[Federal Register Volume 81, Number 59 (Monday, March 28, 2016)]
[Notices]
[Pages 17170-17180]
[FR Doc No: 2016-06888]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2016-N-0969]

Authorization of Emergency Use of an In Vitro Diagnostic Device
for Diagnosis of Zika Virus Infection; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing the
issuance of an Emergency Use Authorization (EUA) (the Authorization)
for an in vitro diagnostic device for diagnosis of Zika virus infection
in response to the Zika virus outbreak in the Americas. FDA issued this
Authorization under the Federal Food, Drug, and Cosmetic Act (the FD&C
Act), as requested by the U.S. Centers for Disease Control and
Prevention (CDC). The Authorization contains, among other things,
conditions on the emergency use of the authorized in vitro diagnostic
device. The Authorization follows the February 26, 2016, determination
by the Department of Health and Human Services (HHS) Secretary that
there is a significant potential for a public health emergency that has
a significant potential to affect national security or the health and
security of U.S. citizens living abroad and that involves Zika virus.
On the basis of such determination, the HHS Secretary declared on
February 26, 2016, that circumstances exist justifying the
authorization of emergency use of in vitro diagnostic tests for
detection of Zika virus and/or diagnosis of Zika virus infection
subject to the terms of any authorization issued under the FD&C Act.
The Authorization, which includes an explanation of the reasons for
issuance, is reprinted in this document.

DATES: The Authorization is effective as of February 26, 2016.

ADDRESSES: Submit written requests for single copies of the EUA to the
Office of Counterterrorism and Emerging Threats, Food and Drug
Administration, 10903 New Hampshire Ave., Bldg. 1, Rm. 4338, Silver
Spring, MD 20993-0002. Send one self-addressed adhesive label to assist
that office in processing your request or include a fax number to which
the Authorization may be sent. See the SUPPLEMENTARY INFORMATION
section for electronic access to the Authorization.

FOR FURTHER INFORMATION CONTACT: Carmen Maher, Office of
Counterterrorism and Emerging Threats, Food and Drug Administration,
10903 New Hampshire Ave., Bldg. 1, Rm. 4347, Silver Spring, MD 20993-
0002,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 564 of the FD&C Act (21 U.S.C. 360bbb-3) as amended by the
Project BioShield Act of 2004 (Pub. L. 108-276) and the Pandemic and
All-Hazards Preparedness Reauthorization Act of 2013 (Pub. L. 113-5)
allows FDA to strengthen the public health protections against
biological, chemical, nuclear, and radiological agents. Among other
things, section 564 of the FD&C Act allows FDA to authorize the use of
an unapproved medical product or an unapproved use of an approved
medical product in certain situations. With this EUA authority, FDA can
help assure that medical countermeasures may be used in emergencies to
diagnose, treat, or prevent serious or life-threatening diseases or
conditions caused by biological, chemical, nuclear, or radiological
agents; when there are no adequate, approved, and available
alternatives.
    Section 564(b)(1) of the FD&C Act provides that, before an EUA may
be issued, the Secretary of HHS must declare that circumstances exist
justifying the authorization based on one of the following grounds: (1)
A determination by the Secretary of Homeland Security that there is a
domestic emergency, or a significant potential for a domestic
emergency, involving a heightened risk of attack with a biological,
chemical, radiological, or nuclear agent or agents; (2) a determination
by the Secretary of Defense that there is a military emergency, or a
significant potential for a military emergency, involving a heightened
risk to U.S. military forces of attack with a biological, chemical,
radiological, or nuclear agent or agents; (3) a determination by the
Secretary of HHS that there is a public health emergency, or a
significant potential for a public health emergency, that affects, or
has a significant potential to affect, national security or the health
and security of U.S. citizens living abroad, and that involves a
biological, chemical, radiological, or nuclear agent or agents, or a
disease or condition that may be attributable to such agent or agents;
or (4) the identification of a material threat by the Secretary of
Homeland Security under section 319F-2 of the Public Health Service
(PHS) Act (42 U.S.C. 247d-6b) sufficient to affect national security or
the health and security of U.S. citizens living abroad.
    Once the Secretary of HHS has declared that circumstances exist
justifying an authorization under section 564 of the FD&C Act, FDA may
authorize the emergency use of a drug, device, or biological product if
the Agency concludes that the statutory criteria are satisfied. Under
section 564(h)(1) of the FD&C Act, FDA is required to publish in the
Federal Register a notice of each authorization, and each termination
or revocation of an authorization, and an explanation of the reasons
for the action. Section 564 of the FD&C Act permits FDA to authorize
the introduction into interstate commerce of a drug, device, or
biological product intended for use when the Secretary of HHS has
declared that circumstances exist justifying the authorization of
emergency use. Products appropriate for emergency use may include
products and uses that are not approved, cleared, or licensed under
sections 505, 510(k), or 515 of the FD&C Act (21 U.S.C. 355, 360(k),
and 360e) or section 351 of the PHS Act (42 U.S.C. 262). FDA may issue
an EUA only if, after consultation with the HHS Assistant Secretary for
Preparedness and Response, the Director of the National Institutes of
Health, and the Director of the CDC (to the extent feasible and
appropriate given the applicable circumstances), FDA \1\ concludes: (1)
That an agent referred to in a declaration of emergency or threat can
cause a serious or life-threatening disease or condition; (2) that,
based on the totality of scientific evidence available to FDA,
including data from adequate and well-controlled clinical trials, if
available, it is reasonable to believe that: (A) The product may be
effective in diagnosing, treating, or preventing (i) such disease or
condition; or (ii) a serious or life-threatening disease or condition
caused by a product authorized under section 564, approved or cleared
under the FD&C Act, or licensed under section 351 of the PHS Act, for
diagnosing, treating, or preventing such a disease or condition caused
by such an agent; and (B) the known and potential benefits of the
product, when used to diagnose, prevent, or treat such disease or
condition, outweigh the known and potential risks of the product,
taking into consideration the material threat posed by the agent or
agents identified in a declaration under section 564(b)(1)(D) of the
FD&C Act, if

applicable; (3) that there is no adequate, approved, and available
alternative to the product for diagnosing, preventing, or treating such
disease or condition; and (4) that such other criteria as may be
prescribed by regulation are satisfied.
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    \1\ The Secretary of HHS has delegated the authority to issue an
EUA under section 564 of the FD&C Act to the Commissioner of Food
and Drugs.
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    No other criteria for issuance have been prescribed by regulation
under section 564(c)(4) of the FD&C Act. Because the statute is self-
executing, regulations or guidance are not required for FDA to
implement the EUA authority.

II. EUA Request for an In Vitro Diagnostic Device for Diagnosis of Zika
Virus Infection

    On February 26, 2016, the Secretary of HHS determined that there is
a significant potential for a public health emergency that has a
significant potential to affect national security or the health and
security of U.S. citizens living abroad and that involves Zika virus.
On February 26, 2016, under section 564(b)(1) of the FD&C Act, and on
the basis of such determination, the Secretary of HHS declared that
circumstances exist justifying the authorization of emergency use of in
vitro diagnostic tests for detection of Zika virus and/or diagnosis of
Zika virus infection, subject to the terms of any authorization issued
under section 564 of the FD&C Act. Notice of the determination and
declaration of the Secretary was published in the Federal Register on
March 2, 2016 (81 FR 10878). On February 22, 2016, CDC requested, and
on February 26, 2016, FDA issued, an EUA for the CDC Zika
Immunoglobulin M (IgM) Antibody Capture Enzyme-Linked Immunosorbent
Assay (Zika MAC-ELISA), subject to the terms of the Authorization.

III. Electronic Access

    An electronic version of this document and the full text of the
Authorization are available on the Internet at http://www.regulations.gov.

IV. The Authorization

    Having concluded that the criteria for issuance of the
Authorization under section 564(c) of the FD&C Act are met, FDA has
authorized the emergency use of an in vitro diagnostic device for
diagnosis of Zika virus infection subject to the terms of the
Authorization. The Authorization in its entirety (not including the
authorized versions of the fact sheets and other written materials)
follows and provides an explanation of the reasons for its issuance, as
required by section 564(h)(1) of the FD&C Act:
BILLING CODE 4164-01-P

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BILLING CODE 4164-01-C

    Dated: March 22, 2016.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2016-06888 Filed 3-25-16; 8:45 am]
 BILLING CODE 4164-01-P


[Federal Register Volume 80, Number 155 (Wednesday, August 12, 2015)]
[Notices]
[Pages 48355-48365]
[FR Doc No: 2015-19758]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75628; File No. SR-MSRB-2015-03]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Instituting Proceedings To Determine Whether To Approve or
Disapprove a Proposed Rule Change Consisting of Proposed New Rule G-42,
on Duties of Non-Solicitor Municipal Advisors, and Proposed Amendments
to Rule G-8, on Books and Records To Be Made by Brokers, Dealers,
Municipal Securities Dealers, and Municipal Advisors

August 6, 2015.

I. Introduction

    On April 24, 2015, the Municipal Securities Rulemaking Board
(``MSRB'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change consisting of proposed new Rule
G-42, on duties of non-solicitor municipal advisors, and proposed
amendments to Rule G-8, on books and records to be made by brokers,
dealers, municipal securities dealers, and municipal advisors. The
proposed rule change was published for comment in the Federal Register
on May 8, 2015.\3\ The Commission received fifteen comment letters on
the proposal.\4\ On

June 16, 2015, the MSRB granted an extension of time for the Commission
to act on the filing until August 6, 2015. This order institutes
proceedings under Section 19(b)(2)(B) of the Act \5\ to determine
whether to approve or disapprove the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Exchange Act Release No. 74860 (May 4, 2015), 80 FR 26752
(``Notice''). The comment period closed on May 29, 2015.
    \4\ See Letters to Secretary, Commission, from Dustin McDonald,
Director, Federal Liaison Center, Government Finance Officers
Association (``GFOA''), dated May 22, 2015 (the ``GFOA I Letter'');
Leslie M. Norwood, Managing Director and Associate General Counsel,
Securities Industry and Financial Markets Association (``SIFMA''),
dated May 28, 2015 (the ``SIFMA Letter''); Cristeena Naser, Vice
President, Center for Securities, Trust & Investments, American
Bankers Association (``ABA''), dated May 29, 2015 (the ``ABA
Letter''); Terri Heaton, President, National Association of
Municipal Advisors (``NAMA''), dated May 29, 2015 (the ``NAMA
Letter''); Hill A. Feinberg, Chairman and Chief Executive Officer
and Michael Bartolotta, Vice Chairman, First Southwest Company
(``First Southwest''), dated May 29, 2015 (the ``First Southwest
Letter''); Guy E. Yandel, EVP and Head of Public Finance, et al.,
George K. Baum & Company (``GKB''), dated May 29, 2015 (the ``GKB
Letter''); David T. Bellaire, Executive Vice President and General
Counsel, Financial Services Institute (``FSI''), dated May 29, 2015
(the ``FSI Letter''); Robert J. McCarthy, Director of Regulatory
Policy, Wells Fargo Advisors LLC, (``Wells Fargo''), dated May 29,
2015 (the ``Wells Fargo Letter''); Tamara K. Salmon, Associate
General Counsel, Investment Company Institute (``ICI''), dated May
29, 2015 (the ``ICI Letter''); W. David Hemingway, Executive Vice
President, Zions First National Bank (``Zions''), dated May 29, 2015
(the ``Zions Letter''); Lindsey K. Bell, Millar Jiles, LLP (``Millar
Jiles''), dated May 29, 2015 (the ``Millar Jiles Letter''); Michael
Nicholas, Chief Executive Officer, Bond Dealers of America
(``BDA''), dated May 29, 2015 (the ``BDA Letter''); Joy A. Howard,
WM Financial Strategies (``WM Financial''), dated May 29, 2015 (the
``WM Financial Letter''); Leo Karwejna, Managing Director, Chief
Compliance Officer, The PFM Group (``PFM''), dated May 29, 2015 (the
``PFM Letter''); and Dustin T. McDonald, Director, Federal Liaison
Center, GFOA, dated June 15, 2015 (the ``GFOA II Letter''). Staff
from the Office of Municipal Securities discussed the proposed rule
change with representatives from SIFMA on May 21, 2015,
representatives from NAMA on June 3, 2015 and representatives from
BDA on June 17, 2015.
    \5\ 15 U.S.C. 78s(b)(2)(B).
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    Institution of proceedings does not indicate that the Commission
has reached any conclusions with respect to the proposed rule change,
nor does it mean that the Commission will ultimately disapprove the
proposed rule change. Rather, as described below, the Commission seeks
and encourages interested persons to comment on the proposed rule
change.

II. Description of the Proposed Rule Change

    As described more fully in the Notice, the MSRB proposed to adopt
new Rule G-42, on duties of non-solicitor municipal advisors and
proposed amendments to Rule G-8, on books and records to be made by
brokers, dealers, municipal securities dealers, and municipal advisors
(the ``proposed rule change'').

Proposed Rule G-42

    Proposed Rule G-42 would establish the core standards of conduct
and duties of municipal advisors when engaging in municipal advisory
activities, other than municipal advisory solicitation activities
(``municipal advisors''). In summary, the core provisions of Proposed
Rule G-42 would:
     Establish certain standards of conduct consistent with the
fiduciary duty owed by a municipal advisor to its municipal entity
clients, which includes, without limitation, a duty of care and of
loyalty;
     Establish the standard of care owed by a municipal advisor
to its obligated person clients;
     Require the full and fair disclosure, in writing, of all
material conflicts of interest and legal or disciplinary events that
are material to a client's evaluation of a municipal advisor;
     Require the documentation of the municipal advisory
relationship, specifying certain aspects of the relationship that must
be included in the documentation;
     Require that recommendations made by a municipal advisor
are suitable for its clients, or that it determine the suitability of
recommendations made by third parties when appropriate; and
     Specifically prohibit a municipal advisor from engaging in
certain activities, including, in summary:
    [cir] Receiving excessive compensation;
    [cir] delivering inaccurate invoices for fees or expenses;
    [cir] making false or misleading representations about the
municipal advisor's resources, capacity or knowledge;
    [cir] participating in certain fee-splitting arrangements with
underwriters;
    [cir] participating in any undisclosed fee-splitting arrangements
with providers of investments or services to a municipal entity or
obligated person client of the municipal advisor;
    [cir] making payments for the purpose of obtaining or retaining an
engagement to perform municipal advisory activities, with limited
exceptions; and
    [cir] entering into certain principal transactions with the
municipal advisor's municipal entity clients.
    In addition, the proposed rule change would define key terms used
in Proposed Rule G-42 and provide supplementary material. The
supplementary material would provide additional guidance on the core
concepts in the proposed rule, such as the duty of care, the duty of
loyalty, suitability of recommendations and ``Know Your Client''
obligations; provide context for issues such as the scope of an
engagement, conflicts of interest disclosures, excessive compensation,
the impact of client action that is independent of or contrary to the
advice of a municipal advisor, and the applicability of the proposed
rule change to 529 college savings plans (``529 plans'') and other
municipal entities; provide guidance regarding the definition of
``engage in a principal transaction;'' recognize the continued
applicability of state and other laws regarding fiduciary and other
duties owed by municipal advisors; and, finally, include information
regarding requirements that must be met for a municipal advisor to be
relieved of certain provisions of Proposed Rule G-42 in instances when
it inadvertently engages in municipal advisory activities.

Standards of Conduct

    Section (a) of Proposed Rule G-42 would establish the core
standards of conduct and duties applicable to municipal advisors.
Subsection (a)(i) of Proposed Rule G-42 would provide that each
municipal advisor in the conduct of its municipal advisory activities
for an obligated person client is subject to a duty of care. Subsection
(a)(ii) would provide that each municipal advisor in the conduct of its
municipal advisory activities for a municipal entity client is subject
to a fiduciary duty, which includes, without limitation, a duty of
loyalty and a duty of care.
    Proposed supplementary material would provide guidance on the duty
of care and the duty of loyalty. Paragraph .01 of the Supplementary
Material would describe the duty of care to require, without
limitation, a municipal advisor to: (1) Exercise due care in performing
its municipal advisory activities; (2) possess the degree of knowledge
and expertise needed to provide the municipal entity or obligated
person client with informed advice; (3) make a reasonable inquiry as to
the facts that are relevant to a client's determination as to whether
to proceed with a course of action or that form the basis for any
advice provided to the client; and (4) undertake a reasonable
investigation to determine that the municipal advisor is not basing any
recommendation on materially inaccurate or incomplete information. The
duty of care that would be established in section (a) of Proposed Rule
G-42 would also require the municipal advisor to have a reasonable
basis for: Any advice provided to or on behalf of a client; any
representations made in a certificate that it signs that will be
reasonably foreseeably relied upon by the client, any other party
involved in the municipal securities transaction or municipal financial
product, or investors in the municipal entity client's securities or
securities secured by payments from an obligated person client; and,
any information provided to the client or other parties involved in the
municipal securities transaction in connection with the preparation of
an official statement for any issue of municipal securities as to which
the advisor is advising.
    Paragraph .02 of the Supplementary Material would describe the duty
of loyalty to require, without limitation, a

municipal advisor, when engaging in municipal advisory activities for a
municipal entity, to deal honestly and with the utmost good faith with
the client and act in the client's best interests without regard to the
financial or other interests of the municipal advisor. Paragraph .02
would also provide that the duty of loyalty would preclude a municipal
advisor from engaging in municipal advisory activities with a municipal
entity client if it cannot manage or mitigate its conflicts of interest
in a manner that will permit it to act in the municipal entity's best
interests.
    Paragraph .03 of the Supplementary Material would specify that a
municipal advisor is not required to disengage from a municipal
advisory relationship if a municipal entity client or an obligated
person client elects a course of action that is independent of or
contrary to advice provided by the municipal advisor.
    Paragraph .04 of the Supplementary Material would specify that a
municipal advisor could limit the scope of the municipal advisory
activities to be performed to certain specified activities or services
if requested or expressly consented to by the client, but could not
alter the standards of conduct or impose limitations on any of the
duties prescribed by Proposed Rule G-42. Paragraph .04 would provide
that, if a municipal advisor engages in a course of conduct that is
inconsistent with the mutually agreed limitations to the scope of the
engagement, it may result in negating the effectiveness of the
limitations.
    Paragraph .07 of the Supplementary Material would state, as a
general matter, that, municipal advisors may be subject to fiduciary or
other duties under state or other laws and nothing in Proposed Rule G-
42 would supersede any more restrictive provision of state or other
laws applicable to municipal advisory activities.

Disclosure of Conflicts of Interest and Other Information

    Section (b) of Proposed Rule G-42 would require a municipal advisor
to fully and fairly disclose to its client in writing all material
conflicts of interest, and to do so prior to or upon engaging in
municipal advisory activities. The provision would set forth a non-
exhaustive list of scenarios under which a material conflict of
interest would arise or be deemed to exist and that would require a
municipal advisor to provide written disclosures to its client.
    Subsection (b)(i)(A) would require a municipal advisor to disclose
any actual or potential conflicts of interest of which the municipal
advisor becomes aware after reasonable inquiry that could reasonably be
anticipated to impair the municipal advisor's ability to provide advice
to or on behalf of the client in accordance with the applicable
standards of conduct (i.e., a duty of care or a fiduciary duty).
Subsections (b)(i)(B) through (F) would provide more specific scenarios
that give rise to conflicts of interest that would be deemed to be
material and require proper disclosure to a municipal advisor's client.
Under the proposed rule change, a material conflict of interest would
always include: any affiliate of the municipal advisor that provides
any advice, service or product to or on behalf of the client that is
directly related to the municipal advisory activities to be performed
by the disclosing municipal advisor; any payments made by the municipal
advisor, directly or indirectly, to obtain or retain an engagement to
perform municipal advisory activities for the client; any payments
received by the municipal advisor from a third party to enlist the
municipal advisor's recommendations to the client of its services, any
municipal securities transaction or any municipal financial product;
any fee-splitting arrangements involving the municipal advisor and any
provider of investments or services to the client; and any conflicts of
interest arising from compensation for municipal advisory activities to
be performed that is contingent on the size or closing of any
transaction as to which the municipal advisor is providing advice.
Subsection (b)(i)(G) would require municipal advisors to disclose any
other engagements or relationships of the municipal advisor that could
reasonably be anticipated to impair its ability to provide advice to or
on behalf of its client in accordance with the applicable standards of
conduct established by section (a) of the proposed rule.
    Under subsection (b)(i), if a municipal advisor were to conclude,
based on the exercise of reasonable diligence, that it had no known
material conflicts of interest, the municipal advisor would be required
to provide a written statement to the client to that effect.
    Subsection (b)(ii) would require disclosure of any legal or
disciplinary event that would be material to the client's evaluation of
the municipal advisor or the integrity of its management or advisory
personnel. A municipal advisor would be permitted to fulfill this
disclosure obligation by identifying the specific type of event and
specifically referring the client to the relevant portions of the
municipal advisor's most recent SEC Forms MA or MA-I \6\ filed with the
Commission, if the municipal advisor provides detailed information
specifying where the client could access such forms electronically.
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    \6\ See 17 CFR 249.1300 (SEC Form MA); 17 CFR 249.1310 (SEC Form
MA-I).
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    Paragraph .05 of the Supplementary Material would provide that the
required conflicts of interest disclosures must be sufficiently
detailed to inform the client of the nature, implications and potential
consequences of each conflict and must include an explanation of how
the municipal advisor addresses or intends to manage or mitigate each
conflict.\7\
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    \7\ The MSRB believes that this requirement is analogous to the
requirement of Form ADV (17 CFR 279.1) under the Investment Advisers
Act of 1940 (15 U.S.C. 80b-1 et seq.) that obligates an investment
adviser to describe how it addresses certain conflicts of interest
with its clients. See, e.g., Form ADV, Part 2, Item 5.E.1 of Part 2A
(requiring an investment adviser to describe how it will address
conflicts of interest that arise in regards to fees and compensation
it receives, including the investment adviser's procedures for
disclosing the conflicts of interest with its client). See also,
Form ADV, Part 2A Items 6, 10, 11, 14 and 17.
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    Paragraph .06 of the Supplementary Material would provide that a
municipal advisor that inadvertently engages in municipal advisory
activities but does not intend to continue the municipal advisory
activities or enter into a municipal advisory relationship \8\ would
not be required to comply with sections (b) and (c) of Proposed Rule G-
42 (relating to disclosure of conflicts of interest and documentation
of the relationship), if the municipal advisor takes the prescribed
actions listed under paragraph .06 promptly after it discovers its
provision of inadvertent advice. The municipal advisor would be
required to provide to the client a dated document that would include:
A disclaimer stating that the municipal advisor did not intend to
provide advice and that, effective immediately, the municipal advisor
has ceased engaging in municipal advisory activities with respect to
that client in regard to all transactions and municipal financial
products as to which advice was inadvertently provided; a notification
that the client should be aware that the municipal advisor has not
provided the

disclosure of material conflicts of interest and other information
required under section (b); an identification of all of the advice that
was inadvertently provided, based on a reasonable investigation; and a
request that the municipal entity or obligated person acknowledge
receipt of the document. The municipal advisor also would be required
to conduct a review of its supervisory and compliance policies and
procedures to ensure that they are reasonably designed to prevent
inadvertently providing advice to municipal entities and obligated
persons. The final sentence of paragraph .06 of the Supplementary
Material would also clarify that the satisfaction of the requirements
of paragraph .06 would have no effect on the applicability of any
provisions of Proposed Rule G-42 other than sections (b) and (c), or
any other legal requirements applicable to municipal advisory
activities.
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    \8\ Under subsection (f)(vi) of Proposed Rule G-42, the MSRB
notes that a municipal advisory relationship would be deemed to
exist when a municipal advisor enters into an agreement to engage in
municipal advisory activities for a municipal entity or obligated
person, and would be deemed to have ended on the earlier of (i) the
date on which the municipal advisory relationship has terminated
pursuant to the terms of the documentation of the municipal advisory
relationship required in section (c) of Proposed Rule G-42 or (ii)
the date on which the municipal advisor withdraws from the municipal
advisory relationship.
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Documentation of the Municipal Advisory Relationship

    Section (c) of Proposed Rule G-42 would require each municipal
advisor to evidence each of its municipal advisory relationships by a
writing, or writings created and delivered to the municipal entity or
obligated person client prior to, upon or promptly after the
establishment of the municipal advisory relationship. The documentation
would be required to be dated and include, at a minimum: \9\
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    \9\ While no acknowledgement from the client of its receipt of
the documentation would be required, the MSRB notes that a municipal
advisor must, as part of the duty of care it owes its client,
reasonably believe that the documentation was received by its
client.
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     The form and basis of direct or indirect compensation, if
any, for the municipal advisory activities to be performed, as provided
in proposed subsection (c)(i);
     the information required to be disclosed in proposed
section (b), including the disclosures of conflicts of interest, as
provided in proposed subsection (c)(ii);
     a description of the specific type of information
regarding legal and disciplinary events requested by the Commission on
SEC Form MA and SEC Form MA-I, as provided in proposed subsection
(c)(iii), and detailed information specifying where the client may
electronically access the municipal advisor's most recent Form MA and
each most recent Form MA-I filed with the Commission; \10\
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    \10\ The MSRB notes that compliance with this requirement could
be achieved in the same manner, and (so long as done upon or prior
to engaging in municipal advisory activities for the client)
concurrently with providing to the client the information required
under proposed subsection (b)(ii).
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     the date of the last material change to the legal or
disciplinary event disclosures on any SEC Forms MA or MA-I filed with
the Commission by the municipal advisor, as provided in proposed
subsection (c)(iv);
     the scope of the municipal advisory activities to be
performed and any limitations on the scope of the engagement, as
provided in proposed subsection (c)(v);
     the date, triggering event, or means for the termination
of the municipal advisory relationship, or, if none, a statement that
there is none, as provided in proposed subsection (c)(vi); and
     any terms relating to withdrawal from the municipal
advisory relationship, as provided in proposed subsection (c)(vii).
    Proposed Rule G-42(c) also would require municipal advisors to
promptly amend or supplement the writing(s) during the term of the
municipal advisory relationship as necessary to reflect any material
changes or additions in the required information.

Recommendations and Review of Recommendations of Other Parties

    Section (d) of Proposed Rule G-42 would provide that a municipal
advisor must not recommend that its client enter into any municipal
securities transaction or municipal financial product unless the
municipal advisor has determined, based on the information obtained
through the reasonable diligence of the municipal advisor, whether the
transaction or product is suitable for the client. Proposed section (d)
also contemplates that a municipal advisor may be requested by the
client to review and determine the suitability of a recommendation made
by a third party to the client. If a client were to request this type
of review, and such review were within the scope of the engagement, the
municipal advisor's determination regarding the suitability of the
third-party's recommendation regarding a municipal securities
transaction or municipal financial product would be subject to the same
reasonable diligence standard--requiring the municipal advisor to
obtain relevant information through the exercise of reasonable
diligence.
    As to both types of review, the municipal advisor would be required
under proposed section (d) to inform its municipal entity or obligated
person client of its evaluation of the material risks, potential
benefits, structure and other characteristics of the recommended
municipal securities transaction or municipal financial product; the
basis upon which the advisor reasonably believes the recommended
transaction or product is, or is not, suitable for the client; and
whether the municipal advisor has investigated or considered other
reasonably feasible alternatives to the recommended municipal
securities transaction or municipal financial product that might also
or alternatively serve the client's objectives.
    Paragraph .04 of the Supplementary Material would provide that a
municipal advisor and its client could limit the scope of the municipal
advisory relationship to certain specified activities or services. The
MSRB notes that a municipal advisor would not be permitted to alter the
standards of conduct or duties imposed by the proposed rule with
respect to that limited scope.
    Paragraph .08 of the Supplementary Material would provide guidance
related to a municipal advisor's suitability obligations. Under this
provision, a municipal advisor's determination of whether a municipal
securities transaction or municipal financial product is suitable for
its client must be based on numerous factors, as applicable to the
particular type of client, including, but not limited to: the client's
financial situation and needs, objectives, tax status, risk tolerance,
liquidity needs, experience with municipal securities transactions or
municipal financial products generally or of the type and complexity
being recommended, financial capacity to withstand changes in market
conditions during the term of the municipal financial product or the
period that municipal securities to be issued are reasonably expected
to be outstanding, and any other material information known by the
municipal advisor about the client and the municipal securities
transaction or municipal financial product, after the municipal advisor
has conducted a reasonable inquiry.
    In connection with a municipal advisor's obligation to determine
the suitability of a municipal securities transaction or a municipal
financial product for a client, which should take into account its
knowledge of the client, paragraph .09 of the Supplementary Material
would require a municipal advisor to know its client. The obligation to
know the client would require a municipal advisor to use reasonable
diligence to know and retain essential facts concerning the client and

the authority of each person acting on behalf of the client, and is
similar to requirements in other regulatory regimes.\11\ The facts
``essential'' to knowing one's client would include those required to
effectively service the municipal advisory relationship with the
client; act in accordance with any special directions from the client;
understand the authority of each person acting on behalf of the client;
and comply with applicable laws, rules and regulations.
---------------------------------------------------------------------------

    \11\ The MSRB notes that similar requirements apply to brokers
and dealers under FINRA Rule 2090 (Know Your Customer) and swap
dealers under Commodity Futures Trading Commission (``CFTC'') Rule
402(b) (General Provisions: Know Your Counterparty), 17 CFR
23.402(b), found in CFTC Rules, Ch. I, Pt. 23, Subpt. H (Business
Conduct Standards for Swap Dealers and Major Swap Participants
Dealing with Counterparties, including Special Entities) (17 CFR
23.400 et. seq.). Notably, the CFTC's rule applies to dealings with
special entity clients, defined to include states, state agencies,
cities, counties, municipalities, other political subdivisions of a
State, or any instrumentality, department, or a corporation of or
established by a State or political subdivision of a State. See CFTC
Rule 401(c) (defining ``special entity'') (17 CFR 23.401(c)).
---------------------------------------------------------------------------

    The MSRB notes that a client could at times elect a course of
action either independent of or contrary to the advice of its municipal
advisor. Paragraph .03 of the Supplementary Material would provide that
the municipal advisor would not be required to disengage from the
municipal advisory relationship on that basis.

Specified Prohibitions

    Subsection (e)(i)(A) would prohibit a municipal advisor from
receiving compensation from its client that is excessive in relation to
the municipal advisory activities actually performed for the client.
Paragraph .10 of the Supplementary Material would provide additional
guidance on how compensation would be determined to be excessive.
Included in paragraph .10 are several factors that would be considered
when evaluating the reasonableness of a municipal advisor's
compensation relative to the nature of the municipal advisory
activities performed, including, but not limited to: The municipal
advisor's expertise, the complexity of the municipal securities
transaction or municipal financial product, whether the fee is
contingent upon the closing of the municipal securities transaction or
municipal financial product, the length of time spent on the engagement
and whether the municipal advisor is paying any other relevant costs
related to the municipal securities transaction or municipal financial
product.
    Subsection (e)(i)(B) would prohibit municipal advisors from
delivering an invoice for fees or expenses for municipal advisory
activities that does not accurately reflect the activities actually
performed or the personnel that actually performed those activities.
    Subsection (e)(i)(C) would prohibit a municipal advisor from making
any representation or submitting any information that the municipal
advisor knows or should know is either materially false or materially
misleading due to the omission of a material fact, about its capacity,
resources or knowledge in response to requests for proposals or in oral
presentations to a client or prospective client for the purpose of
obtaining or retaining an engagement to perform municipal advisory
activities.
    Subsection (e)(i)(D) would prohibit municipal advisors from making
or participating in two types of fee-splitting arrangements: (1) Any
fee-splitting arrangement with an underwriter on any municipal
securities transaction as to which the municipal advisor has provided
or is providing advice; and (2) any undisclosed fee-splitting
arrangement with providers of investments or services to a municipal
entity or obligated person client of the municipal advisor.
    Subsection (e)(i)(E) would, generally, prohibit a municipal advisor
from making payments for the purpose of obtaining or retaining an
engagement to perform municipal advisory activities. However, the
provision contains three exceptions. The prohibition would not apply
to: (1) Payments to an affiliate of the municipal advisor for a direct
or indirect communication with a municipal entity or obligated person
on behalf of the municipal advisor where such communication is made for
the purpose of obtaining or retaining an engagement to perform
municipal advisory activities; (2) reasonable fees paid to another
municipal advisor registered as such with the Commission and MSRB for
making such a communication as described in subsection (e)(i)(E)(1);
and (3) payments that are permissible ``normal business dealings'' as
described in MSRB Rule G-20.

Principal Transactions

    Subsection (e)(ii) of Proposed Rule G-42 would prohibit a municipal
advisor to a municipal entity, and any affiliate of such municipal
advisor, from engaging in a principal transaction directly related to
the same municipal securities transaction or municipal financial
product as to which the municipal advisor is providing or has provided
advice. The ban on principal transactions would apply only with respect
to clients that are municipal entities. The ban would not apply to
principal transactions between a municipal advisor (or an affiliate of
the municipal advisor) and the municipal advisor's obligated person
clients. Although such transactions would not be prohibited, the MSRB
notes that all municipal advisors, including those engaging in
municipal advisory activities for obligated person clients, are
currently subject to the MSRB's fundamental fair-practice rule, Rule G-
17.
    Paragraph .07 of the Supplementary Material would provide an
exception to the ban on principal transactions in subsection (e)(ii) in
order to avoid a possible conflict with existing MSRB Rule G-23, on
activities of financial advisors. Specifically, the ban in subsection
(e)(ii) would not apply to an acquisition as principal, either alone or
as a participant in a syndicate or other similar account formed for the
purpose of purchasing, directly or indirectly, from an issuer all or
any portion of an issuance of municipal securities on the basis that
the municipal advisor provided advice as to the issuance, because such
a transaction is the type of transaction that is addressed, and, in
certain circumstances, prohibited by Rule G-23.
    For purposes of the prohibition in proposed subsection (e)(ii),
subsection (f)(i) would define the term ``engaging in a principal
transaction'' to mean ``when acting as a principal for one's own
account, selling to or purchasing from the municipal entity client any
security or entering into any derivative, guaranteed investment
contract, or other similar financial product with the municipal entity
client.'' Further, paragraph .11 of the Supplementary Material would
clarify that the term ``other similar financial products,'' as used in
subsection (f)(i), would include a bank loan but only if it is in an
aggregate principal amount of $1,000,000 or more and is economically
equivalent to the purchase of one or more municipal securities.

Definitions

    Section (f) of Proposed Rule G-42 would provide definitions of the
terms ``engaging in a principal transaction,'' ``affiliate of the
municipal advisor,'' \12\

``municipal advisory relationship,'' \13\ and ``official statement.''
\14\ Further, for several terms in Proposed Rule G-42 that have been
previously defined by federal statute or SEC rules, proposed section
(f) would, for purposes of Proposed Rule G-42, adopt the same meanings.
These terms would include ``advice;'' \15\ ``municipal advisor;'' \16\
``municipal advisory activities;'' \17\ ``municipal entity;'' \18\ and
``obligated person.'' \19\
---------------------------------------------------------------------------

    \12\ ``Affiliate of the municipal advisor'' would mean ``any
person directly or indirectly controlling, controlled by, or under
common control with such municipal advisor.'' See Proposed Rule G-
42(f)(iii).
    \13\ Proposed Rule G-42(f)(vi) provides that a ``municipal
advisory relationship'' would be deemed to exist when a municipal
advisor enters into an agreement to engage in municipal advisory
activities for a municipal entity or obligated person. The municipal
advisory relationship shall be deemed to have ended on the date
which is the earlier of (i) the date on which the municipal advisory
relationship has terminated pursuant to the terms of the
documentation of the municipal advisory relationship required in
section (c) of this rule or (ii) the date on which the municipal
advisor withdraws from the municipal advisory relationship.
    \14\ ``Official statement'' would have the same meaning as in
MSRB Rule G-32(d)(vii). See Proposed Rule G-42(f)(ix).
    \15\ ``Advice'' would have the same meaning as in Section
15B(e)(4)(A)(i) of the Exchange Act (15 U.S.C. 78o-4(e)(4)(A)(i));
SEC Rule 15Ba1-1(d)(1)(ii) (17 CFR 240.15Ba1-1(d)(1)(ii)); and other
rules and regulations thereunder. See Proposed Rule G-42(f)(ii).
    \16\ ``Municipal advisor'' would have the same meaning as in
Section 15B(e)(4) of the Act, 17 CFR 240.15Ba1-1(d)(1)-(4) and other
rules and regulations thereunder; provided that it shall exclude a
person that is otherwise a municipal advisor solely based on
activities within the meaning of Section 15B(e)(4)(A)(ii) of the Act
and rules and regulations thereunder or any solicitation of a
municipal entity or obligated person within the meaning of Section
15B(e)(9) of the Act and rules and regulations thereunder.
    See Proposed Rule G-42(f)(iv).
    \17\ ``Municipal advisory activities'' would mean those
activities that would cause a person to be a municipal advisor as
defined in subsection (f)(iv) (definition of ``municipal advisor'')
of Proposed Rule G-42. See Proposed Rule G-42(f)(v).
    \18\ ``Municipal entity'' would ``have the same meaning as in
Section 15B(e)(8) of the Act, 17 CFR 240.15Ba1-1(g) and other rules
and regulations thereunder.'' See Proposed Rule G-42(f)(vii).
    \19\ ``Obligated person'' would ``have the same meaning as in
Section 15B(e)(10) of the Act, 17 CFR 240.15Ba1-1(k) and other rules
and regulations thereunder.'' See Proposed Rule G-42(f)(viii).
---------------------------------------------------------------------------

Applicability of Proposed Rule G-42 to 529 College Savings Plans and
Other Municipal Fund Securities

    Paragraph .12 of the Supplementary Material emphasizes the proposed
rule's application to municipal advisors whose municipal advisory
clients are sponsors or trustees of municipal fund securities.\20\
---------------------------------------------------------------------------

    \20\ ``Municipal fund security'' is defined in MSRB Rule D-12 to
mean ``a municipal security issued by an issuer that, but for the
application of Section 2(b) of the Investment Company Act of 1940,
would constitute an investment company within the meaning of Section
3 of the Investment Company Act of 1940.'' The term refers to, among
other things, interests in governmentally sponsored 529 college
savings plans and local government investment pools.
---------------------------------------------------------------------------

Proposed Amendments to Rule G-8

    The proposed amendments to Rule G-8 would require each municipal
advisor to make and keep any document created by the municipal advisor
that was material to its review of a recommendation by another party or
that memorializes its basis for any conclusions as to suitability.

III. Summary of Comments Received

    As noted above, the Commission received fifteen comment letters on
the proposed rule change.\21\
---------------------------------------------------------------------------

    \21\ See supra note 4.
---------------------------------------------------------------------------

A. Standards of Conduct

    One commenter stated that the addition of ``without limitation'' in
Proposed Rule G-42(a)(ii) raises significant and unnecessary
ambiguities, as a fiduciary duty is generally understood to encompass a
duty of care and duty of loyalty.\22\ The commenter also stated that
the language ``includes, but is not limited to'' in paragraph .02 of
the Supplementary Material was vague, and suggested that the MSRB
specify what other duties are included.\23\
---------------------------------------------------------------------------

    \22\ See SIFMA Letter.
    \23\ Id.
---------------------------------------------------------------------------

B. Disclosure of Conflicts of Interest

    Three commenters expressed concerns regarding the differing timing
of documentation required by sections (b) and (c) of Proposed Rule G-
42.\24\ Each of the commenters recommended that the timing requirement
in section (b), on disclosure of conflicts of interest and other
information, be changed to match that in section (c), on documentation
of the municipal advisory relationship.\25\ Two of the commenters
believe that disclosures of conflicts of interest only matter when
municipal advisors enter into municipal advisory relationships.\26\ One
of the commenters stated that the differing timing requirements would
lead to ``confusing guidance and duplicative disclosures'' to
clients.\27\
---------------------------------------------------------------------------

    \24\ See BDA Letter, GKB Letter and NAMA Letter.
    \25\ Id.
    \26\ See BDA Letter and GKB Letter.
    \27\ See NAMA Letter.
---------------------------------------------------------------------------

    One commenter suggested merging the two ``catch-all provisions'' in
subsections (b)(i)(A) and (b)(i)(G) because it is not clear what the
difference is between the two paragraphs.\28\
---------------------------------------------------------------------------

    \28\ Id.
---------------------------------------------------------------------------

    One commenter stated that contingent fees that are based on the
completion of a transaction, but not on the size of a transaction, are
not a conflict of interest.\29\ That commenter argued that contingent
fee arrangements benefit municipal entities by insuring their
government funds will not be drawn upon for payment of fees if the
transaction is not completed.\30\ Accordingly, the commenter requested
that the proposed rule change not require a ``conflict of interest''
disclosure for contingent fees that do not inherently create conflicts
of interest.\31\
---------------------------------------------------------------------------

    \29\ See WM Financial Letter.
    \30\ Id.
    \31\ Id.
---------------------------------------------------------------------------

C. Documentation of Municipal Advisory Relationship--Section (c)

    Two commenters expressed concerns with disclosing information
regarding legal or disciplinary events through reference to the
municipal advisor's most recent Form MA and Form MA-I.\32\ Both
commenters stated it was difficult or burdensome for clients to find
the relevant Form MA and Form MA-I documents in the SEC's EDGAR
system.\33\ One of the commenters requested the proposed rule be
amended to require municipal advisors to provide copies of Form MA-Is
directly to their clients as part of the documentation of the
relationship, rather than providing the location of the forms.\34\ This
commenter also suggested that municipal advisors be required to notify
clients of changes to Form MA that are material and to provide clients
with the updated Form MA with an explanation of how any changes made to
the form materially pertain to the nature of the relationship between
the municipal advisor and the client.\35\
---------------------------------------------------------------------------

    \32\ See GFOA II Letter and NAMA Letter.
    \33\ Id.
    \34\ See GFOA II Letter.
    \35\ Id.
---------------------------------------------------------------------------

    One commenter requested the MSRB provide more clarity about the
term ``detailed information'' in the requirement in subsection (c)(iii)
that the municipal advisor provide ``detailed information specifying
where the client may electronically access the municipal advisor's most
recent Form MA and each most recent Form MA-I filed with the
Commission.'' \36\ The commenter suggested the MSRB provide non-
exclusive examples; for example, allowing municipal advisors to provide
clients with a link to the municipal advisor's EDGAR page.\37\
---------------------------------------------------------------------------

    \36\ See NAMA Letter.
    \37\ Id.

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

D. Recommendations and Review of Recommendations of Other Parties

    One commenter supported section (d)'s requirements to inform
clients about reasons for a recommendation, however, it stated that
greater clarity through a non-exclusive list of examples of how
regulated entities could comply with the regulation was needed.\38\
Specifically, the commenter suggested the MSRB provide examples of how
a municipal advisor should perform its reasonable diligence to satisfy
the criteria listed in section (d).\39\ This commenter also requested
guidance on section (d)(iii), regarding informing a client whether the
municipal advisor investigated or considered reasonably feasible
alternatives because the commenter was concerned that a municipal
advisor would be required to provide a list that was exhaustive and
non-germane to the client.\40\
---------------------------------------------------------------------------

    \38\ Id.
    \39\ Id.
    \40\ Id.
---------------------------------------------------------------------------

    Another commenter requested the MSRB provide a more concise
definition of the term ``suitable'' to enable municipal advisors to
comply with the requirements and stated that the ``perfunctory list of
generic factors'' for consideration in paragraph .08 of the
Supplementary Material failed to provide municipal advisors with a
clear definition of such an important term.\41\
---------------------------------------------------------------------------

    \41\ See PFM Letter.
---------------------------------------------------------------------------

    One commenter expressed concern that the language in subsection
(d)(ii) implies that municipal advisors would be permitted to make a
recommendation to a client that is unsuitable, which seemed contrary to
the proposed rule's duty of care and loyalty requirements.\42\
---------------------------------------------------------------------------

    \42\ See GFOA Letter.
---------------------------------------------------------------------------

    Two commenters expressed concern that documentation requirements
for recommendations are too burdensome.\43\ One of the commenters
estimated that municipal advisors may spend between 20% and 30% of
their time writing letters to document compliance, providing a laundry
list of consequences that would dilute the advice given, ``similar to
the way G-17 letters from underwriters have become boiler plate
disclosures and have lost significance.'' \44\ The other commenter
suggested that the proposed rule should specifically state that such
communication to clients under section (d) may be oral and is not
required to be in writing.\45\ The commenter was concerned that
informing a client of risks, benefits or other aspects of a transaction
in writing may not be in the client's best interest because that
writing could be obtainable through Freedom of Information Act requests
and other means.\46\
---------------------------------------------------------------------------

    \43\ See BDA Letter and First Southwest Letter.
    \44\ See First Southwest Letter.
    \45\ See BDA Letter.
    \46\ Id.
---------------------------------------------------------------------------

    Four commenters expressed concern regarding the duty of care
standard, as expressed in paragraph .01 of the Supplementary Material,
which requires municipal advisors to undertake ``a reasonable
investigation'' to avoid basing recommendations on ``materially
inaccurate or incomplete information.'' \47\ All four commenters argued
that a municipal advisor should be permitted to assume that information
beyond what is publicly available and is provided by the client is
complete and accurate.\48\ Two commenters argued that this requirement
was inconsistent with current regulatory regimes as other financial
professionals are not required to investigate information provided by
clients.\49\ One of the commenters expressed concern that this
requirement would make a municipal advisor potentially liable to its
client for that client's own misrepresentations.\50\ One of the
commenters argued that in the context of 529 college savings plans, it
is not uncommon for the municipal advisor that is acting as a plan
sponsor to rely on its state partner to provide the advisor with the
information necessary for the advisor to fulfill its obligations and
duties to the plan.\51\ In such circumstances, the commenter argued,
municipal advisors should be able to presume the states'
representatives are providing materially accurate and complete
information.\52\ One commenter supported the duty of care provisions
generally but expressed concern that requiring a municipal advisor to
investigate this information ``may be excessive'' and could lead to
cost increases that could be passed on to the client.\53\ Finally, one
commenter requested the MSRB provide clarity by providing ``non-
exclusive explanatory examples of what constitutes a `reasonable
inquiry as to the facts that are relevant to a client's determination
as to whether to proceed with a course of action.' '' \54\
---------------------------------------------------------------------------

    \47\ See ICI Letter, GFOA Letter, SIFMA Letter and WM Financial
Letter.
    \48\ Id.
    \49\ See ICI Letter and SIFMA Letter.
    \50\ See SIFMA Letter.
    \51\ See ICI Letter.
    \52\ Id.
    \53\ See GFOA Letter.
    \54\ See NAMA Letter.
---------------------------------------------------------------------------

E. Prohibition on Delivering Inaccurate Invoices

    One commenter expressed support for the prohibition on delivering
inaccurate invoices, but requested the addition of materiality and
knowledge qualifiers (i.e., a municipal advisor may not intentionally
deliver a materially inaccurate invoice), so that immaterial or
unintentional errors would not be prohibited.\55\
---------------------------------------------------------------------------

    \55\ See SIFMA Letter.
---------------------------------------------------------------------------

F. Prohibited Principal Transactions

    Ten commenters expressed a variety of concerns (as summarized
below) with the prohibition of certain principal transactions in
Proposed Rule G-42(e)(ii).\56\
---------------------------------------------------------------------------

    \56\ See SIFMA Letter, Zions Letter, ABA Letter, BDA Letter, GKB
Letter, Millar Letter, FSI Letter, GFOA II Letter, Wells Fargo
Letter and NAMA Letter.
---------------------------------------------------------------------------

1. Comparison with Similar Regulatory Regimes
    Two commenters expressed concerns that the prohibition on principal
transactions is overbroad and inconsistent with existing regulatory
regimes regarding financial professionals.\57\ One commenter argued
that investment advisers owe a fiduciary duty but are not subject to a
complete prohibition on principal transactions.\58\ Instead, the
commenter noted that investment advisers and their affiliates are
permitted to engage in such transactions provided they make relevant
disclosures and obtain client consent.\59\ Another commenter similarly
argued that restrictions on principal transactions for municipal
advisors and their affiliates should be consistent with those on
investment advisers, and that clients should be permitted to waive
related conflicts of interest.\60\ The commenter also argued that
principal transactions can lead to more favorable financing terms for
clients and cited Commission guidance.\61\
---------------------------------------------------------------------------

    \57\ See SIFMA Letter and Zions Letter.
    \58\ See SIFMA Letter.
    \59\ Id.
    \60\ See Zions Letter.
    \61\ See id. (citing Interpretation of Section 206(3) of the
Investment Advisers Act of 1940, SEC Release No. IA-1732 (July 20,
1998)).
---------------------------------------------------------------------------

2. Advice Incidental to Securities Execution Services
    Three commenters argued for an exemption to the principal
transaction prohibition when advice is provided to a municipal entity
client that is incidental to or ancillary to a broker-dealer's
execution of securities transactions, including transactions involving
municipal bond proceeds or

municipal escrow funds.\62\ One of the commenters proposed excluding
from the proposed prohibition sales of fixed income securities by a
broker-dealer providing incidental advice, including on bond proceeds,
to the transaction, until the Commission and the Department of Labor
conclude their consideration of a uniform fiduciary standard for
broker-dealers and investment advisors and then harmonize the MSRB's
regulatory approach to the execution of fixed income transactions when
a fiduciary duty is owed to the client.\63\
---------------------------------------------------------------------------

    \62\ See FSI Letter, GFOA II Letter and SIFMA Letter.
    \63\ See SIFMA Letter.
---------------------------------------------------------------------------

    Another commenter suggested the MSRB modify the ban on principal
transactions in the case of brokerage of bond proceed investments.\64\
The commenter expressed concern that the proposed prohibition could
force small governments to establish ``a more expensive fee-based
arrangement with an investment adviser in order to receive this very
limited type of advice on investments that are not risky.'' \65\
---------------------------------------------------------------------------

    \64\ See GFOA II Letter; see also SIFMA Letter.
    \65\ See GFOA II Letter.
---------------------------------------------------------------------------

    One of the commenters suggested the exception could include certain
disclosure and client consent provisions similar to Investment Advisers
Act Temporary Rule 206(3)-3T that permits investment advisers that are
also broker-dealers to act in a principal capacity in transactions with
certain advisory clients.\66\ The commenter also suggested the proposed
exception be limited to certain fixed-income securities as defined by
Rule 10b-10(d)(4).\67\
---------------------------------------------------------------------------

    \66\ See FSI Letter.
    \67\ Id.
---------------------------------------------------------------------------

3. Scope: ``Directly Related To''
    Three commenters expressed concern that the language in section
(e)(ii) limiting the principal transaction prohibition to transactions
``directly related to the same municipal securities transaction or
municipal financial product'' is vague or overly broad.\68\ One of the
commenters proposed alternative language prohibiting a principal
transaction ``if the structure, timing or terms of such principal
transaction was established on the advice of the municipal advisor. . .
.'' \69\ The commenter also requested clarification regarding the
application of the principal transaction ban to several specific
scenarios.\70\
---------------------------------------------------------------------------

    \68\ See BDA Letter, GKB Letter and SIFMA Letter.
    \69\ See BDA Letter; see also GKB Letter.
    \70\ See BDA Letter.
---------------------------------------------------------------------------

    One commenter argued that any prohibition should be more narrowly
tailored to prevent principal transactions directly related to the
advice provided by the municipal advisor.\71\ The commenter believed
that, as written, the prohibition would prevent a firm from acting as
counterparty on a swap after having advised a municipal entity client
on investing proceeds from a connected issuance of municipal
securities.\72\ The commenter proposed alternative language prohibiting
principal transactions ``directly related to the advice rendered by
such municipal advisor.'' \73\ This commenter also requested
clarification regarding when a ban would end because as written, the
prohibition would require firms to check for advisory relationships
that may have ended long before the proposed principal transaction
takes place.\74\
---------------------------------------------------------------------------

    \71\ See SIFMA Letter.
    \72\ Id.
    \73\ Id.
    \74\ Id.
---------------------------------------------------------------------------

4. Exception for Affiliates or ``Remote Businesses''
    Two commenters addressed concerns regarding the impact of the
principal transaction prohibition on affiliates of municipal
advisors.\75\ One commenter stated that the MSRB should exempt
municipal advisor affiliates operating with information barriers, and
stated that if an affiliate has no actual knowledge of the municipal
advisory relationship between the municipal entity client and the
municipal advisor due to information barriers and governance
structures, the risk of a conflict of interest is significantly
diminished.\76\ Another commenter proposed the addition of a knowledge
standard (i.e., to prohibit a municipal advisor and any affiliate from
knowingly engaging in a prohibited principal transaction), arguing that
such a knowledge standard is consistent with Section 206(3) of the
Investment Advisers Act.\77\
---------------------------------------------------------------------------

    \75\ See SIFMA Letter and Wells Fargo Letter.
    \76\ See Wells Fargo Letter.
    \77\ See SIFMA Letter.
---------------------------------------------------------------------------

    One commenter suggested that an investment vehicle such as a mutual
fund that is advised by a municipal advisor or its affiliate should not
itself be an ``affiliate'' of the municipal advisor solely on the basis
of the advisory relationship.\78\ Otherwise, the commenter argued the
investment fund may be unable to invest in a municipal security if an
affiliate of the fund's advisor acted as a municipal advisor on the
transaction.\79\ The commenter stated that the ban in this type of
situation is unnecessary because mutual funds and similar vehicles have
independent boards and their affiliates do not have significant equity
stakes in the funds they advise.\80\
---------------------------------------------------------------------------

    \78\ See SIFMA Letter.
    \79\ Id.
    \80\ Id.
---------------------------------------------------------------------------

5. Bank Loans
    Several commenters expressed concerns with proposed paragraph .11
of the Supplementary Material under which a bank loan would be subject
to the prohibition on principal transactions if the loan was ``in an
aggregate principal amount of $1,000,000 or more and economically
equivalent to the purchase of one or more municipal securities.'' \81\
---------------------------------------------------------------------------

    \81\ See ABA Letter, Millar Jiles Letter, BDA Letter, Zions
Letter.
---------------------------------------------------------------------------

    One of the commenters expressed general concern that banking
organizations that are required to operate through a variety of
affiliates and subsidiaries would fall within the scope of the ``common
control'' definition in the statute and the prohibition would prevent a
banking organization from providing ordinary bank services to a
municipal entity.\82\ The commenter also requested the prohibition be
amended to exclude bank loans made by an affiliate from the definition
of ``other similar financial products'' if the bank enters into the
loan after the municipal entity solicits bidders for such loan using a
request for proposal and the bank intends to hold the loan on its books
until maturity.\83\ The commenter believed that there should be few
concerns regarding conflicts if a loan is entered into by an affiliate
of a municipal advisor and a municipal entity would be free to choose
its lender based on factors most appropriate for the municipality and
its taxpayers.\84\ In addition, the commenter stated that the potential
conflicts of interest should be substantially mitigated if a bank holds
a loan on its books to maturity because in such cases, the commenter
believes the interest of the municipal entity and the bank are aligned
in that each party wants funding that serves the particular needs of
the municipal entity and both parties must be satisfied that the loan
can be repaid and desire that it be repaid.\85\
---------------------------------------------------------------------------

    \82\ See ABA Letter.
    \83\ Id.
    \84\ Id.
    \85\ Id.; see also Zions Letter.
---------------------------------------------------------------------------

    Similarly, another commenter suggested that a municipal advisor
should be able to satisfy its fiduciary obligation to a municipal
entity by procuring bids for the proposed financing (and thus make a
principal

bank loan through an affiliated entity permissible), stating that if
the affiliate of the municipal advisor were the lowest bidder, the
municipality would be penalized by being forced to borrow at a higher
rate under the proposed rule change.\86\
---------------------------------------------------------------------------

    \86\ See Millar Jiles Letter.
---------------------------------------------------------------------------

    One commenter argued that bank loans ``should be excluded in their
entirety from Proposed Rule G-42.'' \87\ The commenter believed that it
would be paradoxical to allow individuals and private businesses to
borrow money from banks that are fiduciaries, but to prevent municipal
entities from doing the same.\88\ Alternatively, the commenter
requested that MSRB increase the threshold loan amount in paragraph .11
of the Supplementary Material to align with the bank qualified
exemption amount in the Internal Revenue Code, which it states is
currently $10,000,000.\89\
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    \87\ See Zions Letter.
    \88\ Id.
    \89\ Id.
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    One commenter commented on the language of paragraph .11 of the
Supplementary Material, arguing that the phrase ``economically
equivalent'' is ``too ambiguous and does not provide clarity.'' \90\
The commenter acknowledged this phrase appeared intended to develop a
standard that does not require the determination of when a bank loan
constitutes a security, and acknowledged difficulties applying the
Reves \91\ test to make such a determination.\92\ However, the
commenter argued that this language will ``compound the confusion'' and
requested that the MSRB be clear about which structural components of a
direct purchase structure would cause it to fall within the scope of
the transaction ban.\93\
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    \90\ See BDA Letter.
    \91\ Reves v. Ernst & Young, 494 U.S. 56 (1990).
    \92\ See BDA Letter.
    \93\ Id.
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    Another commenter expressed confusion regarding the ``economically
equivalent'' language.\94\ The commenter requested clarity regarding
the time period over which bank loans should be aggregated in order to
determine whether a series of loans meets the ``aggregate principal
amount'' threshold specified in paragraph .11 of the Supplementary
Material.\95\ The commenter also noted that the typical bank loan to a
municipal entity is for the purchase of equipment and is payable over a
term of less than five years, while the typical municipal security is
secured by a pledge of revenues and is payable over a much longer
term.\96\ The commenter asked whether a bank loan of $1,500,000 which
is secured by real or personal property and which is payable over a
term of five years or less would be ``economically equivalent to the
purchase of one or more municipal securities.'' \97\
---------------------------------------------------------------------------

    \94\ See Millar Jiles Letter.
    \95\ Id.
    \96\ Id.
    \97\ Id.
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6. Exception if Represented by Separate Registered Municipal Advisor
    One commenter suggested the proposed subsection (e)(ii) be revised
to permit an otherwise prohibited principal transaction where the
municipal entity is represented by more than one municipal advisor,
including a separate registered municipal advisor with respect to the
principal transaction.\98\ The commenter argued this exemption would be
comparable to the independent registered municipal advisor exemption,
and would permit municipal entities to contract with a counterparty of
their choice.\99\ The commenter also noted this would be especially
beneficial to municipal entities who may hire several municipal
advisors for different elements of the same transaction.\100\
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    \98\ See SIFMA Letter.
    \99\ Id.
    \100\ Id.
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7. Relationship Between MSRB Rule G-23 and the Prohibition on Principal
Transactions
    Two commenters stated that the reference to MSRB Rule G-23 in
paragraph .07 of the Supplementary Material was unnecessary or enhances
the possible conflict between Proposed Rule G-42 and Rule G-23.\101\
One of the commenters interpreted the prohibition in Rule G-23 as
subsumed by the more stringent provisions of Proposed Rule G-42.\102\
The other commenter believed the additional activities or principal
transactions that should be prohibited under Proposed Rule G-42 (namely
advice with respect to municipal derivatives or the investment of
proceeds) don't conflict with Rule G-23, but merely supplement the
prohibitions in Rule G-23 by extending the list of prohibitions found
in Rule G-23.\103\
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    \101\ See BDA Letter and NAMA Letter.
    \102\ See BDA Letter.
    \103\ See NAMA Letter.
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G. Inadvertent Advice--Supplementary Material .06

    One commenter suggested that the safe harbor in paragraph .06 of
the Supplementary Material for inadvertent advice be expanded to
include the prohibition on principal transactions.\104\ That commenter
argued that firms would be unlikely to rely on the safe harbor unless
it also provided an exemption for inadvertent advice triggering the
prohibition on principal transactions.\105\
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    \104\ See SIFMA Letter.
    \105\ Id.
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    One commenter argued that the inadvertent advice provision in
paragraph .06 of the Supplementary Material creates a loophole that
would allow broker dealers to serve as financial advisors (without a
fiduciary duty) and then switch to serving as an underwriter by
claiming that such advice was inadvertent.\106\
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    \106\ See WM Financial Letter.
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H. Sophisticated Municipal Issuers

    One commenter requested an exemption to the suitability standard in
proposed section (d) and paragraph .08 of the Supplementary Material
for ``sophisticated municipal issuers.'' \107\ This commenter stated
that certain issuers are capable of independently evaluating risks in
issuing municipal securities, and exercising independent judgment in
evaluating recommendations of a municipal advisor.\108\
---------------------------------------------------------------------------

    \107\ See First Southwest Letter.
    \108\ Id.
---------------------------------------------------------------------------

I. Request for Prospective Application of Proposed Rule G-42
Requirements

    Two commenters requested the proposed rule change only apply
prospectively to municipal advisory relationships entered into, or
recommendations of municipal securities transactions or municipal
financial products to an existing municipal entity or obligated person
client made, after the effective date of the proposed rule change.\109\
One of the commenters noted this was relevant with respect to 529 plans
``due to the nature of the advisor's relationship with the plan and
duration of existing 529 plan contracts.'' \110\ The other commenter
argued that reviewing and likely supplementing the documentation for
all existing municipal advisory relationships will be overly burdensome
for both municipal advisors and their clients.\111\
---------------------------------------------------------------------------

    \109\ See ICI Letter and SIFMA Letter.
    \110\ See ICI Letter.
    \111\ See SIFMA Letter.
---------------------------------------------------------------------------

J. Use of Supplementary Material in Proposed Rule G-42

    One commenter suggested that all supplementary material be removed
and moved to separate written interpretative guidance to afford the
subjects more

``fittingly robust regulatory guidance.'' \112\ The commenter was
concerned that the supplementary material which does not allow for
``more succinct definitional direction'' would lead to inconsistent
application by registrants and ``the potential for unintended
consequences as a matter of the statute itself.'' \113\
---------------------------------------------------------------------------

    \112\ See PFM Letter.
    \113\ Id.
---------------------------------------------------------------------------

K. Other Comments

    One commenter expressed concerns with the lack of a pay-to-play
rule for non-dealer municipal advisors, arguing that non-dealer
municipal advisors should be subject to a rule based on the framework
of MSRB Rule G-37 limiting municipal advisors to a limit of $250 per
election to a candidate for whom the contributor is eligible to
vote.\114\
---------------------------------------------------------------------------

    \114\ See First Southwest Letter.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove SR-MSRB-
2015-03 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \115\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposal, as discussed below. As noted above,
institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, the Commission seeks and encourages interested persons to
comment on the proposed rule change.
---------------------------------------------------------------------------

    \115\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\116\ the Commission is
providing notice of the grounds for disapproval under consideration. In
particular, Section 15B(b)(2) of the Act \117\ requires that the MSRB
propose and adopt rules to effect the purposes of the Act with respect
to transactions in municipal securities effected by brokers, dealers,
and municipal securities dealers and advice provided to or on behalf of
municipal entities or obligated persons by brokers, dealers, municipal
securities dealers, and municipal advisors with respect to municipal
financial products, the issuance of municipal securities, and
solicitations of municipal entities or obligated persons undertaken by
brokers, dealers, municipal securities dealers, and municipal advisors.
In addition, Section 15B(b)(2)(C) of the Act \118\ requires, among
other things, that the MSRB's rules 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 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, municipal
entities, obligated persons, and the public interest. In addition,
Section 15B(b)(2)(L)(i) of the Act \119\ requires, with respect to
municipal advisors, the MSRB to adopt rules to prescribe means
reasonably designed to prevent acts, practices, and courses of business
as are not consistent with a municipal advisor's fiduciary duty to its
clients.
---------------------------------------------------------------------------

    \116\ Id.
    \117\ 15 U.S.C. 78o-4(b)(2).
    \118\ 15 U.S.C. 78o-4(b)(2)(C).
    \119\ 15 U.S.C. 78o-4(b)(2)(L)(i).
---------------------------------------------------------------------------

    The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Sections
15B(b)(2),\120\ 15B(b)(2)(C),\121\ and 15B(b)(2)(L)(i) \122\ of the
Act.
---------------------------------------------------------------------------

    \120\ 15 U.S.C. 78o-4(b)(2).
    \121\ 15 U.S.C. 78o-4(b)(2)(C).
    \122\ 15 U.S.C. 78o-4(b)(2)(L)(i).
---------------------------------------------------------------------------

V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
concerns identified above, as well as any others they may have with the
proposed rule change. In particular, the Commission invites the written
views of interested persons concerning whether the proposed rule change
is inconsistent with Section 15B(b)(2)(C) or any other provision of the
Act, or the rules and regulation thereunder. Although there do not
appear to be any issues relevant to approval or disapproval which would
be facilitated by an oral presentation of views, data, and arguments,
the Commission will consider, pursuant to Rule 19b-4, any request for
an opportunity to make an oral presentation.\123\
---------------------------------------------------------------------------

    \123\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposed rule change should be approved
or disapproved by September 11, 2015. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
September 28, 2015.
    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_ADDRESS>Please include
File Number SR-MSRB- 2015-03 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-2015-03. 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; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
MSRB-2015-03 and should be submitted on or before September 11, 2015.
Rebuttal comments should be submitted by September 28, 2015.

    For the Commission, pursuant to delegated authority.\124\
---------------------------------------------------------------------------

    \124\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-19758 Filed 8-11-15; 8:45 am]
 BILLING CODE 8011-01-P


From: "Dolby, Abigail"<EMAIL_ADDRESS>Sent: Tue, 27 Sep 2022 13:57:26  To: Coke ICR2<EMAIL_ADDRESS>Cc: Jones, DonnaLee<EMAIL_ADDRESS>Subject: RE: ABC COKE- Coke Ovens Section 114 Request Enclosure 1

See attached for part A attachments part 3.   Abby Dolby Environmental Coordinator

T:<PHONE_NUMBER>  C:<PHONE_NUMBER>   <<A-Part 3.zip>>

  From: Dolby, Abigail  Sent: Tuesday, September 27, 2022 12:51 PM To: 'Coke ICR2'<EMAIL_ADDRESS>Cc: Jones, DonnaLee<EMAIL_ADDRESS>Subject: RE: ABC COKE- Coke Ovens Section 114 Request Enclosure 1

See attached for pat A attachments part 2.   Abby Dolby Environmental Coordinator

T:<PHONE_NUMBER>  C:<PHONE_NUMBER>

  From: Coke ICR2<EMAIL_ADDRESS>Sent: Tuesday, September 27, 2022 12:46 PM To: Dolby, Abigail<EMAIL_ADDRESS>Coke ICR2<EMAIL_ADDRESS>Cc: Jones, DonnaLee<EMAIL_ADDRESS>Subject: RE: ABC COKE- Coke Ovens Section 114 Request Enclosure 1   Thank you for your two submissions:  A- Part 1.zip E-Flares-community issues-pra.zip   From: Dolby, Abigail<EMAIL_ADDRESS>Sent: Tuesday, September 27, 2022 1:39 PM To: Coke ICR2<EMAIL_ADDRESS>Cc: Jones, DonnaLee<EMAIL_ADDRESS>Subject: RE: ABC COKE- Coke Ovens Section 114 Request Enclosure 1

  See attached for part A attachments part 1.   Abby Dolby Environmental Coordinator

T:<PHONE_NUMBER>  C:<PHONE_NUMBER>     From: Dolby, Abigail  Sent: Tuesday, September 27, 2022 12:36 PM To: 'Coke ICR2'<EMAIL_ADDRESS>Cc: Jones, DonnaLee<EMAIL_ADDRESS>Subject: RE: ABC COKE- Coke Ovens Section 114 Request Enclosure 1     See attached for part E attachments.   Abby Dolby Environmental Coordinator

T:<PHONE_NUMBER>  C:<PHONE_NUMBER>

  From: Coke ICR2<EMAIL_ADDRESS>Sent: Tuesday, September 27, 2022 12:22 PM To: Dolby, Abigail<EMAIL_ADDRESS>Coke ICR2<EMAIL_ADDRESS>Cc: Jones, DonnaLee<EMAIL_ADDRESS>Subject: RE: ABC COKE- Coke Ovens Section 114 Request Enclosure 1

Hello,   This is an acknowledgement of your submission of 3 zip files to<EMAIL_ADDRESS>   Attachment:  Copy of ANSWER-Coke-Enc1-Questionnaire ICR-20162022-DrummondCompany.zip C- 303.zip D- Opacity Data.zip   Thank you     From: Dolby, Abigail<EMAIL_ADDRESS>Sent: Tuesday, September 27, 2022 1:07 PM To: Coke ICR2<EMAIL_ADDRESS>Cc: Raymond, Gabrielle<EMAIL_ADDRESS>Subject: ABC COKE- Coke Ovens Section 114 Request Enclosure 1

Good afternoon,

See attached for the excel sheet for Enclosure 1 of the 114 request for ABC Coke. The email allowed me to attach the zip folders for part D and C, but not allowing me to attach part A, B and E as they are too large.  I believe I will need a file transfer link for those parts.   Regards, Abby Dolby Environmental Coordinator

T:<PHONE_NUMBER>  C:<PHONE_NUMBER>