[Federal Register Volume 82, Number 207 (Friday, October 27, 2017)]
[Notices]
[Pages 49908-49912]
[FR Doc No: 2017-23374]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81921; File No. SR-MSRB-2017-08]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Form G-
45 To Collect Additional Data About the Transactional Fees Primarily
Assessed by Programs Established To Implement the ABLE Act

October 23, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on October 13, 2017 the Municipal
Securities Rulemaking Board (the ``MSRB'' or ``Board'') filed with the
Securities and Exchange Commission (the ``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the MSRB. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to amend
Form G-45 under MSRB Rule G-45, on reporting of information on
municipal fund securities,\3\ to collect additional data about the
transactional fees primarily assessed by programs established to
implement the Stephen Beck, Jr., Achieving a Better Life Experience Act
of 2014 (the ``ABLE Act'' and an ``ABLE program'') (the ``proposed rule
change'').\4\ The MSRB requests that the proposed rule change become
effective on June 30, 2018.\5\
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    \3\ Form G-45 is an electronic form on which submissions of the
information required by Rule G-45 are made to the MSRB.
    \4\ The ABLE Act was enacted on December 19, 2014 as part of The
Tax Increase Prevention Act of 2014 (Pub. L. 113-295).
    \5\ As noted under ``Self-Regulatory Organization's Statement of
the Purpose of, and Statutory Basis for, the Proposed Rule Change''
below, the proposed rule change does not alter the date that
underwriters to ABLE programs must submit data under Rule G-45 to
the MSRB.
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    The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2017-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The MSRB has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The ABLE Act added Section 529A to the Internal Revenue Code of
1986, as amended (the ``Code''), to permit a state, or an agency or
instrumentality thereof, to establish and maintain a new type of tax-
advantaged savings program to help support individuals with
disabilities in

maintaining health, independence, and quality of life.\6\ Section 529A
was modeled, in part, on Section 529 of the Code.\7\ Section 529
established college savings plans (``529 college savings plans'') to
encourage saving for future higher education costs.\8\ The SEC has
determined that interests offered by such 529 college savings plans are
municipal securities under Section 3(a)(29) of the Act.\9\
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    \6\ 26 U.S.C. 529A.
    \7\ Report to accompany H.R. 647, Committee on Ways and Means,
H.R. Rept. No. 113-614, part 1 at 7 (2014).
    \8\ 26 U.S.C. 529(b)(1)(A)(ii). Section 529 also established
prepaid tuition plans. 26 U.S.C. 529(b)(1)(A)(i). Under a prepaid
tuition plan, an investor may purchase tuition credits or
certificates on behalf of a designated beneficiary, which entitle
the beneficiary to the waiver or payment of qualified higher
education expenses. Prepaid tuition plans generally have residency
requirements. Such credits or certificates generally are not viewed
as being municipal securities, and dealers generally do not
participate in the marketing of prepaid tuition plans.
    \9\ Exchange Act Release No. 70462 (Sept. 20, 2013), 78 FR
67468, 67472-73 (Nov. 12, 2013). See Letter from Catherine McGuire,
Chief Counsel, Division of Market Regulation, U.S. Securities and
Exchange Commission, to Diane G. Klinke, General Counsel, Municipal
Securities Rulemaking Board (Feb. 26, 1999) (determining that at
least some interests in higher education trusts are municipal
securities under the Act).
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    Given the similarities between the structure of ABLE accounts and
529 college savings plan accounts and the manner in which interests in
ABLE accounts would be distributed, the MSRB requested and received
interpretive guidance from the SEC staff about the status of interests
in ABLE accounts under the federal securities laws.\10\ SEC staff
stated that ``at least some interests in ABLE accounts . . . may be
`municipal securities' as defined in Section 3(a)(29) of the Exchange
Act, depending on the facts and circumstances'' \11\ and that ``[i]f a
dealer is acting as an `underwriter' (as defined in Rule 15c2-12(f)(8))
in connection with that primary offering, the dealer may be subject to
the requirements of Rule 15c2-12.'' \12\
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    \10\ Letter dated March 31, 2016 from Jessica S. Kane, Director,
Office of Municipal Securities, U.S. Securities and Exchange
Commission to Robert A. Fippinger, Esq., Chief Legal Officer,
Municipal Securities Rulemaking Board, in response to letter dated
December 31, 2015 from Robert A. Fippinger to Jessica S. Kane, both
letters are available at https://www.sec.gov/info/municipal/msrb-letter-033116-interests-in-able-accounts.pdf.
    \11\ Id.
    \12\ Id.
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    After the MSRB received the SEC staff guidance, the MSRB provided
interpretative guidance relating to interests in ABLE programs under
MSRB Rule D-12, on the definition of ``municipal fund security.'' \13\
That guidance was followed by the August 2016 guidance published by the
Board to address particular issues, including Rule G-45, applicable to
the sale of interests in ABLE programs by brokers, dealers and
municipal securities dealers (collectively, ``dealers'').\14\
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    \13\ MSRB Notice 2016-14 (Apr. 12, 2016).
    \14\ Id.
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    Specifically, in August 2016, the MSRB filed for immediate
effectiveness an amendment to Rule G-45 to delay, by two years from
August 29, 2016 until August 29, 2018, the date that submissions are
due under Rule G-45 from underwriters to ABLE programs (the ``August
filing'').\15\ The MSRB believed that the delay would help ensure that
the MSRB would receive reliable, complete and accurate filings on Form
G-45 from such underwriters. The MSRB also believed that the delay
would help ensure that the MSRB would receive more meaningful data
about a larger set of ABLE programs on Form G-45.\16\ Similarly, to
receive more meaningful data about ABLE programs, the MSRB submits the
proposed rule change. However, this proposed rule change does not alter
the date that underwriters to ABLE programs must begin to submit data
to the MSRB under Rule G-45.
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    \15\ See SR-MSRB-2016-11 (Aug. 12, 2016).
    \16\ Further, as part of that August filing, the MSRB provided
guidance in supplementary material under (i) Rule G-42, that such
rule applies to municipal advisors that engage in municipal advisory
activities for sponsors or trustees of ABLE programs and (ii) Rule
G-44, that such rule equally applies to municipal advisors that
engage in municipal advisory activities for sponsors or trustees of
529 college savings plans, ABLE programs, and other municipal fund
securities. That guidance provided clarity about the applicability
of such rules to municipal advisors that engage in municipal
advisory activities for sponsors or trustees of municipal fund
securities. The MSRB provided that guidance in response to requests
from industry groups in other Board rulemaking proposals. Id.; see
also MSRB Notice 2016-20 (Aug. 12, 2016).
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(ii) The Collection of Additional Relevant Fee and Expense Data
    At the time the MSRB submitted the August filing, there were two
ABLE programs that were operational. Since that time, the MSRB
understands that 27 more ABLE programs have become operational. As each
additional ABLE program has become operational, the MSRB has reviewed
the disclosure booklet for the program to determine whether there is
data about the programs that would be beneficial for the MSRB to
analyze under Rule G-45 that an underwriter to an ABLE program would
not be required to submit under current Form G-45. But for the program
type, the review process of ABLE program fees was identical to the
review process that the MSRB used in determining the data elements
relating to the fees and expenses associated with an investment in a
529 college savings plan when the MSRB first developed Form G-45.
    While the MSRB believes that current Form G-45 would capture most
of the data that would be informative to the MSRB, the MSRB noted that
there are differences between the pricing structure of certain ABLE
programs and the typical 529 college savings plan. Specifically, based
on the MSRB's review, there are transactional fees assessed by ABLE
programs that generally are not assessed by 529 college savings plans,
and there is variance based on state residency in the level of the
account maintenance fee assessed by ABLE programs that generally does
not occur with 529 college savings plans.\17\
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    \17\ The MSRB believes that the transactional fees assessed by
an ABLE program reflect the nature of an ABLE program as more of a
short-term, rather than as a longer-term, savings vehicle when
compared to a 529 college savings plan. Further, the MSRB believes
that the variance in the level or amount of the account maintenance
fee assessed by an ABLE program between an in-state and an out-of-
state resident account owner reflects state disability policies.
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    Rule G-45 requires dealers acting in the capacity as underwriters
to ABLE programs or 529 college savings plans to submit on a semi-
annual or annual basis (in the case of performance data) certain
information about the programs or plans they underwrite. That
information includes program or plan descriptive information, assets,
asset allocation information (at the investment option level),
contributions, withdrawals, fee and cost structure, performance, and
other information. The MSRB and other regulatory authorities use this
data to analyze 529 college savings plans (and will be able to use this
data to analyze ABLE programs), monitor their growth rate, size and
investment options, and compare 529 college savings plans based on
fees, costs, and performance. By collecting this information, the MSRB
enhances its understanding of 529 college savings plans (and will be
able to enhance its understanding of ABLE programs). The Commission has
agreed with the MSRB that the collection of information under Rule G-45
is intended to protect investors, municipal entities and the public
interest and prevent fraudulent and manipulative acts and practices by
allowing the MSRB to collect comprehensive, reliable, and consistent
electronic data about such programs or

plans.\18\ The Commission has stated that ``to fulfill its statutory
responsibilities to investors and municipal entities in the context of
529 plans, the Commission believes that it is appropriate for the MSRB
to possess basic, reliable information regarding 529 plans, including
the underlying investment options.'' \19\
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    \18\ Exchange Act Release No. 71598 (Feb. 21, 2014), 79 FR
11161, 11167 (Feb. 27, 2014) (SR-MSRB-2013-04).
    \19\ Id.
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    To help ensure that the MSRB continues to receive comprehensive
information regarding ABLE programs and 529 college savings plans, the
proposed rule change would amend Form G-45 to collect additional
information relating to fees and expenses. This data would enhance the
MSRB's understanding of the markets for ABLE programs and 529 college
savings plans, including the differences among such programs or plans.
Further, as discussed under ``Statutory Basis'' below, the additional
fee and expense information would assist the MSRB in fulfilling its
investor protection mission. The information about fees and expenses
would continue to be submitted in a format that is consistent with the
disclosure principles of the College Savings Plan Network (``CSPN''),
an affiliate of the National Association of State Treasurers,\20\ which
commenters on previous MSRB rulemaking proposals relating to Form G-45
have stated is the industry norm.\21\
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    \20\ CSPN published its voluntary Disclosure Principles
Statement No. 6 (``Disclosure Principles No. 6'') on July 1, 2017
available at http://www.collegesavings.org/wp-content/uploads/2015/06/CSPN-Disclosure-Principles-Statement-No.-6.pdf. Disclosure
Principles No. 6 recommends acceptable disclosure practices for
state entities that establish and maintain 529 college savings
plans. CSPN states that Disclosure Principles No. 6 also may be of
use to qualified ABLE programs. See Disclosure Principles No. 6.
    To assist underwriters, the MSRB included subheadings in how
certain investment options fees and expenses are displayed on Form
G-45 to more closely correspond with the subheadings used in
Disclosure Principles No. 6. The subheadings, however, do not change
any of the data elements required to be submitted on Form G-45.
    \21\ See SR-MSRB-2013-04 (Jun. 10, 2013).
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    Under the proposed rule change, an underwriter to an ABLE program
or a 529 college savings plan would be required to submit data on Form
G-45 about the following additional fees and expenses, as applicable:
     Account opening fee;
     investment administration fee;
     change in account owner fee;
     cancellation/withdrawal fee;
     change in investment option/transfer fee;
     rollover fee;
     returned excess aggregate contributions fee;
     rejected ACH or EFT fee;
     overnight delivery fee;
     in-network ATM fee;
     out-of-network ATM fee;
     ATM mini statement fee;
     international POS/ATM transaction fee;
     foreign transaction fee;
     overdraft fee;
     copy of check or statement fee (per request);
     copy of check images mailed with monthly statement fee;
     check fee (i.e., fee for blank checks);
     returned check fee;
     checking account option fee;
     re-issue of disbursement check fee;
     stop payment fee;
     debit card fee;
     debit card replacement fee;
     outgoing wire fee;
     expedited debit card rush delivery fee;
     paper fee; and
     miscellaneous fee (to address any miscellaneous
transactional fee that is not otherwise specified on Form G-45).
    In addition, under the proposed rule change, the MSRB would collect
data about any variance in the annual account maintenance fee due to
the residency of the account owner. The proposed rule would apply to
underwriters to ABLE programs as well as to underwriters to 529 college
savings plans.\22\
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    \22\ The MSRB, however, anticipates that most of the data that
would be collected by the proposed rule change would relate to ABLE
programs. As noted, the MSRB believes that 529 college savings plans
generally do not assess the fees and charges that are the subject of
this proposed rule change.
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act,\23\ which provides that the MSRB's
rules shall:
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    \23\ 15 U.S.C. 78o-4(b)(2)(C).

    be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities and
municipal financial products, to remove impediments to and perfect
the mechanism of a free and open market in municipal securities and
municipal financial products, and, in general, to protect investors,
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municipal entities, obligated persons, and the public interest.

    The Act requires that the MSRB protect investors. To fulfill this
responsibility, it is necessary for the MSRB to have a complete and
reliable data set about ABLE programs and 529 college savings plans.
That data includes data about the fees and expenses associated with an
investment in an ABLE program or a 529 college savings plan. The
proposed rule change would provide the MSRB with more meaningful data
about the transactional fees primarily assessed by ABLE programs and
about variances in the account maintenance fee due to the residency of
the account owner. The additional information about fees and expenses
associated with ABLE programs and 529 college savings plans would
facilitate the MSRB's ability to analyze the market for ABLE programs
and 529 college savings plans as well as to evaluate trends and
differences among the ABLE programs and 529 college savings plans. The
MSRB believes that understanding the costs associated with ABLE
programs and 529 college savings plans as well as the other data
collected under Rule G-45 are basic requirements for regulation and
necessary to assist the MSRB with its evaluation as to whether its
regulatory scheme for dealers that sell interests in or underwrite ABLE
programs and/or 529 college savings plans is sufficient, or whether
additional rulemaking is necessary to protect investors. Further, the
information that would be collected by the proposed rule change would
help the MSRB and other regulators that examine dealers prioritize
their efforts with respect to those dealers that sell interests in or
underwrite ABLE programs and 529 college savings plans. Those other
regulators may use this information to determine the nature or timing
of risk-based dealer examinations. In short, the MSRB believes that the
information to be collected by the proposed rule change would better
enable the MSRB to protect investors in these programs and plans and
the public interest.
    Further, the MSRB has a statutory obligation to prevent fraudulent
and manipulative acts and practices and to promote just and equitable
principles of trade. In general, underwriters to ABLE programs and 529
college savings plans draft or participate in the drafting of the
program or plan disclosure booklets, as well as the marketing materials
for the ABLE program or 529 college savings plans. The MSRB or other
regulators may use the information submitted on Form G-45 to, among
other things, determine if the disclosure documents or marketing
materials prepared or reviewed by underwriters are consistent with the
data submitted to the MSRB for regulatory purposes.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act requires that MSRB rules not be
designed to impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\24\ In
accordance with the Board's policy on the use of economic analysis in
rulemaking, the Board has reviewed the proposed rule change.\25\ To
fulfill its responsibility to protect investors, as ABLE programs and
529 college savings plans have significant retail investor components,
the MSRB must become well informed about the fees and expenses assessed
under such programs or plans and about the market for ABLE programs and
529 college savings plans as a whole. The proposed rule change is
necessary for the MSRB to gather relevant data required to ensure the
MSRB's regulatory scheme is sufficient and/or to determine whether
additional rulemaking is necessary to protect investors and the public
interest.
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    \24\ Id.
    \25\ Policy on the Use of Economic Analysis in MSRB Rulemaking
is available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx.
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    The proposed rule change would require an underwriter to submit
additional information about the fees and expenses associated with the
applicable ABLE program or 529 college savings plan. The proposed rule
change would enable the MSRB to carry out its regulatory
responsibilities under the Act and fulfill its mission to ensure
efficiency in the market for these programs. The MSRB would realize
substantial benefits in obtaining reliable and consistent information
about the fees and expenses of ABLE programs and 529 college savings
plans, promoting greater regulatory oversight and investor protection.
    Although there are costs associated with compliance with the
proposed rule change, these costs should be minimal. The data that the
MSRB wishes to collect are readily available and should be known to the
underwriters of these plans. Additionally, underwriters are already
required to submit certain information to the MSRB on Form G-45 on a
semi-annual basis.\26\
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    \26\ The proposed rule change would not impose any burden on
non-underwriting dealers that only sell interests in either ABLE
programs or 529 college savings plans, as the obligation to submit
information semi-annually to the MSRB will only be imposed on
underwriters.
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    Among the possible alternatives to the proposed rule change are (a)
a manual review of information in program or plan disclosure documents
submitted to EMMA or on program or plan Web sites; or (b) a review of
data supplied by information vendors voluntarily. However, neither of
these alternatives would satisfy the regulatory needs of the MSRB. A
manual review of information would be insufficient because some of the
information sought by the MSRB is not disclosed in public documents in
a uniform and consistent manner. Moreover, a manual review of
information would be time consuming and inefficient, especially given
that underwriters are already required to submit certain information to
the MSRB on a semi-annual basis. In addition, while a review of
information voluntarily submitted to informational vendors may be of
interest, it is unreliable from a regulatory standpoint. Information
supplied by dealers that are underwriters to ABLE programs and/or 529
college savings plans to information vendors may differ with respect to
its reliability and quality. Essentially, the MSRB would be relying on
such information vendors for important regulatory activities. For
regulatory purposes, the MSRB seeks a consistent set of uniform,
reliable and relevant information about ABLE programs and 529 college
savings plans.
    On balance, the MSRB believes that semi-annual reporting of limited
information, which is readily available to dealers that are
underwriters to ABLE programs and/or 529 college savings plans, would
not pose an unreasonable burden on such underwriters, and the likely
benefits of the proposed amendments justify the likely associated costs
in both the near and long term.
    The MSRB does not believe that the proposed rule change would
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The additional information
would be submitted on an equal and non-discriminatory basis, and the
requirement would apply equally to all dealers that serve as
underwriters to ABLE programs and/or 529 college savings plans.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received on the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period of up to 90 days (i) as
the Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-MSRB-2017-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-MSRB-2017-08. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the MSRB. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish

to make available publicly. All submissions should refer to File Number
SR-MSRB-2017-08 and should be submitted on or before November 17, 2017.

    For the Commission, pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-23374 Filed 10-26-17; 8:45 am]
 BILLING CODE 8011-01-P