The
Commission received several comments on Item 6, as discussed
below.\1053\ The Commission has carefully considered these comments and
is adopting Item 6 and the related information it requires on Schedule
D of Form MA largely as proposed. Some modifications have been made,
however, and these are discussed below.
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    \1053\ See infra notes 1064-1070.
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    Item 6, as proposed and adopted, requires an applicant to provide
information about its associated persons \1054\ that are engaged in

activities other than those that relate to their association with the
applicant. As discussed in the Proposal, Item 6 lists twenty activities
that an associated person may engage in, some of which are not listed
in Item 5 as other activities in which the applicant itself may be
engaged.\1055\ The collection of this information is designed to gather
more complete information about the associated persons of a municipal
advisor who are actually providing advice or are controlling the firm
and help better inform the Commission's regulatory and examination
programs.\1056\
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    \1054\ Section 15B(e)(7) provides that the term ``person
associated with a municipal advisor'' or ``associated person of an
advisor'' means ``(A) any partner, officer, director, or branch
manager of such municipal advisor (or any person occupying a similar
status or performing similar functions); (B) any other employee of
such municipal advisor who is engaged in the management, direction,
supervision, or performance of any activities relating to the
provision of advice to or on behalf of a municipal entity or
obligated person with respect to municipal financial products or the
issuance of municipal securities; and (C) any person directly or
indirectly controlling, controlled by, or under common control with
such municipal advisor.'' 15 U.S.C. 78o-4(e)(7). For purposes of
Form MA, the Glossary defines ``associated person or associated
person of a municipal advisor'' to have the same meaning as in
Exchange Act Section 15B(e)(7) (15 U.S.C. 78o-4(e)(7)), but to
exclude employees that are solely clerical or administrative.
Specifically, the Glossary defines these terms to mean: ``Any
partner, officer, director, or branch manager of a municipal advisor
(or any person occupying a similar status or performing similar
functions); any other employee of such municipal advisor who is
engaged in the management, direction, supervision, or performance of
any municipal advisory activities relating to the provision of
advice to or on behalf of a municipal entity or obligated person
with respect to municipal financial products or the issuance of
municipal securities (other than employees who are performing solely
clerical, administrative, support or other similar functions); and
any person directly or indirectly controlling, controlled by, or
under common control with such municipal advisor.''
    \1055\ Specifically, under Item 6, a municipal advisor is
required to disclose whether any of its associated persons is: (1) A
broker-dealer, municipal securities dealer, or government securities
broker or dealer; (2) an investment company (including a mutual
fund), (3) an investment adviser (including a financial planner),
(4) a swap dealer, (5) a security-based swap dealer, (6) a major
swap participant, (7) a major security-based swap participant, (8) a
commodity pool operator (whether registered or exempt from
registration), (9) a commodity trading advisor (whether registered
or exempt from registration), (10) a futures commission merchant,
(11) a banking or thrift institution, (12) a trust company, (13) an
accountant or accounting firm, (14) an attorney or law firm, (15) an
insurance company or agency, (16) a pension consultant, (17) a real
estate broker or dealer, (18) a sponsor or syndicator of limited
partnerships, (19) an engineer or engineering firm, or (20) another
municipal advisor. See supra note 1049. As adopted, Item 6 includes
an instruction that if an associated person is involved in more than
one of these activities, each such activity must be reported.
    \1056\ See Proposal, 76 FR 844.
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    As proposed, Item 6 of Form MA required an applicant to list, on
related Section 6 of Schedule D of the form, all associated persons,
including foreign affiliates, that are broker-dealers, municipal
securities dealers, or government securities brokers or dealers, or
investment advisers, municipal advisors, registered swap dealers,
banking or thrift institutions, or trust companies. As adopted, the
form requires the applicant also to list in Section 6 of Schedule D all
associated persons that are investment companies (including mutual
funds), major swap participants and major security-based swap
participants, commodity pool operators, commodity trading advisors,
futures commission merchants, accountants or accounting firms,
attorneys or law firms, insurance companies or agencies, pension
consultants, real estate brokers or dealers, sponsors or syndicators of
limited partnerships, or engineers or engineering firms.\1057\
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    \1057\ In other words, the form, as adopted, requires the
applicant to list in Section 6 of Schedule D the names of all
associated persons in any of the categories in Item 6. See supra
note 1055 and accompanying text.
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    Section 6 of Schedule D, as proposed and adopted, also requires the
applicant to provide the legal and primary business names of each
associated person listed, as well as to indicate the category or
categories listed in Item 6 of the main form of which the associated
person is a member. Finally, Section 6 of Schedule D, as proposed and
adopted, requires the applicant to indicate whether it controls, or is
controlled by, the associated person; whether the two are under common
control; \1058\ and/or whether the associated person is registered with
a foreign financial regulatory authority and, if so, the country and
name in English of that authority.\1059\
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    \1058\ See infra note 1080 for the definition of ``control'' as
used in the municipal advisor registration forms.
    \1059\ To the extent that Item 6, as adopted, requires
associated persons in additional categories to be listed in Schedule
D, as discussed supra note 1057, the requirements to provide in
Schedule D the legal and primary business names of each associated
person, indicate the category or categories to which the person
belongs, and respond to the questions relating to control now apply
to persons in those additional categories. Similarly, the questions
relating to registration with foreign financial regulatory
authorities, as discussed further below, apply to associated persons
in all the categories listed in Item 6, as adopted.
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    As discussed above, the purpose of Item 6 is to elicit more
complete information about who is providing advice or controlling the
applicant. Moreover, as new Rule 15Bc4-1 underscores, all associated
persons of municipal advisors are subject to censure.\1060\ Thus, after
further consideration, the Commission believes that requiring the
applicant municipal advisory firm to identify associated persons that
are involved in any of the above categories--each of which involves
activities that can impact or be impacted by the advice the firm
provides--will better assist the Commission in gaining an understanding
of possible conflicts of interest or wrongful influence in the
municipal advisor's activities. The Commission notes that Form MA
elsewhere already reflects a concern that involvement in a wider range
of areas can lead to conflict of interest, as Item 5 of the form
requires disclosure of whether the applicant firm itself is involved in
any of 17 enumerated categories of that Item and must further indicate
whether it acts as any other type of financial product advisor and
specify the type.\1061\
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    \1060\ See infra Section III.A.9.
    \1061\ Item 6, as adopted, also asks the applicant to state the
total number of its associated persons that belong to any of the
twenty categories (listed above in note 1055). Because, in Item 6,
as adopted, all such persons must be identified in Schedule D,
tallying the number involves no additional disclosure and will act
as a cross-check to ensure that the information provided is
complete.
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    As already noted,\1062\ in conformance with the additions to the
categories of associated persons that must be identified in Item 6,
Section 6 of Schedule D, as adopted, will require disclosure of foreign
registration information with respect to associated persons in twenty
categories. As discussed above, the Commission believes that an
associated person's involvement in any of these categories can impact
or be impacted by the advice the firm provides, and foreign financial
regulatory authorities can be of significant help in tracking such
activity and uncovering possible wrongdoing. An additional change in
Section 6 of Schedule D, as adopted, requires the applicant to provide,
in the case of an associated person registered with a foreign financial
regulatory authority, the relevant registration number. The Commission
believes that, for associated persons that are active in foreign
countries, having the registration number, if any, under foreign
financial regulatory authorities can be particularly helpful in
obtaining information for regulatory and investigative purposes.
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    \1062\ See supra note 1059.
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    The Commission received several comment letters opposing the extent
of the disclosures required by Item 6 and, on a more general level, all
the disclosures that Form MA requires regarding an applicant's
associated persons.\1063\ One commenter believed that the form requires
``overly extensive disclosure'' regarding affiliates of a municipal
advisor, particularly for a municipal advisor that is a member of a
large affiliated group of institutions.\1064\ These requirements, the
commenter said, would impose ``a vast information-gathering burden on
applicants.'' \1065\ The commenter raised specifically the case of
affiliates that are under common control with a municipal advisor
(``sister affiliates''), whose activities ``may have no connection to
municipal advisory activities, let alone, in the case of financial
institutions with global operations, a nexus or connection to any

activities in the United States.'' \1066\ The commenter suggested that