[Federal Register Volume 81, Number 23 (Thursday, February 4, 2016)]
[Notices]
[Pages 6088-6094]
[FR Doc No: 2016-02062]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76999; File No. SR-MSRB-2016-01]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change Consisting of
Proposed Amendments to Rule A-3, on Membership on the Board

January 29, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on January 15, 2016, the Municipal
Securities Rulemaking Board (the ``MSRB'' or ``Board'') filed with the
Securities and Exchange Commission (the ``SEC'' or ``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the MSRB. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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    \1\ 15 U.S.C. 78s(b)(i).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change
consisting of proposed amendments to Rule A-3, on membership on the
Board, to lengthen the term of Board member service, change the number
and size of Board classes, limit the number of consecutive terms a
Board member can serve, eliminate the requirement that there be at
least one municipal advisor representative per class that is not
associated with a dealer (``non-dealer municipal advisor''), delete an
obsolete transition provision and provide a technical update to the
name of a Board committee (collectively, the ``proposed rule change'').
The MSRB requests that the proposed rule change be effective on the
date of Commission approval.
    The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2016-Filings.aspx, at the MSRB's principal office, and at the Commission's
Public Reference Room.

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

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

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

1. Purpose
    The MSRB is the self-regulatory organization (``SRO'') created by
Congress to establish regulation for the $3.7 trillion municipal
securities market, including rules governing the municipal securities
activities of dealers and the municipal advisory activities of
municipal advisors. The MSRB's mission is to protect municipal
entities, obligated persons, investors and the public interest, and to
promote a fair and efficient municipal securities market. The Board is
comprised of 21

members \3\ who, collectively, govern the MSRB to carry out its mission
primarily by regulating dealers and municipal advisors, providing
market transparency through its Electronic Municipal Market Access
(EMMA[supreg]) Web site \4\ and conducting market leadership, outreach
and education. The MSRB believes that increasing the term length for
Board membership from three years to four years will improve the
Board's ability to fulfill this purpose.
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    \3\ See MSRB Rule A-3(a).
    \4\ EMMA[supreg] is a registered trademark of the MSRB.
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    Many general, and some more detailed, aspects of the Board's
composition are set forth in the Exchange Act.\5\ It categorizes the
members of the Board into two broad groups: Individuals who must be
associated with a broker, dealer or municipal securities dealer
(``dealer'') or municipal advisor (collectively, ``Regulated
Representatives''), and individuals who must be independent of any
dealer or municipal advisor (``Public Representatives'').\6\ The Act
then specifies that the number of Public Representatives must at all
times exceed the number of Regulated Representatives,\7\ and sets
minimum requirements for certain types of individuals to serve in the
two groups.\8\
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    \5\ See 15 U.S.C. 78o-4(b)(1). Rule A-3 further establishes the
Board's composition.
    \6\ See 15 U.S.C. 78o-4(b)(1); MSRB Rule A-3(a)(i)-(ii).
    \7\ See 15 U.S.C. 78o-4(b)(2)(B)(i).
    \8\ See 15 U.S.C. 78o-4(b)(1); MSRB Rule A-3(a).
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    At the same time, Congress delegated authority to the MSRB to
determine many aspects of Board composition by rule, including such
important aspects as the size of the Board and the length of the term
of Board member service.\9\ Currently, the Board is divided into three
seven-member classes that serve staggered, three-year terms.\10\ Under
this framework, total Board tenure typically is no more than three
years because Board members may only serve consecutive terms under two
limited scenarios: (1) By invitation from, and due to special
circumstances as determined by, the Board; or (2) having filled a
vacancy and, therefore, having served only a partial term.\11\
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    \9\ The Act provides that ``[t]he members of the Board shall
serve as members for a term of 3 years or for such other terms as
specified by rules of the Board,'' and that the rules of the Board
``specify the length or lengths of terms members shall serve.'' 15
U.S.C. 78o-4 (b)(1), (b)(2)(B)(ii).
    \10\ See MSRB Rule A-3(b)(i).
    \11\ Id.
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    In June 2015, the MSRB published a request for comment on several
Board governance matters, including whether the MSRB should consider,
at a conceptual level, proposing amendments to modify the length of
Board member service.\12\ In response, the MSRB received nine comment
letters that specifically addressed that issue.\13\ Most of the
commenters generally supported the MSRB's consideration of modifying
the length of Board member service, but they offered varying
perspectives and approaches to the modification.
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    \12\ MSRB Notice 2015-08 (Jun. 11, 2015) (``First Request for
Comment'').
    \13\ See infra note 28.
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    The MSRB carefully considered all of the comments received in
response to the First Request for Comment and determined to publish a
second request for comment on draft amendments to lengthen the term of
Board member service from three years to four years.\14\ In response to
the Second Request for Comment, the MSRB received five comment letters,
all of which supported the increase.\15\ After carefully considering
all of the comments received in response to both requests for comment,
the MSRB determined to file this proposed rule change to increase Board
member term length from three years to four years.
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    \14\ MSRB Notice 2015-18 (Oct. 5, 2015) (``Second Request for
Comment'').
    \15\ See infra note 29.
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    The optimal term length for members of an organization depends to a
great extent upon the particular characteristics of the organization,
including the nature of its mission and its activities. It is
necessarily a balance among numerous competing interests, such as the
interests in continuity, institutional knowledge and membership
experience, on the one hand, and the interest in the addition of new
perspectives, on the other. To date, the MSRB has aimed to achieve this
balance using a Board member term of three years, but it now believes
that the desired balance could be better achieved using an
incrementally longer Board member term of four years.
    Based on its experience and the views repeatedly expressed by
former Board members, the MSRB believes that members are capable of
making significantly increasing contributions with each year that they
become more fully acclimated to the role and work of the MSRB.\16\ The
existence of such a multi-year ``learning curve'' is consistent with
views expressed in a survey conducted by the Society of Corporate
Secretaries and Governance Professionals of board members across a
range of industries.\17\ A number of studies suggest that longer board
member tenures--to a point--are associated with superior
governance.\18\ Overall, based on its experience and expertise
regarding its mission and activities, the MSRB believes that having
members serve on the Board for a fourth year would improve the
continuity and institutional knowledge of the Board from year to year,
as well as its overall efficiency and effectiveness due to the
collective value of retaining several members who possess additional
knowledge and experience from their service as MSRB Board members.
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    \16\ The current, standard three-year term of Board member
service is significantly shorter than the average tenure of over
eight years that studies have shown for members of other boards. See
Spencer Stuart Board Index 2014, 5, available at https://
www.spencerstuart.com/~/media/pdf%20files/
research%20and%20insight%20pdfs/ssbi2014web14nov2014.pdf%20target;
Governance Minutes by the Society of Corporate Secretaries and
Governance Professionals--Director Tenure (February 26, 2014),
available at http://main.governanceprofessionals.org/governanceprofessionals/memberresources/resources/viewdocument/?DocumentKey=37b09de5-7404-4eab-bc70-10741cbf7138 (stating that
average board member tenure is eight to ten years and that board
members typically experience a three to four year learning curve)
(``Governance Minutes''). Although this research focuses on
corporate boards, the MSRB believes the learning curve and evolution
of an individual director's participation on and contributions to a
corporate board are analogous to the experience of MSRB Board
members as they gain more tenure.
    \17\ See Governance Minutes, supra note 16.
    \18\ See, e.g., Nikos Vafeas, Length of Board Tenure and Outside
Director Independence, 30 J. of Bus. Fin. & Acct. 1043 (2003);
Lucian Arye Bebchuck, Jesse M. Fried, and David I. Walker,
Managerial Power and Rent Extraction in the Design of Executive
Compensation, 69 U. of Chi. L. Rev. 751 (2002).
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    Greater continuity and institutional knowledge is very important
for the MSRB rulemaking process. This process, particularly for rules
that are complex or address unique problems, frequently spans multiple
years from conception to full implementation.\19\ Even for rulemaking
initiatives that can be completed in relatively less time, Board
members have noted frequently that they are often able to engage more
fully and effectively in the process after they have gained experience
with the organization and have deeper knowledge of other, related
rulemaking activities.
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    \19\ For example, the MSRB began its current rulemaking
initiative for Rule G-42, to establish core standards and duties for
municipal advisors, in the fall of 2013, and will not be fully
implemented until June of 2016. The MSRB's initiative for Rule G-18,
to establish the first best-execution rule for transactions in
municipal securities, began as early as the spring of 2013 and will
continue to be in an implementation period until March of 2016.
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    The MSRB believes that the proposed rule change would ensure
greater continuity and institutional knowledge from year to year,
particularly through

the rulemaking process, and increase overall efficiency, while
maintaining the benefits of having a significant number of new Board
members join the organization each year.
Proposed Amendments to Rule A-3
    The proposed rule change would lengthen the term of Board member
service from three years to four years, and it would facilitate the
new, longer term length by increasing the number of Board classes and
adjusting their sizes. Additionally, the proposed rule change would
limit the number of consecutive terms a Board member can serve to two,
and would eliminate the requirement that there be at least one non-
dealer municipal advisor per Board class. Finally, the proposed
amendments would delete an obsolete provision from the rule.
    All of the amendments included in the proposed rule change are to
Rule A-3(b)(i). First, they would increase the Board member term length
from three years to four years and the number of Board classes from
three to four--one class comprised of six members and three classes of
five. The changes in the number of classes and their sizes would ensure
that the MSRB nominates and elects new members every year, maintains
classes that are as evenly distributed in size as possible, and has a
Board composition that always satisfies the statutorily-required
position allocations,\20\ while resulting in a consistent and
manageable rate of turnover from year to year. As required by the
Exchange Act and Rule A-3(a) and (b)(i), the classes would continue to
be as evenly divided in number as possible between Public
Representatives and Regulated Representatives, while also being
majority public.
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    \20\ See supra notes 6-8.
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    Second, no Board member could serve more than two consecutive
terms--eight years in total--which could only occur under the special
circumstances exception. This added provision would ensure that the
special circumstances exception is not overused, mitigate some
commenters' concerns of Board members becoming too dominant and unduly
influential,\21\ assure appropriate turnover of Board membership and
help maintain a robust pool of applicants for Board service. The MSRB
believes this modification will reflect good corporate governance as
applied to the particular characteristics of the MSRB.
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    \21\ See infra Section C, Increase in Term Length--Limits.
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    Third, the proposed rule change would eliminate the requirement
that there be at least one non-dealer municipal advisor.\22\ Because
the draft amendments would result in four classes, not eliminating this
requirement would create an unintended obligation that the Board always
include four non-dealer municipal advisors, thus potentially
diminishing representation of other regulated entities. The proposed
rule change would not affect the existing requirement in Rule A-
3(a)(ii)(3) that, for the Board as a whole, ``at least one, and not
less than 30 percent of the total number of [R]egulated
[R]epresentatives, shall be associated with and representative of
municipal advisors and shall not be associated with a broker, dealer or
municipal securities dealer.'' Therefore, nothing in this change would
reduce the minimum required representation of municipal advisors nor
would it prohibit the MSRB from deciding to include more than three
non-dealer municipal advisors on the Board. All other provisions in
Rule A-3(b)(i) would remain unchanged.
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    \22\ See MSRB Rule A-3(b)(i).
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    To effectuate the changes in term length and the number and size of
classes, the MSRB would implement a transition plan, under which each
Board member, who was elected prior to, and whose term ends on or after
the end of, the MSRB's fiscal year 2016,\23\ could be considered for a
term extension not exceeding one year. This process would occur over
fiscal years 2017, 2018 and 2019. The transition would proceed as
follows: (1) For fiscal year 2017, one Public Representative from the
Board class of 2016 (i.e., members who began a three-year term on
October 1, 2013) would receive a one-year extension and six new members
would join the Board; (2) for fiscal year 2018, one Public and two
Regulated Representatives from the Board class of 2017 (i.e., members
who began a three-year term on October 1, 2014) each would receive a
one-year extension and five new members would join the Board; and (3)
for fiscal year 2019, three Public and two Regulated Representatives
from the Board class of 2018 (i.e., members who began a three-year term
on October 1, 2015) each would receive a one-year extension and five
new members would join the Board. The full Board would vote by ballot
on all members eligible for term extensions to determine who receives
them. The selection of Board members whose terms would be extended
would be in compliance with the statutorily-required compositional
requirements of the Board, and the Board would continue to consist of
21 members with a majority of Public Representatives.\24\ In fiscal
year 2020, no further extensions would be required and five new members
would join the Board, completing the transition to four classes. From
that point forward, the Board would repeatedly nominate and elect
classes in the sequence of six, five, five, and five members. While
there are numerous possible combinations of the number of Board classes
and the number of members in each class, the MSRB believes this
specific combination would achieve the transition expeditiously and
efficiently while minimizing any disruption from the changes.
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    \23\ The MSRB's fiscal year commences on October 1 of a given
year and ends on September 30 of the following year.
    \24\ See supra notes 3 and 6-8.
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    MSRB Rule A-3(h) currently describes the transition process the
MSRB used to increase its Board size from 15 to 21 members during its
fiscal years 2013 and 2014, and to be in compliance with new
requirements established by the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010.\25\ The proposed rule change would
delete this provision from Rule A-3 because that process has been
completed and the provision is, therefore, obsolete.\26\
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    \25\ See Public Law 111-203, 124 Stat. 1376; Exchange Act Rel.
No. 65424 (Sept. 28, 2011), 76 FR 61407 (Oct. 4, 2011) (SR-MSRB-
2011-11) (approving the MSRB's establishment of a Board structure of
21 Board members divided into three classes, each class being
comprised of seven members who would serve staggered three-year
terms).
    \26\ In the Second Request for Comment, the MSRB included draft
amendments to MSRB Rule A-3(h)(i) to include the transition plan.
Since that plan is fully described herein and the inclusion of rule
text that duplicates that description would become obsolete and
eventually require a proposed rule change to be removed from the
rulebook, the MSRB does not believe it should be included.
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    Finally, MSRB Rule A-3(g)(ii) makes reference to the ``Nominating
Committee,'' which is now called the ``Nominating and Governance
Committee.'' Accordingly, the proposed rule change would update the
reference to the current name of the committee.

2. Statutory Basis

    The MSRB has adopted the proposed rule change pursuant to Section
15B(b)(2)(B) of the Act, which provides that the MSRB's rules shall:

establish fair procedures for the nomination and election of members
of the Board and assure fair representation in such nominations and
elections of [P]ublic [R]epresentatives, broker dealer
representatives, bank representatives, and advisor representatives.
Such rules--
    (i) shall provide that the number of [P]ublic [R]epresentatives
of the Board shall at all times exceed the total number of
[R]egulated

[R]epresentatives and that the membership shall at all times be as
evenly divided in number as possible between [P]ublic
[R]epresentatives and [R]egulated [R]epresentatives;
    (ii) shall specify the length or lengths of terms members shall
serve;
    (iii) may increase the number of members which shall constitute
the whole Board, provided that such number is an odd number; and
    (iv) shall establish requirements regarding the independence of
public representatives.

    Specifically, the MSRB believes the increase of the term length
from three to four years, the change in the number and size of Board
classes from three classes of seven members to one class of six and
three classes of five, and the elimination of the requirement that
there be one non-dealer municipal advisor per class are consistent with
the Exchange Act in that the composition of the Board would continue to
satisfy all of the statutory requirements.\27\ In particular, the
number of Public Representatives would continue to exceed the total
number of Regulated Representatives and the classes would continue to
be as evenly divided in number as possible between Public and Regulated
Representatives. Further, the proposed rule change specifies the length
of term that Board members would serve--four years, which, for the
reasons discussed earlier, the MSRB believes will improve the
effectiveness and efficiency of the Board.
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    \27\ See supra notes 5-8.
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    The MSRB also believes the limitation of consecutive terms to two,
totaling a maximum of eight years of consecutive service, is consistent
with the Exchange Act in that it specifies the length of term that
Board members can serve when the MSRB invokes the special circumstances
exception.
    Further, the MSRB believes the proposed deletion of the transition
process described in MSRB Rule A-3(h) is consistent with the Exchange
Act because removing the obsolete provision would improve the clarity
and readability of the rule. The MSRB also believes the proposed update
to the reference to the ``Nominating and Governance Committee'' in MSRB
Rule A-3(g)(ii) is consistent with the Act because it promotes the
accuracy of the rule in regard to a reference to a component of the
Board's governance structure.
    Finally, none of the amendments in the proposed rule change alters
the number of members that constitutes the whole Board or the
requirements regarding the independence of Public Representatives.

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

    Section 15B(b)(2)(C) of the Act requires that MSRB rules not be
designed to impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. The MSRB does
not believe that the proposed rule change would impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act because it is concerned solely with the administration of
the SRO.

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

    The MSRB received nine comment letters specifically addressing the
issue of whether to modify the length of Board member service in the
First Request for Comment \28\ and five comment letters in response to
the Second Request for Comment.\29\ The comment letters are summarized
below by topic.
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    \28\ See letters from: Jerry Gold (``Gold''), dated July 17,
2015; Dustin McDonald, Director, Federal Liaison Center, Government
Finance Officers Association (``GFOA''), dated July 20, 2015;
Dorothy Donohue, Deputy General Counsel--Securities Regulation,
Investment Company Institute (``ICI''), dated July 13, 2015; Bob
Lamb (``Lamb''), President, Lamont Financial Services Corporation,
dated July 7, 2015; Terri Heaton, President, National Association of
Municipal Advisors (``NAMA''), dated July 13, 2015; Lisa S. Good,
Executive Director, National Federation of Municipal Analysts
(``NFMA''), dated July 13, 2015; Benjamin S. Thompson
(``Thompson''), Managing Principal and Chief Executive Officer,
Samson Capital Advisors, dated July 7, 2015; Rick A. Fleming,
Investor Advocate, SEC (``SEC Investor Advocate''), dated July 13,
2015; and Michael Decker, Managing Director, Securities Industry and
Financial Markets Association (``SIFMA''), dated July 13, 2015. Lamb
and Thompson are former Board members.
    \29\ See letters from: Michael Nicholas, Chief Executive
Officer, Bond Dealers of America (BDA), dated November 19, 2015;
Stephen Heaney (``Heaney''), dated November 10, 2015; NAMA, dated
November 19, 2015; SEC Investor Advocate, dated October 29, 2015;
and SIFMA, dated November 19, 2015. Heaney is a former Board member,
who served a four-year term under a previous transition period
between October 1, 2009, and September 30, 2013.
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Increase in Term Length--General
    As noted above, all of the comments in response to the Second
Request for Comment supported increasing the length of Board member
service from three years to four years.\30\ Notably, the SEC Investor
Advocate agreed with the MSRB that lengthening the term would improve
continuity and institutional knowledge of the Board from year to year,
while retaining the benefits of the regular addition of new members,
and that the amendments proposed are a reasonable approach to achieving
that goal. More specifically, he noted that the increased term length
would give Board members, particularly Public Representatives,\31\ more
time to develop the institutional knowledge and experience required for
fully engaged and effective oversight of the MSRB, which he believes
would be in the best interest of investors because it may lessen what
he considered to be the Board's natural dependence upon Regulated
Representatives,\32\ who he presumed have greater experience on certain
issues. To this point, Heaney, a former Board member who served for
four years due to the Board's transition from 15 to 21 members,
believes the MSRB would benefit significantly from the added stability
and continuity, as he believes his extra year enabled him to contribute
more than he would have otherwise been able to in a three-year term.
BDA believes that a four-year term is an acceptable balance and that
having an extra year to serve on the Board would promote continuity of
knowledge and ensure appropriate overlap among those working on rule
proposals and other changes that affect how the municipal securities
market operates. Finally, the SEC Investor Advocate believes the
proposed term length of four years is appropriate when compared to the
structure of similar organizations with a mission to protect investors,
all with board member terms in the range of three to five years.\33\
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    \30\ In response to the First Request for Comment, Thompson
believed that a longer Board member term could allow the Board to
leverage accumulated knowledge more effectively than the current
three-year term length. Gold was generally opposed to the
lengthening of Board member service, and GFOA stated that the
current single three-year terms ensure consistent turnover and the
introduction of new perspectives on the Board. Neither Gold nor GFOA
commented in response to the Second Request for Comment, which
contained the specific draft amendments to increase the term length
from three years to four years.
    \31\ See MSRB Rule A-3(a)(i) (defining a Public Representative
as an individual ``independent of any municipal securities broker,
municipal securities dealer, or municipal advisor'').
    \32\ See MSRB Rule A-3(a)(ii) (defining a Regulated
Representative as an individual ``associated with a broker, dealer,
municipal securities dealer, or municipal advisor'').
    \33\ The SEC Investor Advocate made the comparison to the term
lengths of members of the Financial Industry Regulatory Authority
(``FINRA''), the Public Company Accounting and Oversight Board
(``PCAOB''), the SEC, and the SEC's Investor Advisory Committee.
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Increase in Term Length--Limits
    SIFMA supported the increase in term length from three to four
years and believes the change would improve continuity and
institutional knowledge of the Board from year to year. However,

SIFMA is concerned that serving more than one term could create an
environment in which one or more Board members with multiple terms of
service could become too dominant in Board deliberations and have undue
influence, particularly considering that the Board has a majority of
Public Representatives, who SIFMA suggested may not have significant
market or industry experience. Accordingly, SIFMA urged the Board to
consider further specifying or limiting the circumstances under which a
Board member may serve more than four years by: (1) More explicitly
defining the special circumstances exception allowing consecutive
terms; \34\ (2) imposing a maximum lifetime limit on Board service;
\35\ or (3) specifying that when a Board member, who has already served
a full term is retained or recalled to fill a sudden vacancy, that the
member's extended term be temporary for only as long as necessary to
recruit a qualified, permanent new member to fill the vacancy.
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    \34\ See MSRB Rule A-3(b)(i) (``A member may not serve
consecutive terms, unless special circumstances warrant that the
member be nominated for a successive term or because the member
served only a partial term as a result of filling a vacancy pursuant
to section (d) of this rule.'').
    \35\ In response to the First Request for Comment, SIFMA stated
that there should be a lifetime cap of four years of Board service,
limiting any member to one term only.
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    First, the MSRB does not believe it should more explicitly define
the special circumstances exception, which the Commission approved in
January 2011.\36\ In its filing, the MSRB noted a Board member
possessing special expertise needed by the Board that is not possessed
by other Board members or generally by persons in the pool of potential
candidates for Board membership as an example of how the exception
would be applied. Given that the Commission found the current provision
to be consistent with the Exchange Act, and that the MSRB has only
applied it twice for the purpose of maintaining the special expertise
of a member, with the use for that purpose being consistent with the
MSRB's explanation in the filing, the MSRB does not believe any
additional specificity is needed in the rule.\37\
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    \36\ See Exchange Act Release No. 63764 (Jan. 25, 2011), 76 FR
5417 (Jan. 31, 2011) (SR-MSRB-2010-17) (approving amendments to MSRB
Rule A-3, including the special circumstances exception).
    \37\ The MSRB notes that no other commenters raised this issue.
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    Second, the MSRB does not believe it is appropriate to impose a
maximum lifetime limit on Board service, as it would limit the pool of
applicants to serve on the Board from year to year. The pool of
applicants from which the MSRB can consider and select new Board
members is already limited by the statutory requirement that each Board
member be ``knowledgeable of matters related to the municipal
securities markets,'' \38\ and, as recognized by the SEC Investor
Advocate in response to the First Request for Comment, it can be a
challenge to find talented and qualified people who are willing to
devote time and energy to serve on the Board. Given those constraints,
a lifetime cap, particularly one of only four years (i.e., one term) as
SIFMA has suggested, may hinder the MSRB's ability to select from a
robust pool of applicants. This problem could be exacerbated over time
as additional Board members reach the end of their service and lose
future eligibility under such a cap. The MSRB believes that former
Board members may be highly qualified to serve on the Board with the
benefit of their prior service, and they should not be precluded from
consideration because of it. Additionally, several organizations with
analogous investor-protection missions have no maximum lifetime limit
on member service (e.g., FINRA governors, PCAOB members, SEC
commissioners, and the SEC Investor Advisory Committee members). In
light of all of the above, the MSRB is not including a lifetime cap on
service in the proposed amendments as suggested by SIFMA.
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    \38\ See 15 U.S.C. 78o-4(b)(1).
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    Finally, the MSRB does not believe it should specify that, when a
Board member, who has already served a full term is retained or
recalled to fill a sudden vacancy, the member's extended term be
temporary for only as long as necessary to recruit a qualified,
permanent new member to fill the vacancy. Since a Board member can only
be retained under the special circumstances exception, the first part
of SIFMA's suggestion is more of a critique of that exception and/or
the MSRB's use of it. As noted above, however, the special
circumstances exception has been approved by the Commission. Further,
depending on the nature and timing of a vacancy on the Board, it may be
more efficient for the MSRB to recall a former Board member. In
particular, for vacancies that occur in the middle of a fiscal year or
in the middle to end of a vacating Board member's term, the amount of
time and resources required to find, select and onboard a new member
typically would be significantly greater than the time and resources
required to do the same for a former Board member. This disparity in
efficiency would be even greater when compared to a two-part process in
which a former Board member is temporarily seated and, after a short
period, replaced by a new Board member. Additionally, the temporary
status of the former Board member could potentially limit his or her
effectiveness on the Board. Accordingly, the MSRB believes it is in the
best interest of the organization to continue to have the flexibility
to select from among former Board members, as well as from among all
other sources, to fill a vacancy for the remainder of a vacating Board
member's term.
    While the MSRB does not support specifying or limiting the
circumstances under which a Board member may serve more than four years
in any of the ways SIFMA suggested, the proposed rule change would
limit the number of consecutive terms a Board member can serve to two,
which could only occur when the MSRB invokes the special circumstances
exception, to address the general concern among commenters about unduly
long tenures. There is empirical evidence to suggest very long board
tenures are associated with weaker corporate governance and less
favorable organizational performance.\39\ Additionally, in response to
the First Request for Comment, several commenters expressed concerns
similar to SIFMA's. Specifically, GFOA opposed two consecutive three-
year terms, NFMA was concerned that a six-year or longer term would
limit the opportunity to bring ``fresh ideas'' to the Board, and ICI
stated that it would support consecutive three-year terms if there was
no longer a special circumstances exception that could create a term
greater than six years.\40\
---------------------------------------------------------------------------

    \39\ See supra note 18.
    \40\ The MSRB notes that, in response to the First Request for
Comment, the SEC Investor Advocate and Lamb supported consecutive
three-year terms without any qualification.
---------------------------------------------------------------------------

    To address these concerns, the MSRB believes that Board members
should be limited to two consecutive terms when the special
circumstances exception is invoked. By doing this, under the proposed
rule change, no Board member could serve more than eight years
consecutively. This added provision would ensure that the special
circumstances exception is not overused, mitigate the concern of Board
members becoming too dominant and unduly influential, assure
appropriate turnover of Board membership and help maintain a robust
pool of applicants for Board service. As noted, the MSRB believes this
modification reflects good corporate governance as applied to the
particular characteristics of the MSRB.

Increase in Term Length--Training
    However, BDA encouraged the MSRB to consider instituting a robust,
formalized training program for all incoming Board members in their
first year of service to maximize the benefits of the proposed fourth
year of service. Similarly, in a comment letter in response to the
First Request for Comment, NAMA, which ``does not object'' to the
increase in term length, suggested that the MSRB could devote extensive
staff time and other resources to expedite the learning curve for Board
members. These comments address internal MSRB matters and do not
suggest any revision to the language of the amendments in the proposed
rule change. Additionally, the MSRB already allocates significant
resources to educating new Board members as part of a robust and
dedicated orientation process that begins prior to the commencement of
their terms and focuses on organizational and other substantive
matters, including, but not limited to, rulemaking and other large
initiatives. The MSRB also already routinely revises and improves this
process with the benefit of each successive experience orienting new
Board members.
Number and Size of Board Classes
    In response to the Second Request for Comment, none of the
commenters specifically addressed the proposed change from three
classes of seven Board members to one class of six members and three
classes of five. In response to the First Request for Comment, SIFMA
suggested the same structure. The MSRB continues to believe the
proposed rule change is appropriate and, in light of the absence of any
concern among the commenters, is not making any revision to the
proposal in this respect.
Elimination of the Requirement That There Be at Least One Non-Dealer
Municipal Advisor Representative per Board Class
    In response to the Second Request for Comment, only BDA commented
on the proposed elimination of the requirement that there be at least
one non-dealer municipal advisor representative per Board class. BDA
supported this adjustment because it is its preference to ensure the
number of dealer-affiliated regulated entities on the Board is as
robust as possible. Given that no commenter opposed the change and that
it would neither reduce the representation of municipal advisors nor
preclude the MSRB from deciding to include more than three non-dealer
municipal advisor representatives on the Board, the MSRB is not making
any change to the proposal in this regard.
Transition Plan
    BDA supported the transition plan to the new term lengths proposed
by the MSRB in the Second Request for Comment. In particular, it
supported the part of the plan under which a special nominating
committee comprised only of Board members not being considered for
extensions would nominate the Board members who would receive one-year
extensions to be voted on by the full Board. BDA believes that approach
to be fair in that members on the special committee providing
nominations for term extensions would not be eligible for a longer
term, and that it would reduce any potential for self-dealing. SIFMA
supported the plan because no existing Board member would serve for
more than four years under the transition plan.
    After considering this part of the plan further, the MSRB believes
it is a better approach to have the full Board vote by ballot on all
members eligible for extensions. First, given that 18 of the 21 Board
members would be eligible for an extension, it would be difficult for
the MSRB to constitute a special committee that is a fair
representation of the entire Board. Additionally, despite the change in
the process, the ultimate authority of the full Board to determine who
would receive an extension is unchanged--under the special committee
nomination process, the Board could vote down every nomination until
the member, whom the Board would support for an extended term, was
nominated. Finally, the MSRB believes that any concerns BDA might have
with the potential for conflicts of interest and/or self-dealing under
the new process are mitigated because the size of the Board--21
members--and the large number of members eligible for an extension make
it more difficult for any one member to inappropriately affect the
outcome of the election.
Miscellaneous
    In response to both requests for comment, NAMA stated that the MSRB
should consider returning the size of the Board to 15 members.
Additionally, NAMA suggested that, if there are term extensions for
Board members, the rule amendments should address term lengths for
leadership positions and the point in a Board member's term at which he
or she becomes eligible for such positions. In response to the First
Request for Comment, SIFMA suggested that making a Board member
eligible to serve as vice chair in the third year of a four-year term,
and as chair in the fourth year, would strengthen the leadership of the
Board, as those individuals would be oriented fully to MSRB issues and
processes at those points in their tenures. Lastly, Thompson believed
the MSRB should consider reviewing the single-year term of the chair.
Lamb believed the single-year term of the chair should remain
unchanged.
    The recommendations regarding Board size, and term lengths and
eligibility for leadership positions on the Board, are beyond the scope
of the issues presented in both requests for comment. Therefore, the
MSRB is not considering such matters at this time.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-MSRB-2016-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2016-01. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the

submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street NE., Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the MSRB. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MSRB-2016-01 and should be submitted on
or before February 25, 2016.

    For the Commission, pursuant to delegated authority.\41\
---------------------------------------------------------------------------

    \41\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-02062 Filed 2-3-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 76, Number 35 (Tuesday, February 22, 2011)]
[Rules and Regulations]
[Pages 9650-9652]
[FR Doc No: 2011-3722]

=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R03-OAR-2011-0011; FRL-9268-2]

Approval and Promulgation of Air Quality Implementation Plans;
Maryland; Amendment to the Definition of Fuel-Burning Equipment

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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

SUMMARY: EPA is taking direct final action to approve revisions to the
Maryland State Implementation Plan (SIP) amending the definition of
``fuel-burning equipment.'' The revision removes the word ``furnace''
from the definition of ``fuel-burning equipment'' in one of Maryland's
regulations and also removes the redundant definition of ``fuel-burning
equipment'' from another section. EPA is approving these revisions to
the definition of ``fuel-burning equipment'' in accordance with the
requirements of the Clean Air Act (CAA).

DATES: This rule is effective on April 25, 2011 without further notice,
unless EPA receives adverse written comment by March 24, 2011. If EPA
receives such comments, it will publish a timely withdrawal of the
direct final rule in the Federal Register and inform the public that
the rule will not take effect.

ADDRESSES: Submit your comments, identified by Docket ID Number EPA-
R03-OAR-2011-0011 by one of the following methods:
    A. http://www.regulations.gov. Follow the on-line instructions for
submitting comments.
    B. E-mail<EMAIL_ADDRESS>    C. Mail: EPA-R03-OAR-2011-0011, Cristina Fernandez, Associate
Director, Office of Air Program Planning, Mailcode 3AP30, U.S.
Environmental Protection Agency, Region III, 1650 Arch Street,
Philadelphia, Pennsylvania 19103.
    D. Hand Delivery: At the previously-listed EPA Region III address.
Such deliveries are only accepted during the Docket's normal hours of
operation, and special arrangements should be made for deliveries of
boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-R03-OAR-
2011-0011. EPA's policy is that all comments received will be included
in the public docket without change, and may be made available online
at http://www.regulations.gov, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through http://www.regulations.gov or e-mail. The http://www.regulations.gov Website
is an ``anonymous access'' system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through http://www.regulations.gov, your e-mail address will be
automatically captured and included as part of the comment that is
placed in the public docket and made available on the Internet. If you
submit an electronic comment, EPA recommends that you include your name
and other contact information in the body of your comment and with any
disk or CD-ROM you submit. If EPA cannot read your comment due to
technical difficulties and cannot contact you for clarification, EPA
may not be able to consider your comment. Electronic files should avoid
the use of special characters, any form of encryption, and be free of
any defects or viruses.
    Docket: All documents in the electronic docket are listed in the
http://www.regulations.gov index. Although

listed in the index, some information is not publicly available, i.e.,
CBI or other information whose disclosure is restricted by statute.
Certain other material, such as copyrighted material, is not placed on
the Internet and will be publicly available only in hard copy form.
Publicly available docket materials are available either electronically
in http://www.regulations.gov or in hard copy during normal business
hours at the Air Protection Division, U.S. Environmental Protection
Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103.
Copies of the State submittal are available at the Maryland Department
of the Environment, 1800 Washington Boulevard, Suite 705, Baltimore,
Maryland 21230.

FOR FURTHER INFORMATION CONTACT: Irene Shandruk,<PHONE_NUMBER>, or by
e-mail at<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    The term ``fuel-burning equipment'' was originally defined in order
to differentiate between a boiler that involves the indirect heating of
air or water and fuel-burning installations that involve direct heat
exchange. Fuel-burning installations, such as a kiln, are subject to
the general requirements for sulfur dioxide (SO2) and
particulate matter, whereas fuel-burning equipment is subject to
different standards in the form of pounds of SO2 per million
(British thermal unit) Btu per hour heat input or the sulfur content of
the fuel.
    Since a ``furnace'' is usually direct heat exchange, the State of
Maryland concludes that it should not be included in the definition of
``fuel-burning equipment''. There is no Federal definition of the term
``fuel-burning equipment,'' however, the term ``fuel-burning
equipment'' is consistent with the Federal definition of the term
``boiler.''

II. Summary of SIP Revision

    On December 15, 2010, the State of Maryland submitted a formal
revision (10-10) to its State Implementation Plan (SIP). The
SIP revision consists of amendments to Regulation .01 under COMAR
26.11.01, General Administrative Provisions and Regulation .01 under
COMAR 26.11.09, Control of Fuel-Burning Equipment, Stationary Internal
Combustion Engines, and Certain Fuel-Burning Installations. The
revision removes the word ``furnace'' from the definition of ``fuel-
burning equipment'' in COMAR <IP_ADDRESS> and also removes the redundant
definition of ``fuel-burning equipment'' from COMAR <IP_ADDRESS>.

III. Final Action

    EPA is approving Maryland's revision which removes the word
``furnace'' from the definition of ``fuel-burning equipment'' in COMAR
<IP_ADDRESS> and also removes the redundant definition of ``fuel-burning
equipment'' from COMAR <IP_ADDRESS>. EPA is publishing this rule without
prior proposal because the Agency views this as a noncontroversial
amendment and anticipates no adverse comment. However, in the
``Proposed Rules'' section of today's Federal Register, EPA is
publishing a separate document that will serve as the proposal to
approve the SIP revision if adverse comments are filed. This rule will
be effective on April 25, 2011 without further notice unless EPA
receives adverse comment by March 24, 2011. If EPA receives adverse
comment, EPA will publish a timely withdrawal in the Federal Register
informing the public that the rule will not take effect. EPA will
address all public comments in a subsequent final rule based on the
proposed rule. EPA will not institute a second comment period on this
action. Any parties interested in commenting must do so at this time.
Please note that if EPA receives adverse comment on an amendment,
paragraph, or section of this rule and if that provision may be severed
from the remainder of the rule, EPA may adopt as final those provisions
of the rule that are not the subject of an adverse comment.

IV. Statutory and Executive Order Reviews

A. General Requirements

    Under the CAA, the Administrator is required to approve a SIP
submission that complies with the provisions of the CAA and applicable
Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in
reviewing SIP submissions, EPA's role is to approve state choices,
provided that they meet the criteria of the CAA. Accordingly, this
action merely approves state law as meeting Federal requirements and
does not impose additional requirements beyond those imposed by state
law. For that reason, this action:
     Is not a ``significant regulatory action'' subject to
review by the Office of Management and Budget under Executive Order
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have Federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the CAA; and
     Does not provide EPA with the discretionary authority to
address, as appropriate, disproportionate human health or environmental
effects, using practicable and legally permissible methods, under
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this rule does not have tribal implications as
specified by Executive Order 13175 (65 FR 67249, November 9, 2000),
because the SIP is not approved to apply in Indian country located in
the state, and EPA notes that it will not impose substantial direct
costs on tribal governments or preempt tribal law.

B. Submission to Congress and the Comptroller General

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this action and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. A major rule cannot
take effect until 60 days after it is published in the Federal
Register. This action is not a ``major rule'' as defined by 5 U.S.C.
804(2).

C. Petitions for Judicial Review

    Under section 307(b)(1) of the CAA, petitions for judicial review
of this action must be filed in the United States Court of Appeals for
the appropriate

circuit by April 25, 2011. Filing a petition for reconsideration by the
Administrator of this final rule does not affect the finality of this
action for the purposes of judicial review nor does it extend the time
within which a petition for judicial review may be filed, and shall not
postpone the effectiveness of such rule or action. Parties with
objections to this direct final rule are encouraged to file a comment
in response to the parallel notice of proposed rulemaking for this
action published in the proposed rules section of today's Federal
Register, rather than file an immediate petition for judicial review of
this direct final rule, so that EPA can withdraw this direct final rule
and address the comment in the proposed rulemaking. This action which
pertains to Maryland's amendment to the definition of ``fuel-burning
equipment'' may not be challenged later in proceedings to enforce its
requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Particulate matter, Sulfur oxides.

    Dated: February 1, 2011.
W.C. Early,
Acting Regional Administrator, Region III.

    40 CFR part 52 is amended as follows:

PART 52--[AMENDED]

0
1. The authority citation for part 52 continues to read as follows:

    Authority:  42 U.S.C. 7401 et seq.

Subpart V--Maryland

0
2. In Sec.  52.1070, the table in paragraph (c) is amended by revising
the entries for COMAR <IP_ADDRESS> and COMAR <IP_ADDRESS> to read as
follows:

Sec.  52.1070  Identification of plan.

* * * * *
    (c) * * *

                                                      EPA-Approved Regulations in the Maryland SIP
--------------------------------------------------------------------------------------------------------------------------------------------------------
Code of Maryland  administrative                           State                                             Additional explanation/ citation at 40 CFR
  regulations (COMAR)  citation      Title/subject    effective date            EPA approval date                              52.1100
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       26.11.01 General Administrative Provisions
--------------------------------------------------------------------------------------------------------------------------------------------------------
<IP_ADDRESS>.....................  Definitions.......         9/20/10  2/22/11, [Insert page number where    Revision to paragraph .01B(17).
                                                                       the document begins].

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
              26.11.09 Control of Fuel Burning Equipment and Stationary Internal Combustion Engines, and Certain Fuel-Burning Installations
--------------------------------------------------------------------------------------------------------------------------------------------------------
<IP_ADDRESS>.....................  Definitions.......         9/20/10  2/22/11, [Insert page number where    Revision removes definition of ``fuel-
                                                                       the document begins].                 burning equipment''.

                                                                      * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *

[FR Doc. 2011-3722 Filed 2-18-11; 8:45 am]
BILLING CODE 6560-50-P