disclosures regarding affiliates be limited to affiliates that control
or are controlled by the municipal advisor or ``at a minimum'' to
sister affiliates providing municipal advisory services in the
U.S.\1067\ This commenter also believed that a municipal advisory firm
should not be required to provide information regarding its individual
associated persons (citing the example of employees) on Form MA unless
those persons ``devote a significant amount of time or resources'' to,
or are ``primarily engaged'' in, municipal advisory activities,
particularly if those persons are already registered with a broker-
dealer, investment adviser, municipal securities dealer, commodity
trading advisor or swap dealer.\1068\
---------------------------------------------------------------------------

    \1063\ See, e.g., Acacia Financial Group Letter; Deloitte
Letter; SIFMA Letter I.
    \1064\ SIFMA Letter I.
    \1065\ Id.
    \1066\ Id.
    \1067\ Id. See also infra notes 1119-1120 (related SIFMA
comments regarding disclosure requirements with respect to the
disciplinary history of affiliates and associated persons).
    \1068\ See SIFMA Letter I.
---------------------------------------------------------------------------

    Another commenter believed that requiring disclosures regarding
associated persons performing ``any activities'' relating to advice
could ``impose significant costs'' and ``create a significant burden.''
\1069\ This commenter stated that the Commission should ``establish a
threshold for reporting and updating associated person information in
Form MA''--a certain minimum of hours spent on municipal advisory
activities over a specified time period. The commenter also suggested
that, when personnel from an entity are subcontracted, the entity
itself should not be required to register.\1070\
---------------------------------------------------------------------------

    \1069\ See Deloitte Letter.
    \1070\ See id.
---------------------------------------------------------------------------

    The Commission notes that, for certain information pertaining to
affiliates, it has determined to limit the required disclosures in Form
MA to information regarding persons that control, or are controlled by,
the municipal advisor (and not persons under common control).\1071\
However, with respect to financial industry and other activities
represented on the list in Item 6, the Commission believes it is
appropriate to extend its information base regarding such activities to
all of a municipal advisor's associated persons (which, by definition,
includes persons under common control with the municipal
advisor).\1072\ For example, the Commission believes that ascertaining
such information may assist the Commission in identifying potential
conflicts of interest.
---------------------------------------------------------------------------

    \1071\ See also the discussion below regarding Item 8, infra
notes 1079-1088 and accompanying text.
    \1072\ See Section 15B(e)(7)(C) of the Exchange Act, which
defines the term ``person associated with a municipal advisor'' or
``associated person of an advisor'' as including ``any person
directly or indirectly controlling, controlled by, or under common
control with such municipal advisor.''
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    The ability to discern connections within a large network of
affiliations and other associations that otherwise would not be evident
is particularly important to the Commission for purposes of
enforcement, to enable regulators to detect possible trails of
influence and to widen their potential sources of factual information
relevant to investigations of wrongdoing. The Commission believes that
establishing such an information base is consistent with the Dodd-Frank
Act's amendments to Section 15B of the Act, which explicitly extend the
Commission's regulatory authority (directly and through its oversight
of the MSRB) to associated persons of municipal advisors.\1073\
---------------------------------------------------------------------------

    \1073\ See, e.g., Section 15B(c)(4) of the Exchange Act
(authority of Commission to censure or place limitations on the
activities or functions of associated persons of municipal
advisors); and Section 15B(b)(2)(A) (authority of MSRB to establish
standards of training, experience, competence, and other
qualifications for associated persons of municipal advisors). See
also Section 15B(a)(2) (application for registration as a municipal
advisor to contain such information and documents concerning
associated persons of municipal advisors as the Commission may
prescribe as necessary or appropriate in the public interest or for
the protection of investors).
---------------------------------------------------------------------------

    The Commission notes that Item 6 and Section 6 of Schedule D ask
for little more than the names (legal and business) of any associated
persons of the municipal advisor that do business in the specified
fields and, if the associated person is registered with a foreign
financial regulatory authority, the registration number. Otherwise,
Section 6 asks only whether the municipal advisor controls or is
controlled by the associated person or whether the two are under common
control. Such control relationships are directly relevant to
investigations of the municipal advisor.
    The Commission believes that, in today's world of organizational
and managerial sophistication and advanced information technology,
including as is pertinent to cross-border affiliations, it should not
be unreasonably difficult for a municipal advisor that finds itself
within a larger family of affiliates, particularly of the size
discussed by commenters, to obtain knowledge of its own place and the
place of others within that family. Given the potential relevance and
importance of such information, as discussed above, to assuring
lawfulness and fairness in the field of municipal advisory services, as
well as in maintaining confidence in the municipal securities markets,
the Commission believes it is appropriate to require municipal advisors
to obtain and provide such information.
    With respect to the suggestions that a municipal advisory firm
should not be required to provide information regarding its individual
associated persons unless those persons devote a certain threshold of
time or resources to municipal advisory activities, the Commission
disagrees. In particular, the kind of activity that disclosure relating
to associated persons is intended to bring to light may involve the
kind of significant influence that often is wielded in very short
timeframes of activity, e.g., a short phone call from a partner in the
firm to a key person in a municipal entity ``urging'' the issuance of a
particular offering, or soliciting the municipal entity's investment.

Item 7: Participation or Interest in Municipal Advisory Client or
Solicitee Transactions \1074\
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    \1074\ The title of Item 7 has been revised in Form MA, as
adopted, to include ``solicitee'' transactions to better reflect the
information sought in this item. The term ``solicitee'' is defined
in the discussion below and is included in the Glossary of Terms for
the Form MA series as adopted.
---------------------------------------------------------------------------

    The Commission proposed Item 7 to require information about an
applicant's participation and interest in the transactions of its
municipal advisory clients. The Commission received no comments
referencing Item 7 that are not discussed elsewhere \1075\ and is
adopting Item 7 as proposed.\1076\
---------------------------------------------------------------------------

    \1075\ As discussed above, the Commission received a general
comment questioning whether useful information could be elicited
from applicants with regard to some required disclosures. See supra
note 984 and accompanying discussion.
    \1076\ The Commission notes that, as published in the Proposal,
several of the questions in this item referred explicitly only to
clients of the municipal advisor. It is clear from the context,
however, that these questions were also intended to apply to persons
that the municipal advisor solicits or intends to solicit in the
context of its municipal advisory activities. Item 7, as adopted,
has been modified to explicitly reference such solicitees in
addition to clients in each of these instances.
---------------------------------------------------------------------------

    As discussed in the Proposal, the purpose of Item 7 is to identify
possible conflicts of interest that the municipal advisor and its
associated persons may have with the municipal advisor's clients and/or
the persons the municipal advisor solicits.\1077\ For example, a
municipal advisor that receives commissions or other payments for sales
of securities to clients may have a conflict of interest with its
clients. This type of practice gives the municipal advisor and its
personnel an incentive to base investment recommendations on the amount
of compensation they will

receive rather than on the client's best interests.
---------------------------------------------------------------------------

    \1077\ See Proposal, 76 FR 844.
---------------------------------------------------------------------------

    Specifically, Item 7 requires an applicant to disclose whether it,
or any of its associated persons, has a proprietary interest in the
securities or other investment or derivative product transactions of
its clients or of persons whom it solicited or intends to solicit
(``solicitees''). These disclosures include whether the applicant buys
securities or other investment or derivative products from, or sells
them to, its clients or solicitees; whether it buys or sells for itself
securities (other than shares of mutual funds) or other investment or
derivative products that it also recommends to such clients or
solicitees; whether it enters into derivative contracts with such
clients or solicitees; or whether it recommends to its clients or
solicitees securities or other investment or derivative products in
which it or any associated person has any proprietary interest (other
than as already disclosed in response to the previous questions).
    An applicant is also asked to disclose whether it or its associated
persons recommend purchases of securities or derivative products to
clients or solicitees for which the municipal advisor or its associated
persons serve as underwriter, general or managing partner, or purchaser
representative; recommend purchases or sales of securities or
derivatives to clients or solicitees in which applicant or its
associated person has any other sales interest (other than the receipt
of sales commissions as a broker or registered representative of a
broker-dealer); have certain discretionary authority over transactions
in securities or other investment or derivative products for its
clients or solicitees; and recommend brokers, dealers, or investment
advisers to its clients or solicitees, and, if so, whether those
brokers, dealers, or investment advisers are associated persons of the
municipal advisor. Item 7 also requires the municipal advisor to
disclose whether it or its associated persons give or receive
compensation for municipal advisory client referrals.\1078\
---------------------------------------------------------------------------

    \1078\ In Item 7, as adopted, the phrase ``in the context of its
municipal activities'' has been deleted in instances where the
intention may not have been clear. For example, Item 7.C, as
proposed, asked: ``Does applicant or any associated person have
discretionary authority to determine the: (1) Securities or other
investment or derivative products to be bought or sold for the
account of a client that it serves or person that it has solicited
or intends to solicit in the context of its municipal advisory
activities.'' The phrase ``in the context of its municipal advisory
activities'' was not intended to limit the question to products
bought or sold in such context, but to limit the kind of
solicitation being referenced. To avoid confusion, it has been
deleted.
---------------------------------------------------------------------------

Item 8: Owners, Officers, and Other Control Persons \1079\
---------------------------------------------------------------------------

    \1079\ The title of this item as proposed was ``Control
Persons.'' It has been changed in Form MA, as adopted, because the
item, among other things, is seeking information about owners to
determine whether such persons are control persons.
---------------------------------------------------------------------------

    The Commission proposed Item 8 of Form MA to require information
about an applicant's control persons. As discussed below, the
Commission received one comment specifically relating to Item 8. The
Commission carefully considered issues raised by the commenter and is
adopting Item 8 substantially as proposed, with minor modifications
discussed below.
    Item 8, as proposed and adopted, asks applicants to identify on
Schedules A and B every person that owns a certain percentage of the
applicant, that directly or indirectly controls the applicant, or that
the applicant directly or indirectly controls.\1080\ An initial
applicant is required to complete Schedules A and B. Schedule C is used
to amend information previously reported on Schedules A and B.
---------------------------------------------------------------------------

    \1080\ The term ``control'' is defined in the Glossary to mean,
for purposes of the municipal advisor registration forms, ``the
power, directly or indirectly, to direct the management or policies
of a person, whether through ownership of securities, by contract,
or otherwise.'' Further, the Glossary provides that: (a) Each of the
municipal advisor's officers, partners, or directors exercising
executive responsibility (or persons having similar status or
functions) is presumed to control the municipal advisor; (b) a
person is presumed to control a corporation if the person: (i)
Directly or indirectly has the right to vote 25 percent or more of a
class of the corporation's voting securities; or (ii) has the power
to sell or direct the sale of 25 percent or more of a class of the
corporation's voting securities; (c) a person is presumed to control
a partnership if the person has the right to receive upon
dissolution, or has contributed, 25 percent or more of the capital
of the partnership; (d) a person is presumed to control a limited
liability company (``LLC'') if the person: (i) directly or
indirectly has the right to vote 25 percent or more of a class of
the interests of the LLC; (ii) has the right to receive upon
dissolution, or has contributed, 25 percent or more of the capital
of the LLC; or (iii) is an elected manager of the LLC; and (e) a
person is presumed to control a trust if the person is a trustee or
managing agent of the trust. See Glossary.
---------------------------------------------------------------------------

    Schedule A requires information about the applicant's executive
officers and, for firms, persons that directly own 5% or more of the
applicant.\1081\ Schedule B requests information about persons that
indirectly own 25% or more of the applicant. A clarifying instruction
has been added to Schedule B, as adopted, explaining that, for these
purposes, an ``indirect owner'' includes any owner of 25% or more of
any direct owner listed in Schedule A and any owner of 25% or more of
each such indirect owner going up the chain of ownership. Applicants
are also asked to identify, on Schedule D, any person that controls the
applicant's management or policies if not otherwise identified as an
owner or officer in Schedule A or B. Further information is requested
with respect to control persons that are public reporting companies
under Sections 12 or 15(d) of the Exchange Act.\1082\
---------------------------------------------------------------------------

    \1081\ As detailed in the form, the 5% criterion varies in its
applicability and does not always mean ownership in the ordinary
sense of the word--depending on whether the applicant is a
corporation, partnership, trust, or limited liability company.
    \1082\ Section 8-B of Schedule D to Form MA requires the name
and CIK number of each control person listed on Schedule A, B, C or
Section 8-A of Schedule D.
---------------------------------------------------------------------------

    For ease of use and clarity, Form MA, as adopted, asks for
information separately on Schedules A-1 and B-1 for owners and control
persons that are business entities and on Schedules A-2 and B-2 for
owners and control persons who are natural persons, as well as (in
Schedule A-2) for executive officers.\1083\ The information sought in
these schedules, however, is the same as in the Proposal, with minor
modifications.\1084\
---------------------------------------------------------------------------

    \1083\ The guidance provided in the form has been
correspondingly revised to reflect this restructuring. Although
these Schedules, as published in print, display the information
requested in table form, the electronic version of Form MA--which is
the only format in which the form can be completed and submitted--
asks the questions in a series of pop-up boxes and instructions. See
also supra note 1001.
    \1084\ In the form, as adopted, in addition to providing
information about other registrations that the control person that
is a firm or organization may have with the Commission, information
about any registration on Form MA-T must also be provided. In
addition, the nature of the control must also be described. If the
control person is a natural person, his or her CIK number, if any,
must be supplied in addition to the other basic information
requested.
---------------------------------------------------------------------------

    For each business entity listed, the applicant is required to
provide its organization CRD Number, if it has one, or its IRS tax
number, EIN, or, if not a domestic entity, any foreign business number.
For each natural person listed, the applicant is required to provide
the person's individual CRD Number, if any, or the person's social
security number or foreign identity number, as well as date of
birth.\1085\
---------------------------------------------------------------------------

    \1085\ As noted above, the form, as adopted, makes clear that
social security numbers, foreign identification numbers, and date of
birth will not be publicly disseminated.
---------------------------------------------------------------------------

    As discussed in the Proposal, the information requested and the
definition of control are consistent with that requested and used by
the Commission in other contexts.\1086\ This

information will help to inform the Commission's understanding of the
ownership structure of the municipal advisor and who ultimately
controls the municipal advisor. Such information in turn will provide
useful information in preparing for examinations and also in
identifying potential conflicts of interest. The information requested
also will inform the Commission about changes in control of the
municipal advisor.
---------------------------------------------------------------------------

    \1086\ The requested information and definition of ``control''
are consistent with the information requested of, and definition
used for, investment advisers required to register on Form ADV. See
17 CFR 279.1. See also Proposal, 76 FR 845, note 195 and
accompanying text.
---------------------------------------------------------------------------

    One commenter, as discussed above with respect to Item 6,\1087\
cited Item 8 and Schedules A, B, C and D as another illustration of the
burden imposed by the reach of Form MA's questions to information about
affiliates. Although Item 8 refers to ``control persons,'' \1088\ the
Commission notes that the disclosure requirements in Item 8 apply only
to ``every person that, directly or indirectly, controls the applicant,
or that the applicant directly or indirectly controls'' and does not
include sister affiliates (although a control relationship in other
contexts is sometimes understood to include two persons under common
control). The very point of registration is that, to be permitted to
register as a municipal advisor, a firm must provide certain basic
information that will enable the Commission to oversee the activities
of, and exercise jurisdictional authority over, those who register. The
Commission notes that Forms BD and ADV require filers to provide
substantially similar information.
---------------------------------------------------------------------------

    \1087\ SIFMA Letter I, supra note 1065.
    \1088\ The definition of ``control'' does not refer to persons
under common control. On the other hand, the definition of
``associated person'' of a municipal advisor does include a person
that is under common control with the municipal advisor.
---------------------------------------------------------------------------

Item 9: Disclosure Information and Related DRPs
    As discussed in the Proposal, Item 9 requires an applicant to
provide certain information concerning any criminal, regulatory, and
civil judicial actions relating to the applicant or any of its
associated persons \1089\ (collectively referred to hereinafter as
``disciplinary history'').\1090\ If an applicant indicates in Item 9
that there has been a history of such actions involving itself or any
of its associated persons, the applicant must report further
information in the DRPs that comprise Part II of Form MA, which are
described below.\1091\ The Commission received several comments
regarding the disclosures required by Item 9 and its related DRPs,
which are discussed below.\1092\ The Commission is adopting Item 9 with
certain changes. Although, as adopted, Item 9 generally seeks the same
information as in the Proposal, some questions have been more narrowly
tailored and broken down into subparts. These changes and the reasons
for them are detailed below.
---------------------------------------------------------------------------

    \1089\ See supra note 1054 (discussing the definition of
``person associated with a municipal advisor'' or ``associated
person of a municipal advisor'').
    \1090\ However, as discussed further below, the disclosures
regarding criminal actions are limited to the period of the past ten
years.
    \1091\ See infra note 1115 and accompanying text.
    \1092\ See infra notes 1119-1121 and accompanying text.
---------------------------------------------------------------------------

    As discussed in the Proposal,\1093\ Section 975(c)(3) of the Dodd-
Frank Act amended Section 15B of the Exchange Act to direct the
Commission, by order, to censure, place limitations on the activities,
functions, or operations of, or suspend for a period not exceeding
twelve months, or revoke the registration of any municipal advisor, if
it finds \1094\ that such municipal advisor has committed or omitted
any act, or is subject to an order or finding, enumerated in
subparagraph (A), (D), (E), (G) or (H) \1095\ of paragraph (4) of
Section 15(b) of the Exchange Act; has been convicted of any offense
specified in Section 15(b)(4)(B) \1096\ of the Exchange Act within ten
years of the commencement of the proceedings under Section 15B(c); or
is enjoined from any action, conduct, or practice specified in Section
15(b)(4)(C) \1097\ of the Exchange Act.\1098\
---------------------------------------------------------------------------

    \1093\ See Proposal, 76 FR 845.
    \1094\ Such findings must be on the record after notice and
opportunity for hearing and include a finding that the particular
disciplinary action is in the public interest. See 15 U.S.C. 78o-
4(c)(2).
    \1095\ See 15 U.S.C. 78o(b)(4)(A), (D), (E), (G) and (H).
    \1096\ See 15 U.S.C. 78o(b)(4)(B).
    \1097\ See 15 U.S.C. 78o(b)(4)(C).
    \1098\ The Commission has the same authority with respect to
municipal securities dealers. See 15 U.S.C. 78o-4(c).
---------------------------------------------------------------------------

    Generally, Item 9 was designed to elicit information from a
municipal advisor concerning certain of its activities or the
activities of its associated persons that could subject the municipal
advisor to disciplinary action by the Commission under these statutory
provisions. The Commission intends to use this information to determine
whether to approve an application for registration, to decide whether
to institute proceedings to revoke registration, or to place
limitations on an applicant's activities as a municipal advisor. In
addition, the information will also identify potential problem areas on
which to focus examinations.\1099\
---------------------------------------------------------------------------

    \1099\ See infra Section III.B. (discussing approval or denial
of registration). See also Proposal, 76 FR 846, note 205 and
accompanying text.
---------------------------------------------------------------------------

    In addition to its value for the Commission's oversight of
municipal advisors, generally, as well as to inform MSRB rulemaking,
the Commission seeks this information because it may indicate that a
municipal advisor is statutorily disqualified from acting as a
municipal advisor.\1100\ Further, this information may be valuable to
municipal entities and obligated persons who engage municipal advisors
and to investors who may purchase securities from offerings in which
municipal advisors have participated, as well as to other regulators.
---------------------------------------------------------------------------

    \1100\ See infra Section III.B. and Proposal, 76 FR 846, note
206 and accompanying text. See also Section 15B(a)(2) of the
Exchange Act, which directs the Commission to deny registration to
an applicant municipal advisor if, among other things, it finds that
if the applicant was registered, its registration would be subject
to suspension or revocation.
---------------------------------------------------------------------------

    The information to be disclosed is substantially similar to the
information required to be disclosed in Form BD \1101\ for broker-
dealers and in Form ADV \1102\ for investment advisers.\1103\ In
addition to information sought on Forms BD and ADV with respect to
investment-related activities Form MA also requests parallel
information with respect to municipal advisory activities.
---------------------------------------------------------------------------

    \1101\ See 17 CFR 249.501.
    \1102\ See 17 CFR 279.1.
    \1103\ See Proposal, 76 FR 846.
---------------------------------------------------------------------------

    The requested information is also generally consistent with the
disclosure requirements of the temporary registration form, Form MA-
T.\1104\ However, as discussed in the Proposal, in Form MA-T, the
Commission limited the disciplinary history disclosure requirements to
``associated municipal advisor professionals.'' \1105\ As

explained in the Proposal, due to the short timeframe between the
passage of the Dodd-Frank Act and the deadline for registration of
municipal advisors on October 1, 2010, the Commission believed it was
appropriate to limit the disclosure requirement to this subgroup of
associated persons, which is limited to persons who are closely
associated with an advisor's municipal advisory activities.\1106\
---------------------------------------------------------------------------

    \1104\ As discussed in the Proposal, in Form MA-T, the
disclosure required with respect to orders entered against the
municipal advisor by regulatory authorities, and whether any court
has enjoined the municipal advisor or associated person in
connection with investment related activities, are limited to the
past 10 years. See Proposal, 76 FR 846, note 209. On Form MA, the
Commission is not including any time limitation on this disclosure,
as discussed further below.
    \1105\ The Commission defined the term ``associated municipal
advisor professional'' in the glossary section of Form MA-T to mean:
(A) any associated person of a municipal advisor primarily engaged
in municipal advisory activities; (B) any associated person of a
municipal advisor who is engaged in the solicitation of municipal
entities or obligated persons; (C) any associated person who is a
supervisor of any persons described in subparagraphs (A) or (B); (D)
any associated person who is a supervisor of any person described in
subparagraph (C) up through and including, the Chief Executive
Officer or similarly situated official designated as responsible for
the day-to-day conduct of the municipal advisor's municipal advisory
activities; and (E) any associated person who is a member of the
executive or management committee of the municipal advisor or a
similarly situated official, if any; and excludes any associated
person whose functions are solely clerical or ministerial. See also
Proposal, 76 FR 846, note 211 and accompanying text.
    \1106\ This includes those persons who are primarily engaged in
an advisor's municipal advisory activities, have supervisory
responsibilities over those primarily engaged in municipal advisory
activities, are engaged in day-to-day management of the conduct of
an advisor's municipal advisory activities, or are responsible for
executive management of the advisor. See Temporary Registration Rule
Release, 67 FR 54469. See also Proposal, 76 FR 846, note 212 and
accompanying text.
---------------------------------------------------------------------------

    In connection with the permanent registration regime, however, the
Commission believes it is appropriate to require in Item 9 that a
municipal advisor disclose the disciplinary history, as applicable, of
all its associated persons, as that term is defined in Exchange Act
Section 15B(e)(7), with the exclusion of employees who perform solely
clerical, administrative, support, or other similar functions.\1107\
The Commission believes that, for purposes of the permanent
registration regime, it is important to collect information about
disciplinary matters for all such associated persons, because, under
the Exchange Act, such matters may form the basis for an action to
suspend or revoke a municipal advisor's registration.\1108\
---------------------------------------------------------------------------

    \1107\ See supra note 1054.
    \1108\ See Section 15B(c)(2) and (c)(4) of the Exchange Act and
Rule 15Bc4-1 thereunder, discussed infra Section III.A.9. of this
release, and Section 15(b)(4) of the Exchange Act. See also
Proposal, 76 FR 847, note 217 and accompanying text.
---------------------------------------------------------------------------

    Specifically, Item 9 as proposed and adopted requires disclosure of
disciplinary history with respect to any partner, officer, director or
branch manager of a municipal advisor, and any other employee who is
engaged in the management, direction, supervision, or performance of
any municipal advisory activities relating to the provision of advice
to or on behalf of a municipal entity or obligated person with respect
to municipal financial products or the issuance of municipal
securities; and any person that directly or indirectly controls, is
controlled by, or under common control with the municipal advisor. As a
result, Form MA will capture information with respect to employees that
engage in municipal advisory activities, even if that is not their
primary activity. Form MA, in contrast to temporary Form MA-T, also
requires disclosure with respect to controlling persons and other
affiliates of the municipal advisor.
    As proposed and adopted, Item 9 asks whether the applicant or any
associated person has, in the last ten years, been convicted of any
felony, or pled guilty or nolo contendere to any charge of a felony in
a domestic, foreign, or military court, or charged with any felony.
Item 9 further asks whether the applicant or any associated person has
been convicted of any misdemeanor or pled guilty or nolo contendere in
a domestic, foreign, or military court to any charge of a misdemeanor
in a case involving municipal advisor-related business,\1109\
investments or an investment-related business, or any fraud, false
statements, or omissions, wrongful taking of property, bribery,
perjury, forgery, counterfeiting, extortion or a conspiracy to commit
any of these offenses, or charged with any misdemeanor of the type
described above.\1110\ With respect to charges alone, an applicant must
respond only with respect to charges that are currently pending.
---------------------------------------------------------------------------

    \1109\ The term ``municipal advisor-related'' is defined as
``[c]onduct that pertains to municipal advisory activities
(including, but not limited to, acting as, or being an associated
person of, a municipal advisor).'' See Glossary.
    \1110\ The disclosures relating to felonies, in Form MA as in
Form BD, concern felonies of any kind, and are not limited to
felonies relating to municipal advisor-related and investment-
related business.
---------------------------------------------------------------------------

    A clarification has been added in Item 9, as adopted, regarding the
provision that disclosure of an event in the Criminal Action Disclosure
section is not required if the date of the event was more than ten
years ago. The applicant is instructed that, for purposes of
calculating the ten-year period, the date of an event is the date that
the final order, judgment, or decree was entered, or the date that any
rights of appeal from preliminary orders, judgments, or decrees lapsed.
This instruction provides a clear-cut guideline by requiring any past
cases to be resolved with finality before the ten-year period of no
criminal history can begin. The Commission notes that this defining
line has been set forth explicitly in other contexts.\1111\
---------------------------------------------------------------------------

    \1111\ See, e.g., Item 11 of Form ADV.
---------------------------------------------------------------------------

    In the Regulatory Action disclosure section of Item 9, Form MA as
proposed and adopted asks for information regarding whether the SEC or
the CFTC has ever: found the municipal advisor or any associated person
to have made a false statement or omission; found the municipal advisor
or any associated person to have been involved in a violation of its
regulations or statutes; found the municipal advisor or any associated
person to have been a cause of a municipal advisor- or investment-
related business having its authorization to do business denied,
suspended, revoked, or restricted; entered an order against the
municipal advisor or any associated person in connection with municipal
advisor- or investment-related activity; or imposed a civil money
penalty on the municipal advisor or any associated person, or ordered
the municipal advisor or any associated person to cease and desist from
any activity. Item 9 of the form also asks for similar information with
respect to other federal regulatory agencies, any state regulatory
agency, or any foreign financial regulatory authority.
    Item 9 further asks for information regarding whether any SRO or
commodity exchange ever found the municipal advisor or any associated
person to have made a false statement or omission; found the municipal
advisor or any associated person to have been involved in a violation
of its rules (other than a violation designated as a ``minor rule
violation'' under a plan approved by the SEC); found the municipal
advisor or any associated person to have been the cause of a municipal
advisor- or investment-related business having its authorization to do
business denied, suspended, revoked, or restricted; or disciplined the
municipal advisor or any associated person by expelling or suspending
it from membership, barring or suspending its association with other
members, or otherwise restricting its activities. It also asks whether
the municipal advisor or its associated persons have had authorization
to do business or to act as an attorney, accountant or federal
contractor revoked or suspended.
    The Civil Judicial Disclosure section of Item 9, as proposed, asks
whether any domestic or foreign court has ever (a) enjoined the
applicant or any associated person in connection with any municipal
advisor-related or investment-related activity; (b) found that the
applicant or any associated person was involved in a violation of any
municipal advisor- or investment-related activity; or (c) dismissed a
municipal advisor- or investment-related civil action brought against
the applicant or an associated person by a state or foreign financial
regulatory authority. Form MA, as adopted, retains the same questions,
although the latter

question has been revised to explicitly include actions brought by U.S.
jurisdictions other than states.\1112\
---------------------------------------------------------------------------

    \1112\ The Commission notes that the question, as proposed,
relates to actions in ``any domestic or foreign court.'' The
Commission believes this phrase implicitly includes courts in U.S.
jurisdictions other than states, but is making this explicit to
clarify its intent. If an action was brought and dismissed in a U.S.
jurisdiction other than a state or a foreign jurisdiction, the
information requested is no less pertinent to regulators and
investors.
---------------------------------------------------------------------------

    As already indicated, the Criminal Action Disclosure section of
Form MA as proposed and adopted requires disclosure of events that
occurred within the last ten years.\1113\ With respect to Regulatory
and Civil Judicial Actions, the form as proposed and adopted places no
time limit on how far back in time events must be disclosed. The
applicability of these disclosure requirements to any event in the past
is consistent with the disclosure reporting requirements on Form BD,
adopted pursuant to Section 15(b)(1) of the Exchange Act,\1114\ with
one exception. In Form BD, the requirement to disclose any civil
judicial injunctions is limited to the past ten years. In contrast, the
Commission proposed its corresponding question in Form MA regarding
past civil injunctions without limiting the disclosure requirement to
the past ten years. The Commission received no comment on this
disclosure requirement and is adopting it as proposed.
---------------------------------------------------------------------------

    \1113\ As is the case with respect to brokers and dealers
pursuant to Section 15(b)(4) of the Exchange Act (15 U.S.C.
78o(b)(4)), Section 15B(c)(2) of the Exchange Act (15 U.S.C. 78o-
4(c)(2)), as amended by the Dodd-Frank Act, limits the Commission's
ability to impose sanctions on municipal advisors for convictions of
felonies and misdemeanors to convictions occurring within ten years
preceding the filing of any application for registration.
    \1114\ See Proposal, 76 FR 846.
---------------------------------------------------------------------------

    As mentioned above, Form MA includes three separate kinds of DRPs
to report information, as relevant, relating to criminal, regulatory,
and civil actions involving the municipal advisor or its associated
persons reported in Item 9.\1115\ The Commission is adopting each of
these DRPs as proposed. Some modifications have been made, however, and
these are discussed below.
---------------------------------------------------------------------------

    \1115\ An applicant is required to complete a separate DRP of
the relevant kind for each event or proceeding in which the
applicant itself or any of its associated persons was involved, but
the same event or proceeding may be reported for more than one
person or entity using one DRP.
---------------------------------------------------------------------------

    Generally, each DRP requires detailed information about the
reported action, such as the court where the charges were filed and
when, a description of the charge and the circumstances relating to it
(in the case of criminal actions); the authority that initiated the
action and a description of the allegations and the product-type (in
the case of regulatory actions); or the initiator of the court action,
the relief sought, and the product type (in the case of civil judicial
actions). Applicants are also required to indicate the status of the
charge or action, including resolution details as appropriate. As
discussed in the Proposal and consistent with the limitations set forth
in Section 15(b)(4)(B) \1116\ of the Exchange Act,\1117\ however,
information on the Criminal Action DRP is limited to matters within the
last ten years.
---------------------------------------------------------------------------

    \1116\ 15 U.S.C. 78o(b)(4)(B). See also 15 U.S.C. 78o-4(c)(2).
    \1117\ See Proposal, 76 FR 847.
---------------------------------------------------------------------------

    The Commission believes that it is important to collect the
information required by the DRPs in addition to the basic disclosures
in Item 9 to further the aims described above regarding the information
required in Item 9: to assist it in deciding whether to grant or
institute proceedings to deny an application for registration or to
revoke a registration; to manage the Commission's regulatory and
examination programs; to make such information available to the MSRB;
and to obtain information that can be of value to municipal entities
engaging the services of municipal advisors and to investors who may
purchase securities from offerings in which municipal advisors have
participated, as well as to other regulators.\1118\
---------------------------------------------------------------------------

    \1118\ See Proposal, 76 FR 847.
---------------------------------------------------------------------------

    One commenter expressed concerns about the ``vast information-
gathering burden on applicants'' imposed by Item 9.\1119\ The commenter
indicated that its concerns, which focused on the requirement to
collect information regarding sister affiliates of a municipal advisor,
applied ``particularly in the light of the required disciplinary
history disclosures.'' \1120\ This commenter observed that Form ADV,
upon which Form MA is based, does not require disclosure of a sister
affiliate's disciplinary history. Another commenter stated that
``[s]ome entities, such as banks, broker-dealers and investment
advisers, may have many branches, and branch managers, that have
nothing to do with the entity's municipal advisory business'' and urged
that Form MA be amended to require disciplinary history ``only with
respect to branch managers of branches where a municipal advisory
business is conducted.'' \1121\
---------------------------------------------------------------------------

    \1119\ See SIFMA Letter I. See also supra notes 1065 and 1087.
    \1120\ See SIFMA Letter I.
    \1121\ See ABA Letter.
---------------------------------------------------------------------------

    In considering these comments, the Commission notes that Section
15B of the Exchange Act assigns the Commission oversight and
disciplinary responsibilities with respect to all associated persons of
a municipal advisor, a category that includes sister affiliates and
branches. Moreover, as discussed elsewhere in this release,\1122\ the
Commission is clarifying with new Rule 15Bc4-1 that associated persons
of municipal advisors are subject to censure, limitations on their
activities, suspension, or being barred from being associated. As
explained above, with regard to the value of obtaining information
regarding financial industry and related activities of associated
persons, the Commission believes that the ability to discern
connections within a large network of affiliations and other
associations is important for investigations of wrongdoing. The ability
to gain, through disclosure requirements, a base of knowledge that
includes actions of past wrongdoing is all the more important for these
purposes.
---------------------------------------------------------------------------

    \1122\ See infra Section III.A.9.
---------------------------------------------------------------------------

    Regarding the comment concerning the burden of obtaining
information about sister affiliates, the Commission notes that Form
ADV, too, requests certain information regarding an investment
adviser's sister affiliates--specifically, business information--as the
commenter acknowledged. Moreover, as the commenter also acknowledged,
Form ADV requests the disciplinary history of the investment adviser
and all of its ``advisory affiliates'' (emphasis added)--i.e., all
current employees, all officers, partners or directors, and all persons
directly or indirectly controlling or controlled by the investment
adviser. Given that a municipal advisor is in any case required to
gather certain facts about its sister affiliates' business activities,
the Commission believes that it is appropriate to request the added
information about any disciplinary history of these affiliates,
particularly in view of its potential value to regulators for purposes
of investigation and enforcement discussed above.
    The DRPs associated with the disclosures in Item 9 are being
adopted substantially as proposed. However, as discussed below, some
additional disclosure requirements and other revisions have been
included in the DRPs, as adopted.\1123\
---------------------------------------------------------------------------

    \1123\ Many of the same or similar revisions have also been made
to the DRPs of Form MA-I, including those other than the Criminal,
Regulatory, and Civil Judicial Action DRPs of that form, and a
discussion of all of them will not be repeated in the section on
Form MA-I below.

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

    Generally in all the DRPs, as proposed, when an amendment was filed
seeking to remove a previously-filed DRP, the applicant was asked for
the reason. Some, but not all of the DRPs, gave the option of checking
a box indicating that the DRP was filed in error. Some, but not all of
the DRPs, additionally asked for an explanation of the circumstances
that gave rise to the error. For the sake of consistency and to provide
regulators, municipal entities, and others with important detail, all
the DRPs, as adopted, have been revised to include these elements.
Also, in the Criminal Action DRP, an additional option is given to
indicate why the DRP was filed an error. The new option is that the
event or proceeding occurred more than ten years ago.\1124\
---------------------------------------------------------------------------

    \1124\ See supra note 1116 and accompanying text.
---------------------------------------------------------------------------

    As proposed, if a DRP pertains to an associated person of the
municipal advisor, the DRP asks whether that person is registered with
the Commission. In the DRPs, as adopted, if the associated person is
registered, the registration number must be provided.\1125\ The
Commission believes that, if an applicant for registration with the
Commission has an associated person that is otherwise registered with
the Commission, such information is valuable for cross-referencing and
enforcement and other regulatory purposes and providing it should not
constitute an undue burden.\1126\
---------------------------------------------------------------------------

    \1125\ In all the DRPs, as adopted, if an applicant indicates
that the DRP concerns one or more associated persons, the form asks
how many. Because the names of all such associated persons must be
identified in the DRP in any case, tallying the number involves no
additional disclosure and will act as a cross-check to ensure that
the information provided is complete.
    \1126\ On the other hand, the requirement to name the employer
of an associated person when the activity occurred that led to an
action has been eliminated.
---------------------------------------------------------------------------

    Each DRP, as proposed, asked if the municipal advisor or associated
person whom the DRP concerned was registered through the IARD or CRD
system or the municipal advisor was previously registered on Form MA-T,
whether the advisor or associated person previously filed a DRP (with
Form ADV, BD, or U4) or the advisor filed disclosure on Form MA-T
regarding the same event. The adopted version of each DRP now asks
whether an accurate and up-to-date DRP containing the information
regarding the applicant or associated person required by the DRP is
already on file in the IARD or CRD system (with a Form ADV, BD, or U4)
or in the SEC's EDGAR system (with a Form MA or Form MA-I), and, if so,
to specify the type of filing and provide specific information
regarding the name of the filer, the CRD Number (where relevant), the
date, and disclosure or accession number of the relevant other
form.\1127\ As discussed above,\1128\ the ability to incorporate by
reference any required information about the disciplinary history of an
applicant or associated person from a DRP that already has been filed
relieves the regulatory burden on applicants who can do so. At the same
time, however, sufficient information about where the information is
filed is necessary for regulators, municipal entities, and investors to
be able to access it with reasonable ease.
---------------------------------------------------------------------------

    \1127\ The DRPs, as adopted, do not provide the option of
indicating that the information is already on file in a Form MA-T,
as Form MA-T does not require the disclosures required in the DRPs.
    \1128\ See supra note 995 and accompanying text.
---------------------------------------------------------------------------

    As proposed, some of the DRPs, where relevant, asked for the name
of the federal, military, state or foreign court where a case was
formally brought or appealed. In the DRPs, as adopted, an applicant is
presented with a list of types of courts from which to choose and must
specifically check the type of court in which the case was
brought.\1129\ In addition, ``international court'' and ``other'' have
been added to the choices (and, if the latter is checked, the applicant
must specify the type) and the street address and postal code of the
court will now need to be provided in addition to the city or county
and state or country. Requests for information in all the DRPs
regarding courts and other panels have been made consistent to require
the name of the case (in addition to the docket number, as proposed).
The Commission believes that these additions will enable regulators,
municipal entities, and investors to more easily locate information
that may be relevant to them and, if need be, address further
inquiries. The Commission further believes that complete responses to
the questions in the DRPs, as proposed, would have supplied most of
this same information.\1130\
---------------------------------------------------------------------------

    \1129\ In the electronic form, the applicant must make a
selection and thus cannot avoid answering the question specifically.
    \1130\ As proposed, the DRP asked the applicant to describe
details of the event in narrative form, and to, among other things,
``include charge(s)/charge Description(s), and for each charge
provide: (1) Number of counts, (2) felony or misdemeanor, [and the]
(3) plea for each charge'' and ``provide a brief summary of
circumstances leading to the charge(s) as well as the disposition.''
The proposed version separately required the applicant to
``[i]nclude, for each charge, (a) Disposition Type (e.g., convicted,
acquitted, dismissed, pretrial, etc.), (b) Date, (c) Sentence/
Penalty, (d) Duration (if sentence-suspension, probation, etc., (e)
Start Date of Penalty, (f) Penalty/Fine Amount, and (g) Date Paid.''
It also required an applicant to provide ``a brief summary of
circumstances leading to the charge(s) as well as the disposition''
and to include ``the relevant dates when the conduct which was the
subject of the charge(s) occurred.'' The Commission also notes that
the Criminal Action DRP of Form MA-I, both as proposed and adopted,
asks for information about amended or reduced criminal charges.
---------------------------------------------------------------------------

    For the same reason, similar changes have been introduced into the
DRPs regarding regulatory adjudications and civil judicial actions.
Where the proposed Regulatory Action DRP asked the filer to indicate
whether a regulatory proceeding was initiated by the SEC, another
federal authority, state, SRO, or foreign authority, the forms as
adopted add, as choices, the CFTC, a federal banking agency, the
National Credit Union Administration, or other regulator or authority
that the applicant must specify. In addition, the applicant must now
indicate, as applicable, the name of the administrative proceeding,
commission or agency hearing, or other regulatory proceeding or forum
in which the action was brought and the street address and postal code
of the location where the case was heard. Specific choices added with
respect to who initiated a Civil Judicial Action include the CFTC,
another federal authority (which the applicant must specify), and a
municipal advisory firm.
    As proposed, not all the DRPs contained instructions to the
applicant regarding the language to be used in naming or describing the
charges brought in a foreign jurisdiction. As adopted, the forms
consistently require the applicant to provide all the information
requested in English. The Commission believes that this requirement is
appropriate in an application for U.S. registration designed to obtain
information on behalf of U.S. regulators, municipal entities, and
investors.
    As proposed, in the Criminal Action DRP, in a case where criminal
charges were brought against a firm or organization over which the
applicant or associated person had control, the applicant was required
to indicate whether the firm or organization was engaged in a municipal
advisor-related business. In the DRP, as adopted, the question has been
revised to ask, in addition, whether the firm or organization was
engaged in an investment-related business.\1131\ Because of the close
relationship between investment-related business and municipal advisory
activities, the Commission believes that it is important for
regulators, municipal entities, and

investors in municipal securities to have this information.
---------------------------------------------------------------------------

    \1131\ In the form, as proposed, the applicant would have been
required to indicate only whether the firm or organization was in
municipal advisor-related business.
---------------------------------------------------------------------------

    The instructions in the Criminal Action DRP on how to report an
event or proceeding have been revised in the form as adopted.\1132\ No
substantive changes have been introduced in the reporting requirements.
The revisions have been made solely for purposes of clarity. The
adopted version of the instructions states: ``Use this DRP to report
all charges, including multiple counts of the same charge, arising out
of the same event and filed in one criminal action. The same DRP may be
used for more than one person with respect to the same event or
proceeding. Separate criminal actions arising out of the same event,
and unrelated criminal actions, must be reported on separate DRPs.''
The Commission believes that the revised instructions, which are
similar to instructions that appear in the DRPs for Forms BD and ADV,
will help assure that the disciplinary information provided in response
can be easily understood.
---------------------------------------------------------------------------

    \1132\ In the Criminal Action DRP, as proposed, the applicant
was instructed: ``Use a separate DRP for each event of proceeding.
The same event or proceeding may be reported for more than one
person or entity using one DRP . . . Multiple counts of the same
charge arising out of the same event(s) should be reported on the
same DRP. Use this DRP to report all charges arising out of the same
event. Unrelated criminal actions, including separate cases arising
out of the same event, must be reported on separate DRPs. One event
may result in more than one affirmative answer to the [questions
asked earlier in the DRP].''
---------------------------------------------------------------------------

    An instruction has been added to the Criminal Action DRP advising
applicants that applicable court documents must be attached to, and
filed with, the DRP if not previously submitted.\1133\
---------------------------------------------------------------------------

    \1133\ This instruction, which was included in the proposed
Criminal Action DRPs for Form MA-I, was not included in the proposed
Criminal Action DRP for Form MA. The Commission notes that Form BD
also requires applicable court documents to be attached to the
Criminal Action DRP in that form.
---------------------------------------------------------------------------

    In the Criminal Action DRP, as proposed, an applicant was not
required specifically to indicate whether the original criminal charge
was amended or reduced. As adopted, the DRP asks for this information
and for the relevant date. The Commission believes that the clearer
picture of the disciplinary history that will emerge when this
information is supplied should assist regulators, municipal entities,
and investors in assessing the credentials and background of the
municipal advisor and its associated persons.
    In the Criminal Action DRP, as proposed, an applicant was not
required to state, if the case was on appeal, to whom it was appealed
and the date of the appeal. As adopted, the DRP now requires these
disclosures.\1134\
---------------------------------------------------------------------------

    \1134\ The Commission notes that the Regulatory and Civil
Judicial Action DRPs, when proposed, already required similar
information regarding appeals.
---------------------------------------------------------------------------

    The Criminal Action DRP, as proposed, asked for information
generally about the disposition of the relevant action, in narrative
form, and to include details concerning any sentence or penalty
imposed, its start date, and its duration, and the amount and date of
payment.\1135\ As adopted, the form requires the applicant to choose
from among 16 types of disposition of a case (or to check ``other,''
and specify the other), and to further identify any other type of
disposition. Choices are also provided to describe specifically the
disposition of any appeal.\1136\ The DRP, as adopted, further asks
specifically whether any incarceration was imposed in connection with
the action, and, if so, the duration, the start and end dates, and any
concurrent sentences.\1137\ It also asks, in question-by-question
format, whether any portion of a monetary penalty was reduced or
suspended, whether it has been paid in full, and, if not, how much
remains unpaid. The Commission believes that these revisions will help
ensure that the description of the disposition is complete.
---------------------------------------------------------------------------

    \1135\ See supra note 1130.
    \1136\ These choices are: affirmed; vacated and returned for
further action; or vacated/final. An applicant may also respond
``other,'' in which case the other type of disposition must be
specified.
    \1137\ The DRP, as adopted, also asks specifically whether any
sentence or any other penalty is ordered, and, if so, to list each
type, giving the examples of prison, jail, probation, community
service, counseling, education, or other (which must be specified).
---------------------------------------------------------------------------

    As proposed, the Regulatory Action DRP required the applicant to
check off any of 14 types of ``principal sanctions'' \1138\ in the case
(or to check ``other,'' and specify the other type), and to further
identify any other sanctions. As adopted, the DRP does not
differentiate between principal sanctions and any other kind of
sanction, but adds more types to the list in addition to requiring the
applicant to identify any others. This, too, will help ensure that the
filer provides appropriate detail, thereby enabling interested parties
to better assess the credentials and background of the applicant and
its associated persons.
---------------------------------------------------------------------------

    \1138\ The DRP, as adopted, clarifies that the question refers
to the sanctions sought.
---------------------------------------------------------------------------

    Similarly--and for the same reason--the Civil Judicial Action DRP
no longer differentiates between ``principal relief'' sought and other
relief, and provides a longer list of possible sanctions or relief
sought from among which the applicant must select in addition to
identifying any other sanctions or relief sought.
    The questions in the Regulatory and Civil Judicial Action DRPs
regarding how a case was resolved, like the questions in the Criminal
Action DRP regarding disposition, have been revised in the DRPs, as
adopted, to be more specific and to offer more choices from among which
an applicant must select, for the same reason as in the Criminal Action
DRP. The Commission believes that these revisions will help ensure that
the description of the disposition is complete. More possible answers
are provided from among which the applicant must choose to describe
specifically the type of resolution that resulted (acceptance, waiver,
and consent, settlement, dismissal, judgment rendered, etc.) and
choices are now given regarding how any appeal was resolved.
    Similarly, more choices are presented to describe any sanctions
that were ordered in the relevant Regulatory or Civil Judicial
Action.\1139\ In addition, questions are broken out into separate
sections regarding the details of three specific types of sanctions
and/or conditions of sanctions: (a) Bars, injunctions, and suspensions;
(b) requalifications (by examination, retraining, or other process);
and (c) monetary sanctions.\1140\
---------------------------------------------------------------------------

    \1139\ For example, the choices in the Regulatory Action DRP, as
proposed, were: monetary/fine; revocation/expulsion/denial; censure;
disgorgement/restitution; cease and desist/injunction; bar;
suspension; and other (which must be specified). The choices added
in the adopted version include: civil and administrative penalties/
fines; expulsion; prohibition; reprimand; rescission;
requalification; revocation; and undertaking.
    \1140\ For example, in the Regulatory and Civil Judicial Action
DRPs, as proposed, the applicant was asked broadly to describe, in
narrative form: ``Sanction detail: if suspended, enjoined or barred,
provide duration including start date and capacities affected
(General Securities Principal, Financial Operations Principal,
etc.). If requalification by exam/retraining was a condition of the
sanction, provide length of time given to requalify/retrain, type of
exam required and whether condition has been satisfied. If
disposition resulted in a fine, penalty, restitution, disgorgement
or monetary compensation, provide total amount, portion levied
against the applicant or an associated person, date paid and if any
portion of penalty was waived.''
    By contrast, in the DRPs as adopted, similar information is
requested in question-by-question format in each of the separate
sections described above. Questions relating to bars, injunctions,
and suspensions are further subdivided into a separate subsection
for each, and the questions distinguish between temporary and
permanent bars. The applicant is also instructed to report any
additional details if one or more bars, injunctions, or suspensions
were imposed with regard to different activities and the terms
specify different time periods, and a similar instruction is
included with regard to requalifications. Details similar to those
specified in the Criminal Action DRP, as adopted, see supra notes
1135-1137 and accompanying text, are also requested.

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

    As proposed, the Regulatory and Civil Judicial Action DRPs asked
the applicant to provide a brief summary of details relating to the
action's status with relevant terms, conditions, and dates. As adopted,
the DRPs specifically ask whether any limitations or restrictions are
in effect while the case is pending or on appeal, as applicable. For
pending cases, the DRPs also ask for the date that notice or other
process was served.\1141\ Here, too, the Commission believes that
specifying these details as required elements will serve to ensure that
the applicant's description is complete.
---------------------------------------------------------------------------

    \1141\ As previously mentioned, the DRPs, as proposed, already
requested the date of any appeal. See supra text accompanying note
1134.
---------------------------------------------------------------------------

    The Civil Judicial Action DRP, as proposed, did not ask for the
full name of the defendant or ask whether the applicant is a named
defendant. As adopted, the DRP requires this information, and, if the
applicant is not a named defendant, further requires a description of
how the action involves the defendant. This information should help
interested parties more easily determine the role of the applicant or
associated person in the civil judicial action as part of their
assessment of the applicant.
    The DRPs, as adopted, now ask for various minor additional
disclosures reflecting a level of detail generally similar to the
disclosures discussed above, which the Commission believes should serve
to enhance the usefulness of the information to regulators and the
benefit it will have for municipal entities and the investing public
without unreasonably burdening applicants for registration.\1142\
---------------------------------------------------------------------------

    \1142\ Some examples, when an applicant is asked to check the
type of product involved in a case, more choices are included in the
list of possibilities than in the proposed version. When the
resolution of a case is an order, the applicant is asked whether it
is a final order based on violations of any laws or regulations that
prohibit fraudulent or deceptive conduct. Several changes were made
so that if one or more DRPs asks a follow-up question when a certain
response is given, other DRPs are consistent and ask the same
follow-up question. Thus, each time an applicant selects more than
one resolution of a case as having occurred or if the choice that
the applicant has selected does not adequately summarize the
resolution, the applicant must provide an explanation. Each time an
applicant indicates that a relevant date provided is not exact, an
explanation is required. See also infra note 1147. In addition,
throughout the DRPs, instructions have been revised to offer more
clarity on how to file a DRP or when a separate DRP must be filed
regarding the same event. See also supra note 968.
---------------------------------------------------------------------------

Item 10: Small Businesses
    As described further in Section IX below, the Commission is
required by the Regulatory Flexibility Act (``RFA'') \1143\ to consider
the effect of its regulations on small entities. The Commission's rules
do not define ``small business'' or ``small organization'' for purposes
of municipal advisors. As discussed in the Proposal, the Small Business
Administration (``SBA'') defines small business for purposes of
entities that provide financial investment and related activities as a
business that had annual receipts of less than $7 million during the
preceding fiscal year and is not affiliated with any person that is not
a small business or small organization.\1144\ The Commission proposed
to use the SBA's definition of small business to define municipal
advisors that are small entities for purposes of the RFA.\1145\ This
definition will remain unchanged in the rules as adopted.
---------------------------------------------------------------------------

    \1143\ 5 U.S.C. 601 et seq.
    \1144\ See 13 CFR 121.201. See also Proposal, 76 FR 848, note
222 and accompanying text.
    \1145\ See Proposal, 76 FR 848.
---------------------------------------------------------------------------

    The Commission proposed Item 10 of Form MA to enable it to
determine how many applicants meet the SBA's definition of ``small
business'' or ``small organization'' as applied to municipal advisors.
Thus, Item 10 requires each applicant to disclose whether it had annual
receipts of less than $7 million during its most recent fiscal year (or
during the time it has been in business, if it has not completed its
first fiscal year in business). Item 10 also requires each applicant to
disclose whether any business or organization with which it is
affiliated had annual receipts of more than $7 million in its most
recent fiscal year (or during the time it has been in business, if it
has not completed its first fiscal year in business).
    The Commission received no comments on the information requested by
Item 10 and is adopting this item as proposed.\1146\
---------------------------------------------------------------------------

    \1146\ Several commenters did raise issues with respect to the
impact that the new registration requirements could have, generally,
on small businesses. See, e.g., supra note 986, and see also supra
note 980. Such concerns are addressed in Section IX below.
---------------------------------------------------------------------------

Technical and Other Changes
    In addition to the modifications discussed above, a number of non-
substantive, technical and clarifying changes have been made to Form
MA, its schedules and the DRPs as adopted.\1147\ Further, some of the
multi-pronged questions have been broken down into separate parts to
make the form clearer and more user-friendly.\1148\ The Commission has
also made certain additional changes to correct inadvertent omissions
in the form, as proposed.\1149\
---------------------------------------------------------------------------

    \1147\ For example, new guidance is included on Form MA, as
adopted, that reminds applicants that they must supply supporting
documents where applicable, and that Form MA-NR must be included for
non-residents. Filers are also advised that false statements or
omissions may result in administrative or civil actions, in addition
to the other legal consequences mentioned in the Proposal.
Instructions have been included regarding non-US telephone and fax
numbers. References to U.S. state jurisdictions have been amended to
consistently include other types of U.S. jurisdictions, and the
choices on the forms, accordingly, include such jurisdictions by
name. See also supra note 968.
    \1148\ For example, the questions in the DRPs regarding
associated persons are divided into separate sections for firms and
organizations, on the one hand, and natural persons on the other.
Many of the questions now present applicants with a series of
choices that they can check off. Some questions are renumbered, and
some subsections have been given titles where there were none in the
proposed version.
    \1149\ For example, the Criminal Action DRP requires that if the
applicant is amending a previously filed DRP pertaining to an
associated person because it was filed in error, the applicant is
required to explain the circumstances. The Proposal inadvertently
omitted a requirement to explain the circumstances when the error
pertained to the applicant itself. The Regulatory and Civil Judicial
Action DRPs as previously proposed and now adopted require an
explanation in both cases.
---------------------------------------------------------------------------

Execution Page
    Form MA includes an Execution Page that an authorized person of the
municipal advisor filing the form is required to sign electronically
before the form can be submitted.\1150\ The Commission received no
comments regarding the Execution Page, other than on the self-
certification contained therein. For reasons discussed below, the
Commission is removing the self-certification section of the Execution
Page in Form MA but otherwise is adopting the Execution Page
substantially as proposed.\1151\
---------------------------------------------------------------------------

    \1150\ See Proposal, 76 FR 849. As proposed, the Execution Page
(except for the self-certification section) is similar in purpose to
the Execution Page of Form ADV (see 17 CFR 279.1), but deletes
references to state registration, bonding requirements and other
inapplicable components, and will require a non-resident municipal
advisor to execute a separate form (Form MA-NR) to designate agent
for service of process. See infra Section III.A.6.
    \1151\ The description immediately below relates to the
Execution Page as adopted. Discussion of the removal of the self-
certification section follows.
---------------------------------------------------------------------------

    An authorized person signs the form by typing his or her name and
submitting the form on behalf of the municipal advisor. The authorized
person is required to sign one of two different Execution Pages,
depending on whether the municipal advisor is resident in the United
States or a ``non-resident'' municipal advisor. In either case, by
signing the Execution Page, the authorized person states that he or she
is signing Form MA on behalf, and with the authority, of the municipal
advisor and affirms that the information in Form MA is true and
correct.

    The Execution Page for both resident and non-resident municipal
advisors requires the signatory to certify that the books and records
of the municipal advisor will be preserved and available for inspection
and to authorize any person with custody of the books and records to
make them available to federal representatives. On the Execution Page
for non-resident municipal advisors, the signatory, in signing the
form, also states that the municipal advisor agrees that it will
provide to the Commission, at its own expense, copies of all books and
records that the municipal advisor is required to maintain by law. As
discussed in the Proposal, the Commission believes that, before
granting registration to a domestic or non-resident municipal advisor,
it is appropriate to obtain assurance that such person has taken the
necessary steps to be in the position to provide the Commission with
prompt access to its books and records and to be subject to inspection
and examination by the Commission.\1152\
---------------------------------------------------------------------------

    \1152\ See Proposal, 76 FR 848.
---------------------------------------------------------------------------

    On the Execution Page for domestic municipal advisors, the
signatory also states that it appoints certain officials as agents for
service of process in the state where the advisor maintains its
principal office or place of business. Specifically, a domestic
municipal advisor appoints the Secretary of State or other legally
designated officer in the state where it maintains its principal office
and place of business. As discussed in the Proposal, this appointment
allows private parties and the Commission to bring actions against the
municipal advisor by delivering necessary papers to the appointed
agent.\1153\ The agent is able to receive any process, pleadings, or
other papers in any action that arises out of or relates to or concerns
municipal advisory activities of the municipal advisor. The agent also
is able to receive service for investigation and administrative
proceedings.
---------------------------------------------------------------------------

    \1153\ See id. Appointment of agent for service of process for
non-resident municipal advisors is discussed further below. See
infra Section III.A.6 (discussing Form MA-NR).
---------------------------------------------------------------------------

    On the Execution Page for non-resident municipal advisors, the
signatory on behalf of the registrant also states that an opinion of
counsel is attached as an exhibit to Form MA and that the municipal
advisor can, as a matter of law, provide the Commission with access to
the books and records of the municipal advisor, as required by law, and
that the municipal advisor can, as a matter of law, submit to
inspection and examination by the Commission.\1154\ As discussed in the
Proposal, each jurisdiction may have a different legal framework with
respect to its laws (e.g., privacy laws) that may limit or restrict the
Commission's ability to receive information from a municipal
advisor.\1155\ Providing an opinion of counsel that a municipal advisor
can provide access to its books and records and can be subject to
inspection and examination allows the Commission to better evaluate a
municipal advisor's ability to meet the requirements of registration
and ongoing supervision.\1156\ Failure to provide an opinion of counsel
may be a basis for the Commission to deny an application for
registration.\1157\
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    \1154\ The opinion of counsel is required by Rule 15Ba1-6, as
adopted. General Instruction 13 (General Instruction 14 as proposed)
now states that the non-resident municipal advisor filing Form MA
must attach the opinion as an exhibit to the Execution Page.
    \1155\ The Execution Page for non-resident municipal advisors,
as adopted, however, does not require the opinion of counsel to
state that the municipal advisor is able, as a matter of law, to
submit specifically to ``onsite'' inspection.
    \1156\ See Proposal, 76 FR 848.
    \1157\ See Section 15B(a)(2), providing that a municipal advisor
applying for registration must file with the Commission an
application for registration in such form and containing such
information and documents concerning such municipal advisor as the
Commission, by rule, may prescribe as necessary or appropriate in
the public interest or for the protection of investors. Thus,
failure to provide an opinion of counsel, as required, is a basis
under the statute for the Commission to conclude that the
requirements of Section 15B(a)(2) are not satisfied.
---------------------------------------------------------------------------

    As proposed, Form MA required the authorized person of a municipal
advisor completing the Execution Page to certify separately on behalf
of the municipal advisor that it and every natural person associated
with it had met, or within any applicable required timeframes would
meet, such standards of training, experience, and competence, and such
other qualifications, including testing, for a municipal advisor and
natural persons associated with it, required by the Commission, the
MSRB, or any other relevant SRO. Under the Proposal, the authorized
person, on behalf of the municipal advisor also would have been
required to certify that the municipal advisor had conducted an initial
or annual review, as applicable, of the municipal advisor's business,
and had reasonably determined that the municipal advisor: (a) could
carry out the activities described in the items that are checked in
Item 4-K (Applicant's Business Relating to Municipal Securities) of
Form MA; \1158\ (b) could comply with all applicable regulatory
obligations; and (c) had met such regulatory obligations during the
last year (or during such shorter period if the application was an
initial application for registration). For these purposes, such
applicable regulatory obligations were to include obligations under the
federal securities laws and rules promulgated thereunder and applicable
rules promulgated by the MSRB, or any other relevant SRO.
---------------------------------------------------------------------------

    \1158\ Under the Proposal, factors to be considered in
determining whether a municipal advisor can carry out the described
activities included, but were not limited to, whether the municipal
advisor has, with respect to the described activities, the
appropriate technology systems and equipment; the appropriate
financial resources; adequate staffing with appropriate skill sets,
training, and expertise; and adequate facilities, such as office
space, as appropriate. See Proposal, 76 FR 849.
---------------------------------------------------------------------------

    Under the Proposal, the authorized person also would have been
required to certify that the municipal advisor had documented this
review process and would maintain all documents relating to the review
in accordance with Rule 15Ba1-7 under the Exchange Act.\1159\ Such
certification would have been required in conjunction with the filing
of an initial application for registration as a municipal advisor and
annually thereafter.\1160\
---------------------------------------------------------------------------

    \1159\ Proposed Rule 15Ba1-7 also required municipal advisory
firms to make and keep a record of the initial or annual review, as
applicable, conducted by the municipal advisory firm of its business
in connection with its self-certification on Form MA. Because the
Commission is not adopting a self-certification requirement, the
Commission is also not adopting this corresponding books and records
requirement. See infra note 1344.
    \1160\ See proposed Rule 15Ba1-4(e). The rule required the
annual self-certification to be filed by municipal advisory firms
within 90 days of the end of the municipal advisor's fiscal year, or
within 90 days of the end of the calendar year for municipal
advisors that are sole proprietors.
---------------------------------------------------------------------------

    The Commission received one comment letter opposing the proposed
self-certification requirement.\1161\ The commenter provided that self-
certification should not be required and noted that similar
certifications are not

required with Form BD and Form ADV.\1162\ The commenter also asserted
that requiring a municipal advisory firm to conduct an annual review of
its business and determine that it can carry out its municipal advisory
activities, including requiring the applicant to document the review
process, would be costly, burdensome, and confusing. Further, the
commenter noted that the Commission and the MSRB have yet to propose
standards that are the subject of the certification. Accordingly, the
commenter believed that, without such standards or related guidance, it
is premature for prospective advisors to even comment. The commenter
added that a municipal advisor would be unsure as to how to conduct the
review, which may lead to unnecessary expense and exposure to liability
(since the certification would be ``reports'' and therefore subject the
municipal advisor to criminal liability). The commenter suggested that,
if the Commission's interest is in ensuring competence of a municipal
advisor, a better approach would be to create an MSRB examination
process with qualifications clearly defined by the MSRB.
---------------------------------------------------------------------------

    \1161\ Further, the Commission received two comment letters
that, although did not object to the proposed self-certification
requirement, related to the Commission's request for comment on an
alternative to self-certification. See infra notes 1164 and 1165.
The Commission also received many letters commenting, in the context
of opposing the Commission's proposal to exclude appointed members
of the governing body of a municipal entity from its interpretation
of ``employee of a municipal entity,'' that the cost to comply with
``reporting, record keeping, and certification requirements'' and
the related continuing education requirements and training, would
take away from the board members' full-time jobs and families, and
that such costs were unjustified. See, e.g., letter from Susan N.
Kelly, Senior Vice President of Policy Analysis and General Counsel,
and Diane Moody, Director, Statistical Analysis, American Public
Power Association, dated February 22, 2011; Nick Costanzo, Vice
President Strategic, Financial, and Management Services, City of El
Paso, Texas, dated February 22, 2011; and letter from Ben Gorzell,
Chief Financial Officer and Michael D. Bernard, City Attorney, City
of San Antonio, dated February 18, 2011.
    \1162\ See SIFMA Letter I.
---------------------------------------------------------------------------

    After careful consideration of the comment received, the Commission
is not requiring self-certification in Form MA, as adopted. As the
commenter notes, Forms BD and ADV, on which Form MA is based, do not
require self-certification. Further, as pointed out by the commenter,
the MSRB has yet to propose standards that are the subject of the
certification. Accordingly, at this time, the Commission does not
believe that self-certification should be required of municipal
advisors.
    In response to the Commission's request for comment regarding an
independent third party review and whether the Commission should
mandate a minimum level of review as an alternative to the self-
certification requirements,\1163\ the Commission received two letters.
The two commenters did not object to the self-certification requirement
but did oppose any third-party review or audit.\1164\ Both commenters
assert that such a review would impose unnecessary costs, and that
Commission review would be sufficient. One of these commenters also
opposed any minimum review standards.\1165\ In concurrence with these
commenters, the Commission has determined at this time not to establish
a minimal level of review or require review by an independent third-
party.
---------------------------------------------------------------------------

    \1163\ See Proposal, 76 FR 850.
    \1164\ See NAIPFA Letter I and Joy Howard WM Financial
Strategies Letter. The Commission also received a third comment
letter opposing, as overly-burdensome, any independent party review
either prior to the filing of an initial application or on an annual
or periodic basis thereafter. See Public FA Letter.
    \1165\ See NAIPFA Letter I.
---------------------------------------------------------------------------

c. Information Requested in Form MA-I
    As discussed above, although Form MA-I was proposed as a
registration form for all natural person municipal advisors, Rule15Ba1-
3, as adopted, exempts a natural person municipal advisor from the
requirement to register, if such person is associated with a registered
municipal advisory firm and engages in municipal advisory activities
solely on behalf of a registered firm.\1166\ Rule 15Ba1-2(b)(1), as
adopted, requires a municipal advisory firm, on behalf of which an
associated natural person engages in municipal advisory activities, to
file Form MA-I with the Commission with respect to each such
individual. Pursuant to Rule 15Ba1-2(b)(2), as adopted, a natural
person who is a sole proprietor must file Form MA-I in addition to
filing an application to register as a municipal advisor on Form MA.
---------------------------------------------------------------------------

    \1166\ See supra note 938.
---------------------------------------------------------------------------

    The Commission received more than 30 comment letters relating to
proposed Form MA-I. About 25 of these letters concerned the impact that
the registration requirement for natural person municipal advisors
would have if applied to volunteer members of public boards, in view of
the fact that registration would require completing a Form MA-I.
Because, under the rules as adopted, volunteer public board members
would generally not be required to register, the Commission believes
the concerns of these commenters have been otherwise addressed.\1167\
---------------------------------------------------------------------------

    \1167\ See supra Section III.A.1.c.i. See also infra note 1187.
---------------------------------------------------------------------------

    The remaining comment letters concerned the nature and scope of the
information requested by Form MA-I and are discussed below.\1168\ After
considering the comments, the Commission is adopting Form MA-I
substantially as proposed. However, the Commission is modifying Form
MA-I to require a few additional points of information and is also
eliminating some data requests. In addition, some of the language in
Form MA-I has been modified to reflect the fact that, under the rules,
as adopted, the form is no longer an application for registration and,
except in the case of sole proprietors, will be completed by a firm,
rather than by the individual with respect to whom the form is being
filed.\1169\
---------------------------------------------------------------------------

    \1168\ In addition, the Commission notes that a number of the
comments received regarding proposed Form MA apply similarly to
proposed Form MA-I. Examples include concerns about the duplicative
nature of seeking information already gathered through other
registration programs; confidentiality issues; and compliance
burdens. These comments have been discussed in the section on Form
MA above and are not further addressed here. See, e.g., supra notes
991-992 and 995-996 and accompanying text and the Commission's
response in the discussion following these comments.
    \1169\ For example, the form will now no longer refer to the
individual as ``the applicant'' or ``the registrant.''
---------------------------------------------------------------------------

    As a general matter, the information requested on Form MA-I, as
proposed and adopted, is similar to information requested on FINRA's
Form U4.\1170\ Some questions on Form U4 have been adapted for purposes
of Form MA-I to relate specifically to municipal advisors. Other
questions have been omitted as not necessary or appropriate in the
municipal advisor context.
---------------------------------------------------------------------------

    \1170\ See Form U4, supra note 992. See also Proposal, 76 FR
851, note 237 and accompanying text.
---------------------------------------------------------------------------

    One commenter argued that information sought by Form MA-I largely
duplicates information relating to associated persons sought by Form
MA.\1171\ The Commission acknowledges that a municipal advisory firm
that registers by filing Form MA must already provide information on
that form concerning the disciplinary history of each of its associated
persons, including employees providing advice on behalf of the firm.
However, there is very little overlap between the information required
by Form MA and that required by Form MA-I that cannot be incorporated
by reference.\1172\ Moreover, Form MA-I elicits additional information
that would not be provided by the firm as part of its Form MA. For

example, Form MA-I requires the following information about each
relevant natural person that would not be found on his or her firm's
Form MA if engaged in municipal advisory activities on behalf of a firm
or on his or her own Form MA if acting as a sole proprietor: social
security number of the individual; other names of the individual; his
or her residential and employment history; the offices of the firm
where the individual is located and from which he or she is supervised;
the names of any other municipal advisory firms that employ the
individual; and any other businesses in which the individual is
engaged.\1173\
---------------------------------------------------------------------------

    \1171\ See SIFMA Letter I. The concern over duplication of
information was raised as an argument against separate registration
of individuals on Form MA-I. The rules, as adopted, no longer
require registration for natural person municipal advisors acting
solely as employees of a municipal advisory firm. However, because
Form MA-I is being retained in the rules, as adopted, the Commission
believes it important to address concerns that the information
required by Form MA-I is redundant of information already available
from the firm's Form MA.
    \1172\ Regarding incorporation by reference, see supra notes
994-995 and accompanying text. The Commission acknowledges that a
municipal advisory firm must already provide information on Form MA
concerning the disciplinary history of each of its associated
persons--a term that includes employees who are ``engaged in the
management, direction, supervision, or performance of any activities
relating to the provision of advice to or on behalf of a municipal
entity or obligated person with respect to municipal financial
products or the issuance of municipal securities.'' However, to the
extent that the disciplinary history of an individual is reported in
Form MA, it can be incorporated by reference in Form MA-I.
    \1173\ As noted above, the Commission believes that, in fact,
there is very little overlap between the information required by
Form MA and that required by Form MA-I. For example, when Form MA
asks for the number of employees of the firm engaged in municipal
advisory activities, such information might be gleaned, technically,
by counting all the Form MA-I submissions filed by the firm, but is
not readily apparent. When Form MA asks for the names of all
associated persons of the firm and requires the firm to indicate
whether each such person is active in certain municipal advisory
related fields, the firm is not required to state whether the
associated person is an employee and it does not capture information
on other businesses in which the person is engaged. The requirement
to list the firm's registration information (which, of course, is
available on the firm's Form MA) on the Form MA-I of the individual
will better serve to identify the individual and locate his or her
firm when only the database of individuals reported on Form MA-I is
being searched, separately from the database in which information
obtained in Forms MA is collected. Similarly, the responses to Form
MA's questions in Item 9, in which a firm must disclose whether any
of its associated persons has had a disciplinary history, do not
shed light on the history of any particular employee unless the
relevant DRPs are consulted. Moreover, the disciplinary history
questions in Item 6 of Form MA-I, other than those concerning
criminal, regulatory, and civil judicial actions, do not appear in
Form MA.
---------------------------------------------------------------------------

    Therefore, in completing a Form MA-I for each employee, the
Commission believes that a firm will be supplementing, rather than
duplicating, the information provided on Form MA. For this reason, as
proposed and adopted, the rules require a sole proprietor to complete
and file both forms.
    Among the comments received by the Commission, specifically with
regard to Form MA-I, as has already been discussed, several commenters
questioned the need for separate registration forms for firms and their
individual employees.\1174\ One commenter believed that separate
registration of individuals on Form MA-I could ``lead to confusion''
and ``inadvertent inconsistencies in the information.'' \1175\ Another
commenter believed that processing the estimated 21,800 forms expected
to be filed would put ``significant strain'' on the Commission.\1176\
In addition to these comments, one commenter suggested that, in lieu of
requiring individuals to register separately with the Commission on
Form MA-I, the Commission could ``work with the MSRB to establish,
through the MSRB, a licensing and registration mechanism for
individuals who are municipal advisors, which would be similar to the
program used to register a broker-dealer's licensed associated persons
with FINRA.'' \1177\ Further, the commenter stated that, if the
Commission believes it is necessary to formally register individuals
(in addition to licensing them), the MSRB could adopt Form U4 and
require it to be filed in connection with granting a license to
individuals who engage in municipal advisory activities on behalf of a
Commission- and MSRB-registered municipal advisory firm.\1178\ The
Commission believes that these comments have been addressed by the
exemption created in the rules, as adopted, for natural persons who
engage in municipal advisory activities solely on behalf of a
registered municipal advisor.\1179\
---------------------------------------------------------------------------

    \1174\ See Deloitte Letter; JP Morgan Chase Letter; SIFMA Letter
I. Deloitte stated that registration for natural persons should be
eliminated altogether; or that individuals at least be required to
register only as ``registered representatives.'' See also MSRB
Letter I, stating that ``forms relating to individuals at municipal
advisor entities should be viewed as officially submitted by the
municipal advisor entity.''
    \1175\ See Deloitte Letter.
    \1176\ SIFMA Letter I.
    \1177\ Id. SIFMA stated that because the MSRB is already
planning to develop qualification tests for individuals engaged in
municipal advisory activities, ``having only the MSRB, as opposed to
both the SEC and MSRB, involved in the licensing and registration of
individuals would eliminate duplication and reserve the SEC
resources for regulation of municipal advisory firms.''
    \1178\ See id. SIFMA added that, because many individual
municipal advisors may also be associated persons of a broker-dealer
or investment adviser, it would better serve the interests of the
public to have a single source of information--on Form U4--about a
licensed individual. It would also be easier for an individual and
his or her employer to ensure that the individual is properly
licensed under all applicable regulatory programs if only a single
form is required to be filed with any applicable regulator. See also
Financial Services Roundtable Letter (advocating use of Form U4 for
individuals).
    \1179\ See supra note 938.
---------------------------------------------------------------------------

    Commenters also expressed concerns regarding the disclosures
required by Form MA-I and the plan to make them publicly
available.\1180\ For example, one commenter believed that some of the
information required in Form MA-I ``could not be disclosed by a law
enforcement agency, such as the individual's detailed criminal
history--which includes arrests that do not result in prosecution or
conviction.'' \1181\ The commenter further believed that ``[g]overnment
disclosure of a compiled criminal history is a criminal offense.''
\1182\
---------------------------------------------------------------------------

    \1180\ The comments cited in this paragraph appeared in the
context of letters opposing the application of the definition of
municipal advisor to appointed members of public boards, see supra
note 1161, but are treated here separately because of their possible
relevance to any municipal advisor.
    \1181\ See letter from Jo Anne Bernal, County Attorney, El Paso
County, Texas.
    \1182\ Id.
---------------------------------------------------------------------------

    The Commission believes that it is consistent with the Exchange Act
to require disclosure of such information in order to permit persons
whom Form MA-I concerns to lawfully engage in municipal advisory
activities.\1183\ Regarding a commenter's concern about government
disclosure of compiled criminal history, the Commission notes that
engaging in municipal advisory activities is voluntary. Persons
engaging in municipal advisory activities are on notice that the
information supplied to the Commission on Form MA and MA-I will not be
kept confidential (except where indicated otherwise). Therefore, if a
person does not wish to disclose his or her criminal history, such
person may choose to not engage in municipal advisory activities. In
addition, the Commission notes that the information requested on Form
MA-I is consistent with comparable provisions in Forms BD and ADV, as
well as Form U4.\1184\
---------------------------------------------------------------------------

    \1183\ See Section 15B(c)(2) and (4) of the Exchange Act.
    \1184\ Except where indicated otherwise, the information
supplied on Forms BD, ADV, and U4 is not kept confidential.
---------------------------------------------------------------------------

    One commenter focused on the impact that Form MA-I could have on
bank employees, believing that it would require such information as the
addresses of all offices at which the employee will be physically
located or supervised and noting that it was not uncommon for bank
branch employees such as tellers to work at multiple branch locations
in a geographic region.\1185\ As discussed above, the Commission is
limiting the application of the term investment strategies, providing a
limited exemption for banks, and permitting the registration of
SIDs.\1186\ Due to these changes, few, if any, bank employees of the
type described by the commenter will be engaging in municipal advisory
activities that would require filing of a Form MA-I. For those who are,
the Commission believes that it is as important to obtain this
information as it is with respect to any other natural

person who is engaged in municipal advisory activities.
---------------------------------------------------------------------------

    \1185\ Capital One Letter.
    \1186\ See supra Sections III.A.1.b.viii.
---------------------------------------------------------------------------

    The Commission also received comment letters on Form MA-I from many
municipal entities and agencies concerned about the impact of requiring
appointed members of public boards to make the disclosures required by
the form.\1187\ As discussed in Section III.A.1.c.i., the Commission is
exempting all members of the governing body of a municipal entity
(acting in their capacity as such), including appointed members, from
the requirement to register as municipal advisors. Thus, the concerns
of these commenters should be alleviated.
---------------------------------------------------------------------------

    \1187\ See, e.g., letter from Barry Moline, Executive Director,
Florida Municipal Electric Association, dated February 22, 2011; and
Pennsylvania Public School Employees' Retirement Board Letter.
---------------------------------------------------------------------------

Items 1 and 2: Identifying Information and Other Names
    Item 1 of Form MA-I is being adopted substantially as proposed,
with minor modifications as discussed below.\1188\ Item 1 requires
certain basic identifying information to be disclosed about any natural
person engaged in municipal advisory activities.\1189\ Although, as
discussed above, certain information about an employee of a firm would
already be available through the firm's Form MA, the individual's Form
MA-I requires more information, including:
---------------------------------------------------------------------------

    \1188\ No comments were received concerning Item 1.
    \1189\ This includes, for example, the individual's full legal
name. It also requires the registration and other identifying
numbers of the individual's firm to be provided directly in the Form
MA-I, to make it easier for regulators, municipal entities and
investors to gather the information they need.
---------------------------------------------------------------------------

     the individual's CRD Number, if he or she has one;
     the individual's social security number; \1190\
---------------------------------------------------------------------------

    \1190\ This information will not be made publicly available. As
stated in the Proposal, this information is necessary in connection
with the Commission's enforcement and examination functions pursuant
to Section 15B(c) of the Exchange Act (15 U.S.C. 78o-4(c)). See
Proposal, 76 FR 851, note 240. See also generally supra note 968.
---------------------------------------------------------------------------

     the date of the individual's employment or contract with
the firm;
     whether the individual has an independent contractor
relationship with the firm;
     the firm's registration status;
     all the offices of the firm where the individual may be
physically located and all the offices from which the individual is or
will be supervised; and
     whether any of these offices are located in a private
residence.
    These elements of Item 1 are being adopted as proposed. With
respect to information about the employee's firm, Item 1, as proposed,
would have required the filer to provide any SEC file and registration
numbers assigned to the firm in any registered capacity and also the
firm's CRD Numbers, if any. To ease the completion of the form, Item 1,
as adopted, requires a filer only to indicate whether the firm is
currently registered as a municipal advisor on a Form MA and, if not,
whether it has filed an application for registration on Form MA. If the
latter, the filing date and the firm's EDGAR CIK number must be
provided.
    Item 1, as adopted, additionally requires a filer to provide the
name under which the firm primarily conducts its municipal advisor-
related business, if different from its legal name. It further also
takes into account that an individual may be employed at more than one
municipal advisory firm and requires entry of the relevant information
for each such firm.\1191\ The Commission believes that this additional
information would be useful to the Commission's oversight of the
municipal advisory market, without unreasonably increasing the burdens
upon registrants in completing the form.
---------------------------------------------------------------------------

    \1191\ The form also asks the filer for the total number of such
firms. This question does not require a filer to research any
further information than indicated above, but it can serve as a
helpful cross-check to the filer as well as to regulators, and is
also a useful number for interested parties who do not need the
additional details.
---------------------------------------------------------------------------

    As proposed, Item 2 requires a filer to disclose all other names
that the natural person engaged in municipal advisory activities is
using or has been known by since the age of 18, such as nicknames,
aliases, and names before and after marriage. No comments were received
concerning Item 2, and it is being adopted substantially as proposed.
    As stated in the Proposal, the Commission believed that the
information sought by Items 1 and 2 would be useful to municipal
entities and obligated persons in exploring the background,
credentials, reliability, and trustworthiness of an individual in the
course of making a decision whether to engage that natural person or
his or her firm as a municipal advisor.\1192\ The same information will
be valuable to regulators in overseeing municipal advisors and
investigating possible instances of wrongdoing.
---------------------------------------------------------------------------

    \1192\ See Proposal, 76 FR 851.
---------------------------------------------------------------------------

Item 3: Residential History
    In Item 3, which is being adopted substantially as proposed,\1193\
Form MA-I requires disclosure of each location where the natural person
engaged in municipal advisory activities has resided for the past five
years, including the time period at each residence.\1194\ Changes in
residence must be reported (via an amendment) as they occur. In
addition, no gaps greater than three months between addresses are
permitted.
---------------------------------------------------------------------------

    \1193\ No comments were received concerning Item 3, other than
in the general context of concerns that the degree of detail
required by the forms was overly burdensome and, in particular, in
the context of concerns about registration requirements for
appointees to municipal entity boards, which concerns are discussed
elsewhere in this release.
    \1194\ Non-substantive, technical, and clarifying changes have
been made to Item 3. See infra note 1237.
---------------------------------------------------------------------------

    As stated in the Proposal, the Commission believes that the
residential history of a natural person engaged in municipal advisory
activities, like the additional identifying information Form MA-I
seeks, will be useful for municipal entities and other interested
parties in exploring the background, credentials, reliability, and
trustworthiness of the individual and be valuable to regulators in
overseeing municipal advisors and investigating possible instances of
wrongdoing. The information that is required regarding residential
history is similar to the information requested on Form U4.\1195\
---------------------------------------------------------------------------

    \1195\ See Proposal, 76 FR 852. As stated in the Proposal, the
Commission does not intend to make the information required by Item
3 publicly available. See id., at 852, note 241. A statement to this
effect has been added to the introduction to Item 3, as adopted.
---------------------------------------------------------------------------

Item 4: Employment History
    In Item 4, which is being adopted substantially as proposed,\1196\
Form MA-I requires a listing of the complete employment history of the
natural person engaged in municipal advisory activities for the past
ten years, including full and part-time employment, self-employment,
military service, and homemaking. All statuses during the ten-year
period, such as unemployed, full-time education, extended travel, and
other similar circumstances must be included. In addition, the filer
may not leave a gap longer than three months between entries. As
discussed in the Proposal, the information required is similar to the
information requested on Form U4.\1197\ Such information will help
inform an understanding of an employee's business experience and
provide useful information in preparing for regulatory
examinations.\1198\
---------------------------------------------------------------------------

    \1196\ No comments were received concerning Item 4, other than
in the general context of concerns that the degree of detail
required by the forms was overly burdensome and, in particular, in
the context of concerns about registration requirements for
appointees to municipal entity boards, which concerns are discussed
elsewhere in this release.
    \1197\ The Commission intends to make this information publicly
available.
    \1198\ See Proposal, 76 FR 852. Because no separate blanks are
provided for statuses other than employment at a firm or company,
(e.g., military service, homemaking, unemployment, education, or
travel), guidance has been included in Item 4, as adopted,
instructing the filer to enter such statuses in the space provided
for ``Name of Municipal Advisory Firm or Company.'' Regarding non-
substantive, technical, and clarifying changes, generally, see infra
note 1237.

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Item 5: Other Business
    Item 5 of Form MA-I is being adopted substantially as
proposed.\1199\ Item 5 requires information about the individual's
other business activities, if any, in which he or she is currently
engaged, as a proprietor, partner, officer, director, employee,
trustee, agent or otherwise. The form asks for the name of the other
business, its address, whether it is municipal advisor-related and, if
not, the nature of the business in which it is engaged.
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    \1199\ No comments were received concerning Item 5. Only slight
clarifying changes have been made in the wording of this item as
adopted.
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    The filer is required to provide the individual's position, title,
or relationship with the other business, the start date of the
relationship, the approximate number of hours per month the individual
devotes to the other business, and a brief description of his or her
duties relating to the other business. As discussed in the Proposal,
the information sought in this section is similar to the information
sought by the equivalent section in Form U4. Such information will help
the Commission understand the other business activities of a natural
person engaged in municipal advisory activities and will help staff
prepare for examinations.\1200\
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    \1200\ See Proposal, 76 FR 853.
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Item 6: Disclosures Relating to Any Criminal Action, Regulatory Action,
Investigation, Civil Judicial Action, Customer Complaint/Arbitration/
Civil Litigation, Termination, Certain Financial Matters, and Judgments
and Liens
    Item 6 of Form MA-I, regarding the disciplinary history of the
individual, is being adopted substantially as proposed.\1201\ However,
the Commission has made some modifications to the information sought in
the DRPs, which are discussed below.
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    \1201\ The Commission received no comments specifically relating
to Item 6 in the Proposal.
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    Item 6 of Form MA-I includes three sections that require the same
general types of information regarding an individual's criminal,
regulatory, and civil judicial history, if any, as required regarding
municipal advisory firms in corresponding sections in Form MA,\1202\
although the questions in these sections of Form MA-I differ somewhat
from those in the corresponding sections of Form MA, as will be
discussed below. As in Form MA, certain responses in the criminal,
regulatory, and civil judicial action sections of Form MA-I require
disclosure of complete details of all events or proceedings in DRPs
pertaining to these areas.
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    \1202\ See supra Section III.A.2.b.
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    Item 6 of Form MA-I also has five additional disclosure sections
\1203\ relating to an individual, which are also discussed below. Four
of these ask about any investigations, terminations, customer
complaints/arbitration/civil litigation, or judgments/liens relating to
the individual. Each of these four sections has an associated DRP
requiring further detail where applicable. The fifth additional
section, which has no associated DRP, asks for certain financial
disclosures. As discussed in the Proposal, the Commission believes that
additional disclosures in these five areas, which are also required of
individuals associated with broker-dealers and investment advisers on
Form U4, are appropriate to aid municipal entities, obligated persons,
and other members of the public in researching the background of
municipal advisors and to aid regulators in enhancing their oversight
of municipal advisors.\1204\
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    \1203\ In the proposed version of Item 6, the question about
investigations appeared at the end of the Regulatory Action section.
In the adopted version, a separate section has been created for this
question (which remains the same) for the sake of clarity, as it
concerns both criminal and regulatory investigations. Form MA-I,
both as proposed and adopted, has a separate DRP that concerns only
investigations reported in this question.
    \1204\ See Proposal, 76 FR 853.
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    As discussed in the Proposal, the Commission believes that the
additional disclosure items in the DRPs will be helpful to municipal
entities and obligated persons as clients or prospective clients of
municipal advisors.\1205\ The information may also serve as the basis
for granting or instituting proceedings to deny a registration or for
revoking a registration or imposing other sanctions by the Commission
with respect to an individual.\1206\
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    \1205\ See id., at 854.
    \1206\ See supra notes 1093-1097 and accompanying text
(discussing grounds for revocation of a municipal advisor's
registration or imposing other sanctions).
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    As a general matter, as was the case with the proposed DRPs of Form
MA, many of the questions in the proposed DRPs of Form MA-I did not ask
for specifics. The Commission believes that, with regard to certain
questions, additional details of the kind requested in the adopted
versions of Form MA's DRPs will help regulators, municipal entities,
and other interested parties more easily research and better assess the
background of the individual that is the subject of the DRP of Form MA-
I.\1207\ Thus, many of the revisions made to the DRPs of Form MA have
also been made to the DRPs of Form MA-I.
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    \1207\ See supra note 1123.
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    Among these are changes in questions relating to: removing a DRP
filed in error; \1208\ incorporation by reference of disclosures
already filed elsewhere; \1209\ names and types of courts, regulatory
authorities and forums and their locations, and parties who initiated
the relevant action; \1210\ how to report an event; \1211\ appeals;
\1212\ disposition of a case and sanctions imposed in criminal cases;
\1213\ sanctions and/or relief sought, type of resolution, and
sanctions ordered in regulatory and civil judicial actions; \1214\ and
other matters.\1215\
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    \1208\ See supra text following note 222.
    \1209\ See supra notes 1127-1128 and accompanying text.
    \1210\ See supra notes 1129-1130 and accompanying and following
text.
    \1211\ See supra text accompanying note 1132.
    \1212\ See supra note 1134 and accompanying text.
    \1213\ See supra notes 1135-1137 and accompanying text.
    \1214\ See supra notes 1137-1139 and accompanying text.
    \1215\ See supra notes 1140-1142 and accompanying text.
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    The following discussion summarizes Item 6 and its related DRPs as
well as additional revisions made in their adopted versions:
Criminal Action Disclosures
    With respect to felonies, Item 6 of Form MA-I--in contrast to the
disclosures required by Item 9-A of Form MA--requires disclosure of:
     any past conviction of, or plea of guilty or nolo
contendere to, a felony by the individual, rather than limiting the
disclosure to the past ten years, as in a firm's or solo practitioner's
Form MA;
     any charges of felony against the individual in the past,
rather than limiting disclosure to currently pending charges, as in a
firm's or sole proprietor's Form MA; and
     any convictions of, or plea of guilty or nolo contendere
to, a felony by an organization based on activities that occurred when
the individual exercised control over the organization--a disclosure
not required in Form MA.
    With respect to misdemeanors, while Form MA requires only
disclosures of convictions and pleas concerning an individual looking
back ten years, and requires only disclosures of charges that are
currently pending, Form MA-I requires disclosure of such convictions,
pleas, and charges that occurred at any time in the individual's past.
Misdemeanors, and convictions, pleas,

and charges of misdemeanor against an organization while the individual
exercised control over the organization are also required to be
disclosed.
    These criminal action disclosure requirements regarding individuals
beyond the information required in Form MA, are consistent with the
disclosure requirements on Form U4. In addition, as discussed in the
Proposal, these disclosures provide additional information with respect
to natural persons engaged in municipal advisory activities that will
be useful to the Commission's regulatory and examination programs, and
may be useful to municipal entities and obligated persons who are
clients or prospective clients of the individual or his or her
firm.\1216\
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    \1216\ See Proposal, 76 FR 853.
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    As proposed and adopted, the Criminal Action DRP of Form MA-I asks
for additional details regarding, among other things: the charges,
number of counts, and the court in which they were brought; status of
the action; details of its disposition and sanctions ordered; and the
date of amended charges, if any. It also provides an option and space
for comment consisting of a brief summary of the circumstances leading
to the charge(s) as well as their current or final disposition.
    Certain revisions have been made in the adopted version of the DRP.
For example, in its disclosure requirements concerning the charges, the
DRP, as adopted, asks specifically whether the charge is (a) municipal
advisor-related or (b) investment-related; and, if so, in each case,
(c) what product type it involved.\1217\
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    \1217\ The Commission believes that these additional details
contribute to an accurate picture of the individual's disciplinary
history and notes that the same questions are asked in the
equivalent DRP of Form MA, as both proposed and adopted. On the
other hand, specific questions regarding pleas to amended charges
have been removed as unnecessary because the requested information
should be provided in responses to other questions.
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    Moreover, as proposed, the DRP required a description, in narrative
form, of details concerning any sentence or penalty imposed, its start
date, and its duration, and the amount and date of payment.\1218\ As
adopted, the DRP asks specifically whether any sentence or any other
penalty is ordered, and requires, if so, a description of whether it
involved prison, jail, probation, community service, counseling,
education, or other. It further asks, in question-by-question format,
for the duration in days, months, and/or years of any incarceration,
the start and end dates, whether any concurrent sentence is to be
served, and, if so, the end date. It also asks, in question-by-question
format, whether any portion of a monetary penalty was reduced or
suspended, whether it has been paid in full, and, if not, how much
remains unpaid. These details should contribute to the clarity of the
picture received by regulators, municipal entities, and investors of
the individual's disciplinary background.
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    \1218\ The form provided a blank space for: ``Sentence/Penalty,
Duration (if suspension, probation, etc.), Start Date of Penalty:
(MM/DD/YYYY), End date of Penalty (MM/DD/YYYY); If Monetary penalty/
fine--Amount paid, Date monetary/penalty fine paid: (MM/DD/YYYY), if
not exact, provide explanation.'' It also gave the filer the option
of providing ``a brief summary of circumstances leading to the
charge(s) as well as the current status or final disposition.''
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    Finally, the proposed Criminal Action DRP of Form MA-I did not ask
specifically about appeals. In its adopted version, the DRP asks
whether the criminal action was appealed, and, if so, the name and
location of the appeals court, and other details. Choices are also
provided to describe specifically the disposition of any appeal.\1219\
The Commission believes that obtaining this information will better
enable regulators, municipal entities, and other interested parties to
research the complete criminal history of the individual.\1220\
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    \1219\ These choices are: affirmed; vacated and returned for
further action; or vacated/final. An applicant may also respond
``other,'' in which case the other type of disposition must be
specified.
    \1220\ See also supra note 1134.