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    The Commission believes that the additional disclosure items
described above would be helpful to municipal entities and obligated
persons as clients or prospective clients of municipal advisors. The
information could 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 a natural
person municipal advisor.\246\
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    \246\ See supra note 218 (discussing grounds for revocation of a
municipal advisor's registration).
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    The DRP for regulatory action disclosure in Form MA-I, as proposed,
would require a natural person municipal advisor to include certain
details regarding events noted in the main body of the form that are
similar to the information that would be required in the corresponding
DRP in a firm's Form MA, including: If requalification was a condition
of any sanction reported, whether it was by exam, retraining, or other
process; the length of time given to requalify; and whether the
requalification condition was satisfied.
    The additional disclosures required by the DRP would also include
details of any monetary sanction imposed, including amount; portion
levied against the natural person municipal advisor; payment plan;
whether such plan was current; date paid; and whether the sanction was
a civil or administrative penalty or fine, a monetary penalty other
than a fine, disgorgement, or restitution.
    Consistent with Form MA, Form MA-I would also include a DRP
requiring a natural person municipal advisor to provide details of any
investigation reported in the main body of the form, including the date
the investigation was initiated, and indicate whether it was initiated
by an SRO, a foreign financial regulatory authority (giving the
specific jurisdiction), the Commission, or other Federal agency. Space
would be provided for the natural person municipal advisor to briefly
describe the nature of the investigation, if known; whether it was
pending or resolved; and details of any resolution. A space for
optional comment would also be provided for the natural person
municipal advisor to present a brief summary of the circumstances
leading to the investigation, and its current status or final
disposition and/or findings.
Request for Comment
    The Commission requests comment generally on the regulatory action
disclosure requirements of proposed Form MA-I, and also requests
comment on the following specific issues:
     In addition to the questions posed above regarding the
disclosures with respect to regulatory history proposed in Form
MA,\247\ the Commission seeks comment on whether the broadened scope of
the disclosures required of natural person municipal advisors in
proposed Form MA-I would elicit information that would be valuable to
the public, and in particular municipal entities or obligated persons.
If so, in what way? Is there information proposed to be requested that
would not be useful? If so, why? Is there additional information that
should be requested with respect to regulatory actions relating to
natural person municipal advisors? If so, what information and why?
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    \247\ See supra Section II.A.2.c.
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Civil Judicial Action Disclosure
    The disclosures that would be required by proposed Form MA-I with
respect to certain matters relating to a natural person municipal
advisor's civil judicial history would be the same as disclosures
required on Form MA. Thus, a natural person municipal advisor would be
required to disclose on Form MA-I whether he or she was ever:
     Enjoined by a domestic or foreign court in connection with
any investment-related or municipal advisor-related activity;
     Found by a domestic or foreign court to be involved in a
violation of any investment-related or municipal advisor-related
statute or regulation; or
     Had an investment-related or municipal advisor-related
civil action brought against him or her dismissed, pursuant to a
settlement agreement, by a state or foreign financial regulatory
authority; or
     Named in any such pending action.
    A DRP would be required for affirmative responses to questions
under this item. Specifically, the DRP would require, among other
things, information regarding by whom the court action was initiated;
the name of the party initiating the proceeding; information about the
relief sought; the date on which the action was filed and notice or
process was served; the types of financial products involved; a
description of the allegations relating to the civil action; the
current status, including whether the action is on appeal and details
relating to any such appeal; sanction details; and if the disposition
resulted in a fine, disgorgement, restitution or monetary compensation,
or information relating thereto. The DRP would also provide the
opportunity for an applicant to provide additional comment, including a
summary of the circumstances leading to the action and current status.
The Commission believes that it is appropriate to seek information from
natural person municipal advisors regarding investment-related
activities as well as municipal advisor-related activities due to the
significant similarities that exist between the two

advisory functions, and because such information could serve as a basis
to institute proceedings to deny registration of a municipal advisor or
to impose other sanctions on the municipal advisor's activities.
Request for Comment
    The Commission requests comment generally on the civil action
disclosure requirements of proposed Form MA-I and also requests comment
on the following specific issues:
     Are these additional disclosure requirements for natural
person municipal advisors regarding civil judicial history warranted?
     Would it be useful to municipal entities and obligated
persons to require natural persons registering as municipal advisors to
provide information regarding past investment-related activities as
well as past municipal advisor-related activities? If so, why? If not,
why not?
Customer Complaints/Arbitration/Civil Litigation
    Form MA does not require a municipal advisory firm or a sole
proprietor to disclose any customer complaints, arbitration matters,
and civil litigation concerning natural person municipal advisors. Form
MA-I, however, would require a natural person municipal advisor to
disclose whether he or she has ever been:
     The subject of a complaint initiated by a consumer,
whether written or oral, regarding investment-related or municipal
advisor-related matters, which alleged that he or she was involved in
fraud, false statements, omissions, theft, embezzlement, wrongful
taking of property, bribery, forgery, counterfeiting, extortion, and
dishonest, unfair or unethical practices; or
     The subject of an arbitration or civil litigation
initiated by a consumer regarding investment-related or municipal
advisor-related matters, which alleged that he or she was involved in
fraud, false statements, omissions, theft, embezzlement, wrongful
taking of property, bribery, forgery, counterfeiting, extortion, and
dishonest, unfair or unethical practices.
    In the case of a complaint, the natural person municipal advisor
would be required to indicate whether the complaint is still pending or
was settled. In the case of arbitration or civil litigation, the
natural person municipal advisor would be required to indicate whether
the arbitration or litigation is still pending; resulted in an
arbitration award or civil judgment against the natural person
municipal advisor in any amount; or was settled.
    A DRP would be required for affirmative responses to questions
under this item. Specifically, the related DRP would require the
municipal advisor to disclose the customer's name; the customer's state
of residence and other states of residence; the employing firm of the
municipal advisor when the activities occurred that led to the
complaint, arbitration, CFTC reparation or civil litigation; and the
allegations and brief summary of events related to the allegations,
including the dates when they occurred; the product type; and the
alleged compensatory damage amount. For customer complaints,
arbitration, CFTC reparation, or civil litigation in which the
municipal advisor is not a named party, the DRP would require
disclosure of whether the complaint is oral or written, or whether it
is an arbitration, CFTC reparation or civil litigation (and the
arbitration or reparation forum, docket or case number, and the filing
date); whether the complaint, arbitration, CFTC reparation or civil
litigations is pending, and if not, the status. The DRP would require
disclosure of the status date, and the settlement award amount,
including the municipal advisor's contribution amount. If the matter
involves an arbitration or CFTC reparation in which the municipal
advisor is a named respondent, the DRP would require disclosure of the
entity with which the claim was filed; the docket or case number; the
date process was served; whether the arbitration of CFTC reparation is
pending, and if not pending the form of disposition; the disposition
date; and the amount of the monetary award, settlement or reparation
(including the municipal advisor's contribution). If the matter
involves a civil litigation, the DRP would require disclosure of the
court in which the case was filed; the location of the court; the
docket or case number; the date the complaint was served on or received
by the municipal advisor; whether the litigation is still pending; if
not still pending the form of its disposition; the disposition date;
the judgment, restitution or settlement amount, including the municipal
advisor's contribution amount; whether the action is currently on
appeal, and if so, the date the appeal was filed, the court in which
the appeal was filed, the location of the court, and the docket or case
number for the appeal. The DRP would also provide for optional
additional comment, such as a summary of the circumstances leading to
the complaint.
    These disclosures, too, would mirror similar disclosures in Form
U4, and would provide additional information about natural person
municipal advisors that may be useful to municipal entities or
obligated persons as clients or prospective clients. The information
would also help the Commission prepare for and plan examinations.
Request for Comment
    The Commission requests comment generally on the customer
complaint/arbitration/civil litigation disclosure requirements of
proposed Form MA-I and also requests comment on the following specific
issues:
     Would these additional disclosure requirements for natural
person municipal advisors provide information that would be useful in
the context of natural person municipal advisors but that would not be
useful in the context of firms? If so, to whom would the information be
useful, and why?
     Would municipal entities and obligated persons find it
useful for Form MA-I to require municipal advisors to disclose customer
complaints, arbitration, and civil litigation with respect to
investment-related matters, in addition to complaints, arbitration, and
civil litigation with respect to municipal advisor-related matters? Is
this information they would access and use if available? If so, how?
     Should Form MA also require similar disclosure with
respect to associated persons of municipal advisory firms? If so, which
additional information would be useful and why?
Termination Disclosure
    Unlike in Form MA, Form MA-I would require disclosure regarding the
termination of a natural person municipal advisor's employment.
Specifically, consistent with Form U4, Form MA-I would ask the natural
person municipal advisor to indicate whether he or she ever voluntarily
resigned, or was discharged or permitted to resign after allegations
were made that accused him or her of:
     Violating investment-related or municipal advisor-related
statutes, regulations, rules, or industry standards of conduct;
     Fraud or the wrongful taking of property; or
     Failure to supervise in connection with investment-related
or municipal advisor-related statutes, regulations, rules or industry
standards of conduct.
    An affirmative response to the disclosures described above would
require the municipal advisor to disclose additional information on a
related DRP. Specifically, the DRP

would require the municipal advisor to disclose the name of the firm,
the type of termination (whether discharged, permitted to resign, or
voluntary resignation), the termination date, the allegations, and the
product types. The DRP would also provide for optional additional
comment, such as a summary of the circumstances leading to the
termination. This disclosure would provide information that would be
useful to the Commission in planning and preparing for inspections and
examinations, and would be useful to the public generally (including
municipal entities and obligated persons, as clients or prospective
clients).
Request for Comment
    The Commission requests comment generally on the termination
disclosure requirements of proposed Form MA-I and also requests comment
on the following specific issues:
     Would the requirement for the above-listed additional
disclosures by natural person municipal advisors regarding their
municipal advisory activities elicit information that would be useful
to the public (including municipal entities and obligated persons, as
clients or prospective clients) and that would be relevant in the
context of natural person municipal advisors that is not relevant in
the context of firms? If not, what additional information should be
requested and why?
     Would requiring municipal advisors to disclose violations
of investment-related statutes, regulations, rules, and industry
standards, in addition to violations of municipal advisor-related
statutes, regulations, rules, and industry standards on Form MA-I
elicit information that would be useful to the public (including
municipal entities and obligated persons, as clients or prospective
clients)?
Financial Disclosures
    Form MA-I also would require natural persons who are municipal
advisors to make financial disclosures that are not required to be made
by municipal advisory firms regarding their associated persons or by
sole proprietors regarding themselves on Form MA. Specifically, the
form would ask a natural person municipal advisor whether, within the
past ten years:
     He or she has made a compromise with creditors, filed a
bankruptcy petition, or been the subject of an involuntary bankruptcy
petition;
     An organization controlled by the natural person municipal
advisor has made a compromise with creditors, filed a bankruptcy
petition, or been the subject of an involuntary bankruptcy petition
based upon events that occurred while he or she exercised control over
it; or
     A broker or dealer controlled by the natural person
municipal advisor has been the subject of an involuntary bankruptcy
petition, had a trustee appointed, or had a direct payment procedure
initiated under the Securities Investor Protection Act based upon
events that occurred while he or she exercised control over it.
    In addition, a natural person who is a municipal advisor would be
required to disclose whether:
     A bonding company ever denied, paid out on, or revoked a
bond for him or her; or
     The natural person municipal advisor has any unsatisfied
judgments or liens against him or her.
    An affirmative response to the disclosure items described above
would require the municipal advisor to provide additional disclosure on
a DRP. Specifically, the municipal advisor would be required to
disclose the judgment or lien amount, the judgment or lien holder, the
judgment or lien type (whether civil or tax), the date filed, the court
in which the action was brought, the name of the court, the location of
the court, the docket or case number (and whether the docket or case
number is the municipal advisor's social security number, bank card
number, or personal identification number), whether the judgment or
lien is outstanding, and if the judgment or lien is not outstanding,
the status date and how the matter was resolved. The DRP would also
provide for optional comment, such as a brief summary of the
circumstances leading to the action.
    The Commission believes that the information that would be
required, which is consistent with that required by Form U4, would be
useful for its regulatory purposes, including planning and preparing
for inspections and examinations, and to the public generally
(including municipal entities and obligated persons, as clients or
prospective clients).
Request for Comment
    The Commission requests comment generally on the financial
disclosure requirements of proposed Form MA-I and also requests comment
on the following specific issues:
     Would financial disclosure requirements be necessary,
useful, or relevant in connection with natural person municipal
advisors in a way that it would not be useful with respect to municipal
advisors that are firms? If so, how? If not, why not?
Item 7: Execution and Self-Certification
    With respect to execution of Form MA-I, the natural person
municipal advisor who signs the form would be required to represent
that the information and statements made in Form MA-I are true and
correct. The municipal advisor also would be required to consent to
service of any civil action or notice of any proceeding before the
Commission or an SRO regarding its municipal advisory activities via
registered or certified mail. The proposed requirements for execution
of Form MA-I would be consistent with and serve the same purposes as
the execution provisions of proposed Form MA, with modifications to
reflect that Form MA-I would apply to municipal advisors that are
natural persons rather than firms and that, unlike municipal advisory
firms, natural person municipal advisors would not be subject to the
books and records requirements of proposed rule 15Ba1-7.
    A natural person municipal advisor would also be required to
certify that he or she has: (1) Sufficient qualifications, training,
experience, and competence to effectively carry out his or her
designated functions; (2) met, or within any applicable required
timeframes will meet, such standards of training, experience, and
competence, and such other qualifications, including testing, for a
municipal advisor, required by the Commission, the MSRB or any other
relevant SRO; and (3) the necessary understanding of and ability to
comply with, all applicable regulatory obligations. For these purposes,
such applicable regulatory obligations are obligations under the
Federal securities laws and rules promulgated thereunder and applicable
rules promulgated by the MSRB, or any other relevant SRO. Proposed rule
15Ba1-4(e) would require such certification at the time an initial
application for registration as a municipal advisor is filed and
annually thereafter.\248\
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    \248\ See proposed rule 15Ba1-4(e). The proposed rule would
require the annual self-certification to be filed by natural person
municipal advisors, including sole proprietors, within 90 days of
the end of the calendar year. General Instruction 13 would require
that a natural person municipal advisor filing an annual self-
certification on Form MA-I check the appropriate box to indicate as
such and complete the certification included in Item 7.
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Request for Comment
    The Commission requests comment generally on the execution
requirements of proposed Form MA-I and also requests comment on the
following specific issues:

     Should there be additional or alternative representations
to those proposed for Item 7 of Form MA-I? If so, what representations
and why?
     Would there be alternative methods to obtain consent to
service of process or should such consent not be obtained?
     Is the proposed self-certification broad enough in scope
or too broad? If not, what additional factors should be included or
excluded and why? Should the self-certification be required more or
less frequently? If so, how often and why? Are there other alternatives
the Commission should consider? If so, what alternatives and why?
     Should the self-certification required of natural person
municipal advisors include additional factors? If so, what would they
be and why? Should the Commission require an independent third party
review of the municipal advisor? What are examples of such a review?
Should the Commission undertake a review of all municipal advisors as
part of the registration and examination process? If so, what should be
the scope and frequency of the examination process? Should the
Commission provide municipal advisors a choice between independent
third party review and Commission review, or a combination thereof?
3. Proposed Rule 15Ba1-3
a. Withdrawal From Municipal Advisor Registration
    Pursuant to proposed rule 15Ba1-3, all municipal advisors, whether
registered on Form MA or MA-I, would be required to file Form MA-W to
withdraw from registration with the Commission as a municipal
advisor.\249\ As would be the case with Forms MA and MA-I, Form MA-W
would be required to be filed electronically with the Commission.\250\
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    \249\ See proposed rule 15Ba1-3(a).
    \250\ See proposed rule 15Ba1-3(b).
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    A notice of withdrawal from registration would become effective on
the 60th day after electronically filing the Form MA-W with the
Commission, or within a longer time period if the municipal advisor
consents, or the Commission by order determines as necessary or
appropriate in the public interest, for the protection of investors, or
within such shorter time as the Commission may determine.\251\ Under
the proposed rule, if a municipal advisor electronically filed a notice
of withdrawal from registration with the Commission at any time
subsequent to the date of issuance of a Commission order instituting
proceedings pursuant to Section 15B(c) of the Exchange Act \252\ to
censure, place limitations on the activities, functions or operations
of, or suspend or revoke the registration of the municipal advisor, or
if the Commission institutes such a proceeding or a proceeding to
impose terms and conditions upon the withdrawal, the notice of
withdrawal would not become effective except at the time and upon the
terms and conditions as deemed by the Commission as necessary or
appropriate in the public interest or for the protection of investors.
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    \251\ See proposed rule 15Ba1-3(c).
    \252\ 15 U.S.C. 78o-4(c).
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b. Form MA-W
    Consistent with the requirements of withdrawal of a registration on
Form ADV, Form MA-W would require a municipal advisor, whether a firm,
sole proprietor, or associated person of a municipal advisor (that
falls within the definition of a ``municipal advisor'') to provide
identifying information keyed to the identifying information on, and
the file number of, the municipal advisor's Form MA or Form MA-I. In
the case of a firm, the municipal advisor would be required to provide
on the form the name of an employee (or principal) of the firm who is
authorized to receive information and respond to questions about the
Form MA-W. Contact information for outside counsel for the firm would
not suffice.
    A municipal advisor filing to withdraw registration would be
required to indicate on Form MA-W whether it has received any pre-paid
fees for municipal advisory services that have not been delivered,
including subscription fees for publications, and to specify the
amount. In addition, the withdrawing registrant would be required to
indicate how much money, if any, it has borrowed from clients that it
has not repaid. The municipal advisor that is filing to withdraw its
registration also would be required to indicate whether there were any
unsatisfied liens or judgments against it. If the filer responded
affirmatively that it owed money or had any liens or judgments against
it, it would be required to disclose on a schedule attached to Form MA-
W, Schedule W2, the nature and amount of its assets and liabilities and
its net worth on the last day of the month prior to the filing of the
form.
    The Commission believes that requiring such information from a
municipal advisor that is withdrawing its registration is appropriate
for the protection of investors and of those who do business with
municipal advisors because it would put them on notice that the
municipal advisor would no longer be registered and, therefore, would
not be able to engage in municipal advisory activities without
violating Federal securities laws. Such information would also alert
clients and prospective clients as to the financial stability of the
municipal advisor. In addition, the information would help
investigative and enforcement efforts on the part of regulators. The
Commission notes that an investment adviser that withdraws from
registration must supply similar information on its Form ADV-W.\253\
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    \253\ See 17 CFR 279.2.
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    Because proposed rule 15Ba1-7(b) under the Exchange Act requires a
municipal advisor withdrawing from registration to nonetheless preserve
its books and records, a filer of Form MA-W would be required to list
the name and address of each person who has, or will have, custody or
possession of its books and records and the location at which such
books and records will be kept. A withdrawing municipal advisor would
be required to identify, in an additional schedule attached to Form MA-
W, Schedule W1, each person to which it has assigned any of its
contracts. The Commission believes that such a requirement--which also
exists for investment advisers--is important for the protection of
participants in the municipal securities markets.
    The signatory to the Form MA-W would be required to certify, under
penalty of perjury, that the information and statements made in the
form, including any exhibits or other information provided, are true.
If the form is being filed on behalf of a municipal advisory firm,\254\
the signature would constitute such certification by both the firm and
the signatory. Similarly, the signatory (and the municipal advisory
firm, if the municipal advisor is a firm) would be required to certify
that the advisor's books and records will be preserved and available
for inspection as required by law, and to authorize any person having
custody or possession of these books and records to make them available
to authorized regulatory representatives.
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    \254\ In the case of a firm, the signatory's certification
includes a statement that he or she has signed on behalf of the firm
and that he or she has the authority to do so.
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    The certification would include a statement that all information
previously submitted on the municipal advisor's most recent Form MA,
Form MA-I, or both, as applicable, was accurate and complete as of the
date of the signing of the Form MA-W. It would also include an
understanding by the

signatory that if any information contained in items on the Form MA-W
is different from the information contained on the most recent Form MA,
MA-I, or both, as applicable, the information on the Form MA-W would
replace the corresponding entry on the municipal advisor's Form MA or
MA-I available through the Commission's electronic system.
    The Commission believes that the certification requirement should
serve as an effective means to assure that the information supplied in
Form MA-W is correct.
Request for Comment
    The Commission requests comment generally on proposed Form MA-W and
also requests comment on the following specific issues:
     Form MA-W would have to be filed electronically for
purposes of withdrawing from registration with the Commission. Should
the proposed rule include an option for the form to be filed in paper
rather than electronically? If so, please explain under what
circumstances it would be appropriate to allow paper filings of the
form.
     How much identifying information should be required of the
municipal advisor filing to withdraw its registration? Is the
information required in the proposed form too much or too little?
     What are the relative benefits and disadvantages of
requiring the contact person for a withdrawal of registration to be an
employee or principal of the firm that is withdrawing? Considering
these factors, should a firm be permitted to name outside counsel as
the contact?
     Do the proposed disclosures require more, or less,
information than necessary from municipal advisors that are withdrawing
from registration? To the extent additional disclosures should be
required, please provide specific examples of the types of additional
disclosures that would be valuable, to whom they would be valuable, and
why.
4. Proposed Rule 15Ba1-4: Amendment to Application for Registration and
Self-Certification
    Proposed rule 15Ba1-4 sets forth the timeframes within which a
municipal advisor must amend its Forms MA and MA-I. Proposed rule
15Ba1-4(a)(1) would require that a municipal advisor amend its Form MA
at least annually, within 90 days of the end of the applicant's fiscal
year in the case of applicants that are firms, or within 90 days of the
end of the calendar year in the case of sole proprietors. In addition,
proposed rule 15Ba1-4(a)(2) would require that a municipal advisor
amend its Form MA more frequently than annually if required by the
instructions to Form MA.\255\
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    \255\ See proposed rule 15Ba1-4(a)(2). See also General
Instruction 8.
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    Consistent with the requirement of Form ADV, proposed rule 15Ba1-
4(a) would require a firm to amend its Form MA promptly if information
provided in response to Item 1 (Identifying Information), 2 (Form of
Organization), or 9 (Disclosure Information) becomes inaccurate in any
way; or if information provided in response to Items 3 (Succession), 7
(Participation or Interest of Applicant, or of Associated Persons of
Applicant, in Municipal Advisory Client Transactions), or 8 (Control
Persons) becomes materially inaccurate.\256\ Proposed rule 15Ba1-4(b)
would require that a natural person municipal advisor promptly amend
its Form MA-I if any information provided previously becomes
inaccurate.\257\ This requirement for natural person municipal advisors
would be consistent with the requirement for updating Form U4.
---------------------------------------------------------------------------

    \256\ See proposed rule 15Ba1-4(a). See also General Instruction
8.
    \257\ See proposed rule 15Ba1-4(b). See also General Instruction
9.
---------------------------------------------------------------------------

    A non-resident municipal advisory firm would be required to file an
amendment to Form MA promptly after any changes in the legal or
regulatory framework that would impact its ability or the manner in
which it provides the Commission with the required access to its books
and records or impacts the Commission's ability to inspect to examine
the municipal advisor onsite.\258\ The amendment should include a
revised opinion of counsel describing how, as a matter of law, the
municipal advisor will continue to meet its obligations to provide the
Commission with the required access to the municipal advisor's books
and records and to be subject to the Commission's onsite inspection and
examination under the new regulatory regime. As noted in Section
II.a.2.c. above, if a registered non-resident municipal advisory firm
becomes unable to comply with this requirement, because of legal or
regulatory changes, or otherwise, then this may be a basis for the
Commission to revoke the municipal advisor's registration.
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    \258\ See General Instruction 8.
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    The Commission is not proposing to require natural person municipal
advisors to annually update their Forms MA-I, as it is proposing to
require municipal advisors registered on Form MA to do. In the case of
firms, changes commonly occur over the course of a year, and a wide
range of changes is possible--e.g., changes in control persons and
personnel, number of employees, nature of services provided, types of
clients, and compensation arrangements, among others, as well as new
disclosures that may be necessary for all of the firm's associated
persons, rather than just one natural person. Accordingly, the
Commission believes it is appropriate to require a firm to confirm
through an annual update that its registration is up-to-date. With
respect to natural person municipal advisors, however, because an
amendment to Form MA-I would be promptly required whenever information
previously provided becomes inaccurate, the Commission believes that
the gains to be had by requiring the extra confirmation of an annual
update are outweighed by the burden such a requirement would impose on
natural person municipal advisors that are employees of municipal
advisory firms.
    All amendments to Form MA and Form MA-I would be required to be
filed electronically with the Commission.\259\ In addition, amendments
to Form MA and Form MA-I would be ``reports'' for purposes of Sections
15B(c), 17(a), 18(a), 32(a) (15 U.S.C. 78oF(b), 78q(a), 78r(a),
78ff(a)) and other applicable provisions of the Exchange Act.\260\
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    \259\ See proposed rule 15Ba1-4(c).
    \260\ See proposed rule 15Ba1-4(d). As a consequence, it would
be unlawful for a municipal advisor to willfully make or cause to be
made, a false or misleading statement of a material fact or omit to
state a material fact in an amendment to Form MA or Form MA-I.
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    These proposed rules are consistent with the Commission's
requirements for other registrants (e.g., national securities
exchanges, SIPs, broker-dealers) to file updated and annual amendments
with the Commission.\261\ The Commission believes that such amendments
are important for obtaining updated information on each municipal
advisor so that the Commission would be able to assess whether each
municipal advisor continues to be in compliance with the Federal
securities laws and the rules and regulations thereunder. Obtaining
updated information would also assist the Commission in its inspection
and examination of a municipal advisor, and better inform the MSRB's
regulation of municipal advisors. In addition, the Commission believes
it is important for municipal entities and obligated persons, as well

as the public generally, to have access to current information
regarding advisors registered with the Commission.
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    \261\ See e.g., rules 6a-2 and 15b3-1 under the Exchange Act. 17
CFR 240.6a-2 and 240.15b3-1. See also 17 CFR 249.1001 (Form SIP,
application for registration as a securities information processor
or to amend such an application or registration).
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Request for Comment
    The Commission requests comment generally on the proposed
requirement for amendments to Forms MA and MA-I, and also requests
comment on the following specific issues:
     Should the events triggering amendment of Form MA be
reduced or expanded? If so, which events should be added or removed and
why?
     Is there any information that would be required by Form
MA-I that should not trigger an amendment if it becomes inaccurate? If
so, which information and why? Should the deadline by which a natural
person municipal advisor must file an amendment to Form MA-I upon the
occurrence of a material change be different from the deadline by which
a firm must file an amendment to a Form MA? If so, what should be the
deadline, and why?
     Should the requirements for amending or updating Forms MA
and MA-I be the same? If so, why? If not, why not?
5. Proposed Rule 15Ba1-5: General Procedures for Serving Non-Residents
and Form MA-NR
    The Commission is proposing rule 15Ba1-5 to set forth the general
procedures for serving non-residents under Form MA-NR. Proposed rule
15Ba1-5 would require that non-resident municipal advisors and non-
resident general partners and managing agents \262\ of municipal
advisors must furnish the Commission with a written irrevocable consent
and power of attorney on Form MA-NR to appoint an agent in the United
States, other than a Commission member, official, or employee, upon
whom may be served any process, pleadings, or other papers in any
action brought against the non-resident municipal advisor, general
partner or managing agent that arises out of or relates to or concerns
the municipal advisory activities of the municipal advisor.
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    \262\ Proposed rule 15Ba1-1(c) defines a ``managing agent'' as
``any person, including a trustee, who directs or manages, or who
participates in directing or managing, the affairs of any
unincorporated organization or association other than a
partnership.'' This definition is consistent with the definition of
a ``managing agent'' as used in rule 15b1-5 under the Exchange Act
relating to consent to service of process to be furnished by non-
resident brokers or dealers and by non-resident general partners or
managing agents of brokers or dealers. See 17 CFR 240.15b1-5. See
also 17 CFR 275.0-2 (discussing general procedures for serving non-
resident investment advisers in connection with Form ADV).
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    This proposed requirement is designed to allow the Commission and
others to provide service of process to a non-resident municipal
advisor, general partner or managing agent to enforce the provisions of
new Exchange Act Section 15B. Proposed rule 15Ba1-5 also would require
that non-resident municipal advisors, general partners and managing
agents update the information on the Form MA-NR if it becomes
inaccurate. Further, the proposed rule would require that the non-
resident municipal advisor, general partner or managing agent appoint a
successor agent and file an updated Form MA-NR if the non-resident
municipal advisor, general partner or managing agent discharges its
agent or if the agent becomes unwilling or unable to accept service on
behalf of the municipal advisor, general partner or managing agent.
Finally, proposed rule 15Ba1-1(h) would define the term ``non-
resident,'' to mean: ``(i) [i]n the case of an individual, one who
resides in or has his principal office and place of business in any
place not in the United States; (ii) [i]n the case of a corporation,
one incorporated in or having its principal office and place of
business in any place not in the United States; (iii) [i]n the case of
a partnership or other unincorporated organization or association, one
having its principal office and place of business in any place not in
the United States.''Pursuant to proposed General Instruction 2, and
consistent with the proposed rule, every non-resident municipal advisor
and every non-resident general partner and managing agent of a
municipal advisor, whether or not the municipal advisor is resident in
the United States, must file Form MA-NR in connection with the
municipal advisor's initial application.\263\
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    \263\ See General Instruction 2. Failure to file Form MA-NR
promptly may delay SEC consideration of the initial application.
Additionally, a municipal advisor or general partner or managing
agent of an SEC-registered municipal advisor who becomes a non-
resident after the initial application has been submitted must file
Form MA-NR within 30 days. Id.
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Request for Comments
    The Commission requests comment generally on the proposed general
procedures for serving non-residents and proposed Form MA-NR, and also
requests comment on the following specific issues:
     Is the Commission's proposed rule regarding service of
process on non-residents appropriate and sufficiently clear? If not,
why not and what would be a better alternative?
     Are there any factors that the Commission should take into
consideration to ensure effective service of process on a non-resident
municipal advisor or a non-resident general partner or managing agent?
     Should the Commission require non-resident municipal
advisors and non-resident managing agents and general partners to
certify to anything else on Form MA-NR?
6. Proposed Rule 15Ba1-6: Registration of Successor to Municipal
Advisor
    Proposed rule 15Ba1-6 would govern the registration of a successor
to a registered municipal advisor. This proposed rule is substantially
similar to rule 15b1-3 under the Exchange Act, which governs the
registration of a successor to a registered broker-dealer.\264\
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    \264\ See 17 CFR 240.15b1-3. See also Registration of Successors
to Broker-Dealers and Investment Advisers, Exchange Act Release No.
31661 (December 28, 1992), 58 FR 7 (January 4, 1993) (providing
interpretive guidance regarding amendments to rule 15b1-3).
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Succession by Application
    Specifically, proposed rule 15Ba1-6(a) provides that in the event
that a municipal advisor succeeds to and continues the business of a
municipal advisor registered pursuant to Exchange Act Section 15B(a),
the registration of the predecessor shall be deemed to remain effective
as the registration of the successor if the successor, within 30 days
after such succession, files an application for registration on Form
MA, and the predecessor files a notice of withdrawal from registration
with the Commission on Form MA-W.
    This proposed rule further provides that the registration of the
predecessor municipal advisor shall cease to be effective 45 days after
the application for registration on Form MA is filed by the successor
municipal advisor.\265\ In other words, the 45-day period would not
begin to run until a complete Form MA has been filed by the successor
with the Commission. This 45-day period is consistent with Exchange Act
Section 15B(a)(2), pursuant to which the Commission has 45 days to
grant a registration or institute proceedings to determine if a
registration should be denied.\266\
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    \265\ See proposed rule 15Ba1-6(a).
    \266\ See 15 U.S.C. 78o-4(a)(2).
---------------------------------------------------------------------------

Succession by Amendment
    Proposed rule 15Ba1-6(b) further provides that notwithstanding rule
15Ba1-6(a), if a municipal advisor

succeeds to and continues the business of a registered predecessor
municipal advisor, and the succession is based solely on a change in
the predecessor's date or state of incorporation, form of organization,
or composition of a partnership, the successor may, within 30 days
after the succession, amend the registration of the predecessor
municipal advisor on Form MA to reflect these changes. Such amendment
shall be deemed an application for registration filed by the
predecessor and adopted by the successor. In all three types of
successions that are specified in proposed rule 15Ba1-6(b) (change in
the date or state of incorporation, change in form of organization, and
change in composition of a partnership), the predecessor must cease
operating as a municipal advisor. The Commission believes that it is
appropriate to allow a successor to file an amendment to the
predecessor's Form MA in these types of successions because such
successions do not typically result in a change of control of the
municipal advisor.
Scope and Applicability of Proposed Rule 15Ba1-6
    The purpose of proposed rule 15Ba1-6 is to enable a successor
municipal advisor to operate without an interruption of business by
relying for a limited period of time on the registration of the
predecessor municipal advisor until the successor's own registration
becomes effective. The proposed rule is intended to facilitate the
legitimate transfer of business between two or more municipal advisors
and to be used only where there is a direct and substantial business
nexus between the predecessor and the successor municipal advisor. The
proposed rule is not designed to allow a registered municipal advisor
to sell its registration, eliminate substantial liabilities, spin off
personnel, or facilitate the transfer of the registration of a
``shell'' organization that does not conduct any business. No entity
would be permitted to rely on proposed rule 15Ba1-6 unless it is
acquiring or assuming substantially all of the assets and liabilities
of the predecessor's municipal advisor business, or there has been no
practical change of control.\267\
---------------------------------------------------------------------------

    \267\ See Instruction 1 to Form MA.
---------------------------------------------------------------------------

    The Commission would not apply proposed rule 15Ba1-6 to a
reorganization that involves only registered municipal advisors. In
those situations, the registered municipal advisors need not rely on
the proposed rule because they can continue to rely on their existing
registrations. The proposed rule would also not apply to situations in
which the predecessor intends to continue to engage in municipal
advisory activities. Otherwise, confusion may result as to the
identities and registration statuses of the parties.
Request for Comments
    The Commission requests comment generally on the proposed
requirement for registration of a successor to a municipal advisor and
also requests comment on the following specific issues:
     Is the Commission's proposed successor rule sufficiently
clear? If not, why not and what would be a better alternative?
     Are the 30-day and 45-day timeframes in the proposed
successor rule too short or too long? If so, what would be more
appropriate timeframes and why?
     Are there any other instances not specified in the
proposed rule in which a successor should be permitted to file an
amendment to the predecessor's Form MA for registration?
     Are there any downsides to allowing a successor to rely on
its predecessor's registration by filing an amendment to the
predecessor's Form MA?

B. Approval or Denial of Registration

    Exchange Act Section 15B(a)(2) provides that within forty-five days
of the filing of an application to register as a municipal
advisor,\268\ the Commission must either: (a) By order grant
registration, or (b) institute proceedings to determine whether
registration should be denied. Such proceedings shall include notice of
the grounds for denial under consideration and opportunity for hearing
and shall be concluded within one hundred twenty days of the date of
the filing of the application for registration. At the conclusion of
such proceedings, the Commission, by order, shall grant or deny such
registration. The Commission may extend the time for the conclusion of
such proceedings for up to ninety days if it finds good cause for such
extension and publishes its reasons for so finding or for such longer
period as to which the applicant consents.
---------------------------------------------------------------------------

    \268\ The statute allows for a longer period if the applicant
consents. See 15 U.S.C. 78o-4(a)(2).
---------------------------------------------------------------------------

    In accordance with Exchange Act Section 15B(a)(2), the Commission
shall grant the registration of a municipal advisor if the Commission
finds that the requirements of Section 15B of the Exchange Act are
satisfied.\269\ The Commission shall deny the registration of a
municipal advisor if the Commission does not make any such finding, or
if it finds that if the applicant were registered, its registration
would be subject to suspension or revocation under Section 15B(c) of
the Exchange Act.\270\
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    \269\ See 15 U.S.C. 78o-4(a)(2).
    \270\ See id.
---------------------------------------------------------------------------

    The information currently required by temporary Form MA-T is not
reviewed by the Commission prior to registration, although the
Commission retains full authority to review such information and
examine any registered municipal advisor at any time. The Commission
intends that the permanent registration process would entail a review
of each Form MA and Form MA-I filed. In approving or denying an
application for registration as a municipal advisor, the Commission
would review the information provided on Form MA or Form MA-I as
applicable. For example, the Commission may perform cross checks of
applicants through the use of the applicant's other registration
numbers, such as its CRD or other SEC registration numbers, to the
extent available. Also, the Commission may review the disclosures
required by Item 9 of Form MA and Item 6 of Form MA-I discussed above,
including the disciplinary history of an applicant. In order to form a
more complete and informed basis on which to determine whether to
grant, institute proceedings to deny, or revoke a municipal advisor's
registration, the Commission is also proposing to adopt a requirement
that a municipal advisor file with the Commission an annual self-
certification relating to its ability to meet its regulatory
obligations.
    The benefit of the proposed municipal advisor registration process
is that it would allow the Commission and staff to ask questions and,
as needed, to require amendments, before approving an application for
registration. The procedural process for reviewing applications for
registration as a municipal advisor would be substantially similar to
the procedural process for reviewing applications of other registrants
with the Commission (e.g., SIPs, broker-dealers, national securities
exchanges, registered securities associations, clearing agencies, and
investment advisers).\271\
---------------------------------------------------------------------------

    \271\ See 15 U.S.C. 78k-1(b)(3), 78o(b), 78s(a), and 80b-3(c).
---------------------------------------------------------------------------

C. Proposed Rule 15Ba1-7: Books and Records To Be Made and Maintained
by Municipal Advisors

    Section 17(a)(1) under the Exchange Act provides, in pertinent
part, that all registered municipal advisors other than

natural persons (i.e., municipal advisory firms, including sole
proprietors) shall make and keep for prescribed periods such records,
furnish such copies thereof, and make and disseminate such reports as
the Commission, by rule, prescribes as necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of the Act.\272\ The Commission is
proposing rule 15Ba1-7 under the Exchange Act to specify books and
records requirements applicable to municipal advisors.\273\ Proposed
rule 15Ba1-7's requirements are discussed below.
---------------------------------------------------------------------------

    \272\ See Exchange Act Section 17(a)(1). 15 U.S.C. 78q(a)(1).
    \273\ In addition, Section 15B(b)(2)(G) provides that the rules
of the MSRB shall ``prescribe records to be made and kept by * * *
municipal advisors and the periods for which such records shall be
preserved.'' 15 U.S.C. 78o-4(b)(2)(G).
---------------------------------------------------------------------------

Records to be Made by Municipal Advisors
    Proposed rule 15Ba1-7(a) would require municipal advisory firms to
make and keep true, accurate, and current, certain books and records
relating to its municipal advisory activities. These proposed books and
records requirements are based generally on Exchange Act rules 17a-3
and 17a-4, and Investment Advisers Act rule 204-2, which set forth
books and records requirements with respect to broker-dealers and
investment advisers, respectively, with appropriate revisions to
reflect the activities of municipal advisors.\274\
---------------------------------------------------------------------------

    \274\ See 17 CFR 240.17a-3 and 17a-4, and 17 CFR 275.204-2.
---------------------------------------------------------------------------

    Proposed rule 15Ba1-7(a) would require municipal advisory firms to
make and keep current originals or copies of all communications
received, and originals or copies of all communications sent, by such
municipal advisor (including inter-office memoranda and communications)
relating to municipal advisory activities, regardless of the format of
the communications.\275\ Municipal advisory firms would also have to
keep all check books, bank statements, cancelled checks and cash
reconciliations; a copy of each version of the municipal advisor's
policies and procedures, if any, in effect at any time within the last
five years; and a copy of any document created by the municipal advisor
that was material to making a recommendation to a municipal advisory
client or that memorializes the basis for that recommendation. A
municipal advisory firm would also be required to keep copies of all
written agreements entered into by the municipal advisor with any
municipal entity, employee of a municipal entity or an obligated person
or otherwise relating to the business of the municipal advisor. A
municipal advisory firm would also be required to keep a record of the
names of persons who are, or have been in the past five years,
associated persons of the municipal advisor; names, titles and
addresses of persons associated with the municipal advisor; municipal
entities or obligated persons with whom the municipal advisor has
engaged in municipal advisory activities in the past five years; the
names and business addresses of persons to whom the municipal advisor
agrees to provide payment to solicit municipal entities on its behalf;
and the names and business addresses of persons that agree to provide
payment to the municipal advisor to make solicitations on their behalf.
The purpose of these rules is to assist the Commission in its
inspection and examination function. Based on the Commission's
experience in conducting examinations of broker-dealers and investment
advisers, the Commission believes that requiring municipal advisory
firms to comply with these rules would facilitate the Commission's
inspections and examinations of municipal advisors.
---------------------------------------------------------------------------

    \275\ Materials posted on a municipal advisor's Web site
relating to municipal advisory activities would be written
communications sent by the municipal advisor for purposes of this
provision.
---------------------------------------------------------------------------

    Proposed rule 15Ba1-7(b)(1) would require municipal advisory firms
to maintain and preserve all books and records required to be made
under this proposed rule for a period of not less than five years, the
first two years in an easily accessible place. Corporate governance
documents, such as articles of incorporation and stock certificate
books of the municipal advisor and including those of any predecessor,
would be required to be maintained in the principal office of the
municipal advisor and preserved for three years after termination of
the business or withdrawal from registration as a municipal advisor.
    Proposed rule 15Ba1-7(d) is modeled on rule 204-2 under the
Investment Advisers Act,\276\ and permits, and sets forth the
requirements for, electronic storage of the records required to be
maintained by this proposed rule. Also, proposed rule 15Ba1-7(e)
provides that any book or record made, kept, maintained and preserved
in compliance with rules 17a-3 and 17a-4 of the Exchange Act, rules of
the MSRB, or rule 204-2 under the Investment Advisers Act, which is
substantially the same as a book or record required to be made, kept,
maintained and preserved under rule 15Ba1-7, would satisfy these
proposed record-keeping requirements.\277\ Subparagraph (e) of proposed
rule 15Ba1-7 is designed to minimize the record-keeping burden for
municipal advisory firms that are otherwise subject to similar record-
keeping requirements.
---------------------------------------------------------------------------

    \276\ See 17 CFR 275.204-2.
    \277\ See proposed rule 15Ba1-7(e).
---------------------------------------------------------------------------

Record-keeping After a Municipal Advisor Ceases To Do Business
    Proposed rule 15Ba1-7(c) would require a municipal advisory firm,
if it ceases doing business as a municipal advisor, to arrange for and
be responsible for the continued preservation of the books and records
required by the rule for the remainder of the period required by the
rule, and would require the municipal advisor to notify the Commission
of where such books and records will be maintained. This proposed
requirement is necessary for the Commission to perform effective
inspections and examinations of municipal advisory firms.
Requirements for Non-Residents
    Proposed rule 15Ba1-7(f), which is modeled on rule 204-2(j) under
the Investment Advisers Act,\278\ sets forth the books and records
requirements for non-resident municipal advisory firms, including
requirements for making, keeping current, maintaining, and preserving
copies of books and records required to be made, kept current,
maintained, and preserved under any rule or regulation adopted under
the Exchange Act, as well as the requirements for providing notice to
the Commission regarding the location of such books and records.\279\
Specifically, proposed rule 15Ba1-7(f) would require non-resident
municipal advisors, other than natural persons, including non-resident
sole proprietors (i.e., non-resident municipal advisor firms) to
maintain all such books and records in the United States,\280\ and
provide notice to the Commission of such location within 30 days after
the proposed rule becomes effective (in the case of municipal advisory
firms that are already registered or in the process of applying for
registration when, and if, the rule becomes effective), or when filing
an application for registration (in the case of municipal advisory
firms that have not yet applied for registration when, and if, the rule
becomes

effective).\281\ A non-resident municipal advisory firm would not be
required to keep such books and records in the United States if the
municipal advisor files with the Commission an undertaking to furnish
the Commission, upon demand, copies of any or all of such books and
records at the municipal advisor's expense to the Commission's
principal or regional office (as specified by the Commission),\282\
provided the municipal advisor furnishes the requested books and
records within 14 days of the Commission's written demand to the
offices of the Commission specified in the written demand.\283\
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    \278\ 17 CFR 275.204-2(j).
    \279\ See proposed rule 15Ba1-7(f).
    \280\ See proposed rule 15Ba1-7(f)(2).
    \281\ See id.
    \282\ See proposed rule 15Ba1-7(f)(3)(i). The proposed rule sets
forth the form of undertaking the municipal advisor would be
required to file. See id.
    \283\ See proposed Rule 15Ba1-7(f)(3)(ii). The rule would
require that any written demand would be forwarded by the Commission
to the municipal advisor by registered mail at the municipal
advisor's last address of record filed with the Commission. See id.
---------------------------------------------------------------------------

    The proposed requirements for non-resident municipal advisory firms
are designed to ensure that the Commission has access to the books and
records of municipal advisors located outside of the United States to
enable it to perform effective examinations and inspections. The
proposed requirements would also serve to mitigate the time and cost
burdens the Commission may otherwise face in attempting to gain access
to books and records located outside of the United States, for example
in the case of any jurisdictional dispute relating to such access.
Request for Comments
    The Commission requests comment generally on the proposed books and
records requirements and also requests comment on the following
specific issues:
     What types of documents and data should be retained by
municipal advisory firms pursuant to the proposed rules? What burdens
or costs would the retention of such information entail?
     Is it appropriate to base the books and records
requirements for municipal advisory firms on the books and records
requirements for broker-dealers and investment advisers? Are there
books and records requirements for broker-dealers and investment
advisers not included in proposed rule 15Ba1-7 that should be included?
Please provide examples of any such requirements.
     Should the proposed periods for maintaining and preserving
books and records for municipal advisory firms be lengthened or
shortened? If so, by how much and why?
     Should the Commission impose other requirements that might
be necessary or useful in protecting the records of a municipal
advisory firm upon the failure of such entity?
     What documents and data typically are kept by municipal
advisory firms? In what format? How long are such records currently
maintained by municipal advisors?
     What are the technological or administrative burdens of
maintaining the information specified in the proposed rules?
     Is there an industry standard format for information and
records regarding municipal advisory firms? Are there different
standard formats depending on the type of municipal advisor? Please
answer with specificity.
     Should the Commission require records retained under this
section to be retained electronically or furnished to the Commission
electronically? If so, should any particular electronic format be
mandated?
     Are the proposed requirements for non-resident municipal
advisory firms overly burdensome? Are they sufficient to ensure that
the Commission would have adequate access to the municipal advisor's
books and records in a timely manner?
     Should the proposed books and records requirements include
a requirement that municipal advisory firms must keep all bills or
statements (or copies thereof), paid or unpaid, relating to the
business of the municipal advisor? Would such a requirement be overly
burdensome? If so, how should such a requirement be modified to make
the information provided useful for examination, enforcement, or any
other purpose? Please provide suggested alternatives for any such books
and records requirement.

III. General Request for Comment

    The Commission is requesting comments from all members of the
public. The Commission particularly requests comment from the point of
view of persons who must register as municipal advisors, municipal
entities, obligated persons, investors, and other regulators. The
Commission seeks comments on all aspects of the proposed rules and
forms. The Commission will carefully consider the comments that it
receives. In addition, the Commission seeks comment on the following:
     Should the Commission clarify or modify any of the
definitions included in the proposed rules? If so, which definitions
and what specific modifications would be appropriate or necessary?
     Are the proposed rules sufficiently clear? Is additional
guidance from the Commission necessary?
     Are there additional disclosures that would be useful to
require on Forms MA and MA-I?
     Are the burdens of any of the requirements in the proposed
rule greater than the benefits that would be attained by such
requirement?
     Exchange Act rule 15b1-4 provides that the registration of
a broker or dealer shall be deemed to be the registration of any
executor, administrator, guardian, conservator, assignee for the
benefit of creditors, receiver, trustee in insolvency or bankruptcy, or
other fiduciary, appointed or qualified by order, judgment, or decree
of a court of competent jurisdiction to continue the business of such
broker or dealer, provided that the fiduciary files with the
Commission, within 30 days after entering upon the performance of his
duties, a statement setting forth as to such fiduciary substantially
the information required by Form BD.\284\ Should rules relating to the
registration of municipal advisors similarly include a process through
which an executor, administrator, guardian, conservator, assignee for
the benefit of creditors, receiver, trustee in insolvency or
bankruptcy, or other fiduciary, appointed or qualified by order,
judgment, or decree of a court of competent jurisdiction could continue
the business of a municipal advisor?
---------------------------------------------------------------------------

    \284\ See 15 U.S.C. 240.15b1-4.
---------------------------------------------------------------------------

     Form ADV \285\ and related rules under the Investment
Advisers Act require investment advisers registered with the Commission
to provide new and prospective clients with a brochure and brochure
supplements written in plain English and to send an updated brochure or
a summary of material changes to existing clients at least annually.
These brochures are intended to provide advisory clients with clearly
written, meaningful, current disclosure of the business practices,
conflicts of interest and background of the investment adviser and its
advisory personnel.\286\ Would such a brochure delivery requirement be
necessary or useful to municipal entities and obligated persons? If so,
what information would it be helpful to include in such brochures? If
the Commission were to adopt a brochure delivery requirement, should it
be in substantially the same form as the brochure delivery requirement
relating

to investment advisers, including with respect to content, amendments
to the content, and time periods for delivery? What aspects of the
brochure delivery requirement for investment advisers would it be
appropriate to apply to municipal advisors and what aspects of the
brochure delivery requirement for investments advisers would it not be
appropriate to apply to municipal advisors? Is there a category of
municipal advisors that should be excluded from any such brochure
delivery requirement, if the Commission were to adopt such a
requirement? If so, how should such a category be described and what
would be the reason for the exclusion? If such an exclusion were
created, how would the Commission ensure that the clients of excluded
advisors received adequate disclosures and protection? Is there a
category of clients as to whom the brochure delivery requirement should
not, or need not, apply? If so, how should such a category be described
and what would be the reason for the exclusion? What would be the costs
and benefits of any such brochure delivery requirement to municipal
advisors? What would be the costs and benefits of any such brochure
delivery requirement to the clients of municipal advisors?
---------------------------------------------------------------------------

    \285\ See 17 CFR 279.1.
    \286\ See Investment Advisers Act Release No. IA-3060 (July 28,
2010), 75 FR 49234 (August 12, 2010).
---------------------------------------------------------------------------

    The Commission seeks comments generally concerning the requirement
for a municipal advisor to supply information in Forms MA and MA-I
concerning the general types of municipal advisory activities in which
it engages. In particular, would it be confusing or otherwise difficult
for a municipal advisor to provide this information? Are there
considerations relating to the business of municipal advisors, or of
some types of municipal advisors, that the Commission may not have
taken into account in connection with the proposed information
disclosure requirements of Forms MA and MA-I?
    In addition, the Commission seeks comments on the proposals as a
whole, including their interaction with the other provisions of the
Dodd-Frank Act. The Commission seeks comments on whether the proposals
would help achieve the broader goals of increasing transparency and
accountability in the municipal securities markets.
    The Commission requests comment generally on whether its proposed
actions to govern the municipal advisor registration process are
necessary or appropriate. If commenters do not believe one or all such
actions are necessary and appropriate, why not? What would be the
preferred action?
    Commenters should, when possible, provide the Commission with
empirical data to support their views. Commenters suggesting
alternative approaches should provide comprehensive proposals,
including any conditions or limitations that they believe should apply,
the reasons for their suggested approaches, and their analysis
regarding why their suggested approaches would satisfy the statutory
mandate contained in Section 975 of the Dodd-Frank Act governing
municipal advisors.

IV. Paperwork Reduction Act

    Certain provisions of the Dodd-Frank Act and the rules and forms
the Commission is proposing thereunder relating to the permanent
registration of municipal advisors would impose new ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (``Paperwork Reduction Act'' or ``PRA'').\287\
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    \287\ 44 U.S.C. 3501 et seq.
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    The Commission is submitting these collections of information to
the Office of Management and Budget (``OMB'') for review and approval
in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The proposed
titles for these collections of information are ``Form MA: Application
for Municipal Advisor Registration''; ``Form MA-I: Application for
Municipal Advisor Registration for Natural Persons''; ``Rule 15Ba1-4:
Amendments to Application for Registration and Self-Certification'';
``Form MA-W: Notice of Withdrawal from Registration as a Municipal
Advisor''; ``Form MA-NR: Designation of U.S. Agent for Service of
Process''; and ``Rule 15Ba1-7: Books and Records to be Maintained by
Municipal Advisors.''
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid OMB control number. Section 15B of the Exchange Act, as
amended by the Dodd-Frank Act, requires municipal advisors (as defined
in Section 15B(e)(4) of the Exchange Act \288\) to register with the
Commission.\289\ As a transitional step to the implementation of a
permanent registration program, the Commission adopted, on an interim
final basis, Rule 15Ba2-6T, which permitted municipal advisors to
temporarily satisfy the registration requirement by filing Form MA-T,
effective October 1, 2010. The interim final temporary rule provides
that, unless rescinded, a municipal advisor's temporary registration by
means of Form MA-T will expire on the earlier of (1) the date that the
municipal advisor's registration is approved or disapproved by the
Commission pursuant to a final rule establishing a permanent
registration regime; (2) the date on which the municipal advisor's
temporary registration is rescinded by the Commission; or (3) December
31, 2011.\290\ Pursuant to the Dodd-Frank Act, the Commission is
proposing new rules that would establish a permanent municipal advisor
registration regime and would impose certain record-keeping
requirements on municipal advisors.
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    \288\ See 15 U.S.C. 78o-4(e)(4). See also supra Section II.A.1.
    \289\ See 15 U.S.C. 78o-4(a).
    \290\ See 17 CFR 240.15Ba2-6T(e). The OMB approved the
collection of information for Form MA-T and Rule 15Ba2-6T
(``Temporary Registration of Municipal Advisors--Form MA-T'') (OMB
Control No. 3235-0659) on an emergency basis for six months.
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A. Summary of Collection of Information

    Section 15B(a)(2) of the Exchange Act, as amended by the Dodd-Frank
Act, provides that a municipal advisor may be registered by filing with
the Commission an application for registration in such form and
containing such information and documents concerning the municipal
advisor and any persons associated with the municipal advisor as the
Commission, by rule, may prescribe as necessary or appropriate in the
public interest or for the protection of investors.\291\
---------------------------------------------------------------------------

    \291\ See 15 U.S.C. 78o-4(a)(2).
---------------------------------------------------------------------------

    Under the proposed rules, the permanent registration regime for
municipal advisors would be more comprehensive than the temporary one.
The proposed regime would require more detailed disclosures, and entail
a review of a respondent's registration form. Under proposed rule
15Ba1-2(a), a municipal advisory firm would be required to apply for
registration with the Commission by completing and electronically
filing Form MA. Under proposed rule 15Ba1-2(b), a natural person
municipal advisor would be required to apply for registration with the
Commission by completing and electronically filing Form MA-I. A sole
proprietor would have to complete both Form MA and Form MA-I. The
Commission anticipates developing an online filing system, where a
municipal advisor would be able to file a completed Form MA and/or MA-I
and the information filed would be publicly available. In addition,
under proposed rule 15Ba1-7, registered municipal advisors other than
natural persons (i.e., municipal advisory firms, including sole
proprietors) would be required to maintain books and records relating
to their municipal advisory activities.
    Under the proposed permanent registration regime, municipal
advisors

would include sole proprietorships, individual employees of municipal
advisors, and firms of varying sizes. In addition, municipal advisors
would include firms that engage in municipal advisory activities as
part of a broader array of financial services serving many types of
clients, and may have many associated persons. Thus, the paperwork
burden would reflect these differences in size and types of other
financial services in which the municipal advisors engage.
    Pursuant to proposed rule 15Ba1-4(a)(1), a municipal advisory firm
that registers on Form MA would have to amend its Form MA at least
annually, within 90 days of the end of the applicant's fiscal year in
the case of applicants that are firms, or within 90 days of the end of
the calendar year in the case of sole proprietors. Proposed rule 15Ba1-
4(a)(2) would require a municipal advisory firm to amend its Form MA
more frequently than annually as required by the General Instructions.
Pursuant to proposed rule 15Ba1-4(b), a natural person municipal
advisor who registers on Form MA-I would have to amend his or her Form
MA-I whenever any information previously provided in Form MA-I becomes
inaccurate. Pursuant to proposed rule 15Ba1-4(e), a registered
municipal advisor would have to complete the self-certification on Form
MA or Form MA-I, as applicable, both at the time the municipal advisor
initially files its application for registration, and also on an
ongoing annual basis. Municipal advisors registered on Form MA would
have to complete the Form MA self-certification within 90 days of the
end of a municipal advisor's fiscal year, or for municipal advisors
that are sole proprietors, within 90 days of the end of the calendar
year. Municipal advisors registered on Form MA-I would have to complete
the Form MA-I self-certification within 90 days of the end of the
calendar year.
    Pursuant to proposed rule 15Ba1-3, all municipal advisors, whether
registered on Form MA or MA-I, would be required to file Form MA-W to
withdraw from registration with the Commission as a municipal advisor.
As would be the case with Form MA and MA-I, Form MA-W would be required
to be filed electronically with the Commission.
    Proposed rule 15Ba1-5 sets forth the general procedures for serving
non-residents on Form MA-NR. Pursuant to the instructions to Form MA-
NR, and consistent with proposed rule 15Ba1-5, non-resident municipal
advisors other than natural persons, but including sole proprietors
(``non-resident municipal advisory firms''), and non-resident general
partners and non-resident managing agents of municipal advisors must
file Form MA-NR to furnish the Commission with a written irrevocable
consent and power of attorney to appoint an agent in the United States,
other than a Commission member, official, or employee, upon whom may be
served any process, pleadings, or other papers in any action brought
against the non-resident municipal advisory firm, non-resident general
partner or non-resident managing agent that arises out of or relates to
the municipal advisory activities of the municipal advisor. In
addition, proposed rule 15Ba1-5(d) would require each non-resident
municipal advisory firm to provide an opinion of counsel that the
advisory firm can, as a matter of law, provide the Commission with
prompt access to the advisory firm's books and records and that the
advisory firm can, as a matter of law, submit to onsite inspection and
examination by the Commission.
    Proposed rule 15Ba1-7 would require all registered municipal
advisors other than natural persons (i.e., municipal advisory firms,
including sole proprietors) to maintain books and records relating to
their municipal advisory activities. Generally, proposed rule 15Ba1-7
would require such books and records to be maintained and preserved for
a period of not less than five years, the first two years in an easily
accessible place.

B. Proposed Use of Information

    The proposed requirement that a municipal advisor must register
with the Commission on Forms MA and MA-I to continue to engage in
municipal advisory activities would help ensure that the Commission has
information to effectively oversee respondents and their activities in
the municipal securities market. In particular, the information
provided in Forms MA and MA-I would be used to determine whether to
grant the applicant's application for registration, institute
proceedings to determine whether registration should be denied, and
place limitations on the applicant's activities as a municipal advisor.
The information would also be used to focus on-site examinations and
aid in risk-based examination targeting. It would enable the Commission
to obtain an accurate estimate of the number of municipal advisors, by
size and by municipal advisory activity; analyze data regarding the
various types of municipal advisory activities in which advisors
engage; and evaluate the disciplinary history of all advisors and
associated persons, including all regulatory, civil, and criminal
proceedings. The proposed registration requirement would also help to
ensure that the Commission can make such information transparent and
easily accessible to the investing public, including municipal entities
and obligated persons who engage municipal advisors, investors who may
purchase securities from offerings in which municipal advisors
participated, and other regulators.
    The proposed requirement that a municipal advisory firm must make
and keep books and records, including written communications and
records of associated persons, would help to ensure that records exist
of the respondent's primary municipal advisory activities and of its
associated persons, and could potentially be requested by Commission
staff during an examination to evaluate the municipal advisory firm's
compliance with the proposed rules. In particular, the proposed
requirement that a municipal advisory firm must keep a record of the
initial or annual review, as applicable, conducted by the municipal
advisory firm of such municipal advisory firm's business in connection
with its self-certification on Form MA, would help ensure, among other
things, that the municipal advisory firm and every natural person
associated with it has met certain standards of training, experience,
and competence required by the Commission, the MSRB, or any other
relevant SROs.
    The proposed requirement that a non-resident municipal advisor, or
a non-resident general partner or non-resident managing agent of a
municipal advisor, file Form MA-NR in connection with the municipal
advisor's initial application would help minimize legal or logistical
obstacles that the Commission may encounter when attempting to effect
service, to conserve Commission resources, and to avoid potential
conflicts of law. The proposed requirement that a non-resident
municipal advisory firm provide an opinion of counsel on Form MA would
help ensure that such non-resident municipal advisory firm could
provide access to its books and records and submit to onsite inspection
and examination by the Commission.

C. Respondents

    The Commission estimates that the proposed ``collections of
information'' would initially apply to approximately 1,000 municipal
advisory firms, including sole proprietors. This estimate is based
partly on the number of municipal advisors that have registered with
the Commission under rule 15Ba2-

6T. As of October 2010, there were approximately 800 total unique
electronic registrations where Form MA-T was completed and not
withdrawn. The Commission believes that this number of Form MA-T
registrants would likely increase, because numerous applicants that
would be required to register may have missed the October 1, 2010
deadline for a variety of reasons, such as concluding, based on their
interpretation of the Dodd-Frank Act, that they were not required to
register as municipal advisors. For the PRA analysis of the interim
final temporary rule, Commission staff estimated that approximately
1,000 applicants would be required to complete Form MA-T.\292\
Commission staff believes that this remains an appropriate estimate for
the total number of municipal advisory firms that would be required to
register on Form MA under the proposed permanent registration
regime.\293\
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    \292\ See Temporary Registration Rule Release, supra note 63, at
54473.
    \293\ The Commission notes that a person that solicits a
municipal entity or obligated person on behalf of a broker, dealer,
municipal securities dealer, municipal advisor, or investment
adviser that controls, is controlled by, or is under common control
with the person undertaking such solicitation, may voluntarily apply
to register as a municipal advisor. See supra Section II.A.2.a.
Based on investment adviser registration data, Commission staff
estimates that out of approximately 12,000 investment advisers
currently registered with the Commission, only 385, or approximately
3%, (1) have municipal clients; (2) use firms or persons to solicit
advisory clients on the adviser's behalf; and (3) compensate persons
for client referrals. The Commission expects that of these 385
investment advisers, a significantly smaller subset would have the
specific circumstances where voluntary municipal advisor
registration would be applicable, i.e., they use affiliates that
exclusively solicit municipal entities for them (or other
affiliates), and not for third parties. For purposes of this
analysis, the Commission's estimate of the number of potential
voluntary municipal advisor applicants is included as part of the
total estimate of 1,000 applicants noted above.
---------------------------------------------------------------------------

    The proposed ``collections of information'' would also apply to
natural person municipal advisors. For purposes of estimating the
paperwork burden, the Commission notes that the number of Form MA-I
applicants may be divided into three main categories: (1) Individuals
who are currently also registered as investment advisers, broker-
dealers, or both, and who are employed at investment advisory firms,
broker-dealer firms, or banks; (2) individuals who are employed at
financial advisor firms that are not registered as broker-dealers or
investment advisers; and (3) individual solicitors who are employed at
third-party marketing and solicitor firms. To calculate the total
number of likely Form MA-I applicants, the Commission estimates the
number of respondents in each of these categories.
    First, the Commission estimates the number of individuals who are
currently registered as investment advisers, broker-dealers, or both,
and would register on Form MA-I. To calculate this estimate, the
Commission compares the proportion of FINRA Form U4 filers (i.e.,
individuals who are registered representatives of investment advisers
and/or broker-dealers) to the sum of all investment advisers registered
on Form ADV and all broker-dealers registered on Form BD. FINRA
estimates that as of October 2010, 637,000 individuals had registered
as representatives of broker-dealers and/or investment advisers on Form
U4.\294\ The Commission estimates that as of October 2010, 11,888
investment advisers had registered on Form ADV, while as of March 2010,
5,163 broker-dealers had registered on Form BD. The proportion of Form
U4 registrants to the sum of Form ADV and Form BD registrants is
approximately 37.36 to 1.\295\ According to Form MA-T data collected to
date, the Commission estimates that approximately 450 of 1,000 MA-T
registrants would be investment adviser and/or broker-dealer firms.
Thus, the Commission estimates that approximately 16,800 individuals
who are registered as investment advisers, broker-dealers, or both,
would be required to register on Form MA-I.\296\
---------------------------------------------------------------------------

    \294\ See October 2010 ``Registered Reps'' in ``FINRA
Statistics,'' available at http://www.finra.org/Newsroom/Statistics.
    \295\ 637,000 (estimated number of Form U4 registrants)/(11,888
(estimated number of Form ADV registrants) + 5,163 (estimated number
of Form BD registrants)) = 37.36.
    \296\ 450 (total number of investment adviser and broker-dealer
firms registered as municipal advisors) x 37.36 (proportion of Form
U4 registrants to all Form ADV and Form BD registrants) = 16,812.
---------------------------------------------------------------------------

    Second, the Commission estimates the number of individuals who are
employed at financial advisor firms and would register on Form MA-I.
Commission staff understands from discussions with industry and market
participants that it is reasonable to estimate that there is an average
of approximately 10 professional employees per financial advisor firm.
According to Form MA-T data collected to date, the Commission estimates
that approximately 450 of 1,000 MA-T registrants would be financial
advisor firms. Thus, the Commission estimates that approximately 4,500
individuals who are employed at financial advisor firms would be
required to register on Form MA-I.\297\
---------------------------------------------------------------------------

    \297\ 450 (total number of independent financial advisor firms
registered as municipal advisors) x 10 (estimated average number of
professional employees per independent financial advisor firm) =
4,500.
---------------------------------------------------------------------------

    Third, the Commission estimates the number of individual solicitors
who would register on Form MA-I. Commission staff examined the data of
all MA-T registrants as of October 2010, and estimates that
approximately 100 out of 1,000 registrants are exclusively focused on
third-party marketing and solicitation. For purposes of this PRA, the
Commission assumes that there are five individual solicitors who would
register on Form MA-I for every solicitor firm that would register on
Form MA.\298\ Thus, the Commission estimates that approximately 500
individual solicitors would be required to register on Form MA-I.\299\
---------------------------------------------------------------------------

    \298\ See Letter from Donna DiMaria, President, Third Party
Marketers Association, dated August 27, 2009, available at http://www.sec.gov/comments/s7-18-09/s71809-36.pdf (commenting on the
Commission's proposal to adopt a rule addressing ``pay to play''
practices by investment advisers and estimating that the typical
solicitor firm consists of 2 to 5 professionals).
    \299\ 100 (estimated number of solicitor firms) x 5 (estimated
number of Form MA-I applicants per solicitor firm) = 500. The
Commission notes that a person that solicits a municipal entity or
obligated person on behalf of a broker, dealer, municipal securities
dealer, municipal advisor, or investment adviser that controls, is
controlled by, or is under common control with the person
undertaking such solicitation, may voluntarily apply to register as
a municipal advisor. See supra Section II.A.2.a. Based on investment
adviser registration data, Commission staff expects that only a
small number of registered investment advisers that are natural
persons would have the specific circumstances where voluntary
municipal advisor registration would be applicable. See supra note
293. For purposes of this analysis, the Commission's estimate of the
number of potential voluntary natural person municipal advisor
applicants is included as part of the total estimate of 500
individual solicitors noted above.
---------------------------------------------------------------------------

    The Commission estimates that the total number of Form MA-I
applicants would be approximately 21,800 natural persons.\300\ The
Commission recognizes that, based on a number of factors, the actual
total number of respondents may differ from this estimate. For example,
the current estimate does not include Form MA-I applicants who might be
employed at banks, but are not registered as either investment advisers
or broker-dealers. Thus, the actual total number of respondents could
be higher. Under the proposed rules, sole proprietors would be required
to complete both Form MA and Form MA-I. The respondent estimates
presented here likely include some overlap, but the actual total number
of respondents could be slightly lower depending on

the overall percentage of sole proprietors among all municipal advisory
firms.
---------------------------------------------------------------------------

    \300\ 16,800 (estimated number of individual investment advisers
and/or broker-dealers) + 4,500 (estimated number of individuals who
are employed at financial advisor firms) + 500 (estimated number of
individuals who are employed at solicitation firms) = 21,800.
---------------------------------------------------------------------------

    To estimate the average annual number of new Form MA applicants,
the Commission relies on investment adviser registration data, which
indicates that new investment adviser applicants comprise, on average,
approximately 10.4% of the total number of registered investment
advisers.\301\ The Commission expects the proportion of new municipal
advisory firm applicants to all municipal advisory firm applicants may
be similar. Accordingly, the Commission estimates that the average
number of new Form MA applicants per year would be 100.\302\ To
estimate the average annual number of new Form MA-I applicants, the
Commission relies on FINRA registration data, which indicates that new
Form U4 applicants that are new to the industry comprise, on average,
approximately 8.39% of the total number of Form U4 applicants.\303\ The
Commission expects the proportion of new natural person municipal
advisor registrants to all natural person municipal advisor registrants
may be similar. Accordingly, the Commission estimates that the average
number of new Form MA-I applicants per year would be 1,800.\304\
---------------------------------------------------------------------------

    \301\ According to the Commission's Division of Investment
Management, as of October 2010, there were 11,888 investment
advisers registered with the Commission. From 2002 to 2009, there
was an average of 1,237 new investment adviser registrations per
year. (1,237/11,888) = 10.4%.
    \302\ 1,000 (all Form MA applicants) x 10.4% = 104 new Form MA
applicants per year.
    \303\ According to FINRA, as of October 2010, there were
approximately 637,000 individuals registered on Form U4. See supra
note 295. FINRA has notified the Commission that from October 2008
to the present, there was an average of 53,474 Form U4 registrants
that were new to the industry per year. (53,474/637,000) = 8.39%.
    \304\ 21,800 (all Form MA-I applicants) x 8.39% = 1,829 new Form
MA-I applicants per year.
---------------------------------------------------------------------------

D. Total Initial and Annual Reporting and Record-Keeping Burdens

    The estimated burdens on respondents to complete and submit Forms
MA, MA-I, MA-W, and MA-NR,\305\ amend Forms MA and MA-I, consult with
outside counsel, and maintain books and records related to municipal
advisory activities, are described below.
---------------------------------------------------------------------------

    \305\ See infra Sections IV.D.4 and IV.D.5 (discussing the
number of respondents relating to filing Form MA-W and Form MA-NR,
respectively).
---------------------------------------------------------------------------

1. Form MA
    Form MA, which is to be completed by municipal advisory firms
(including sole proprietors) registering under the proposed permanent
registration regime, would require more comprehensive disclosure in
addition to the information already collected and submitted on Form MA-
T. As discussed in detail above, municipal advisory firms that would be
required to register with the Commission by filing Form MA would have
to provide, among other things:
    1. Identifying information;
    2. Information regarding the municipal advisor's form of
organization;
    3. Whether the advisor is succeeding to the business of a
registered municipal advisor;
    4. Information about the municipal advisor's business and business
structure;
    5. Information regarding the municipal advisor's other business
activities;
    6. Financial industry affiliations of associated persons of the
municipal advisor;
    7. The municipal advisor's interest in municipal advisory client
transactions;
    8. Information related to control persons of the municipal advisor;
    9. Disclosures relating to regulatory, civil, and criminal
disciplinary history; \306\
---------------------------------------------------------------------------

    \306\ See supra Section II.A.2.c.
---------------------------------------------------------------------------

    10. Information regarding whether the municipal advisor is a
``small business;'' and
    11. A self-certification, filed on an initial and annual basis,
regarding the municipal advisor's qualifications as a municipal advisor
and its ability to comply with its obligations under the Federal
securities laws.
    The Commission has previously estimated that, in the case of Form
ADV--a similar form to Form MA, which must be completed for the
registration of investment advisers with the Commission--the average
time necessary to complete the form is approximately 36.24 hours.\307\
Form ADV, however, is significantly longer than Form MA and contains
sections that are not required for Form MA registration, such as Part
2A, which requires the applicant to create narrative brochures
containing information about the advisory firm. Thus, the Commission
expects the hourly burden for Form MA to be considerably less than
36.24 hours.
---------------------------------------------------------------------------

    \307\ See Release No. IA-3060, supra note 286, at 49256.
Additionally, the Commission notes that the average time necessary
to complete Part IA of Form ADV is approximately 4.32 hours. See
Form ADV, Part 1A (Paper Version), at 1 (under ``OMB Approval,''
estimated average burden hours per response is 4.32 hours).
---------------------------------------------------------------------------

    In contrast, the Commission previously estimated that the average
amount of time for a municipal advisor to complete Form MA-T,
regardless of advisor size, is approximately 2.5 hours.\308\ This
estimate for completion of Form MA-T includes all of the time necessary
to research, evaluate, and gather all of the information that is
requested in the form and all of the time necessary to complete and
submit the form.\309\
---------------------------------------------------------------------------

    \308\ See Temporary Registration Rule Release, supra note 63, at
54473.
    \309\ The Commission notes that some municipal advisors that
would be required to register under the proposed permanent
registration regime would also be registered with the Commission as
broker-dealers and/or investment advisers. The Commission believes
that these persons could require less time to research and complete
the proposed permanent registration forms to the extent information
contained in those other registration(s) could be incorporated by
reference, avoiding the need to repeat the information on Form MA.
See supra note 220, and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that the paperwork burden of completing
Form MA would be greater than the amount of time required to complete
Form MA-T, because Form MA is longer and more comprehensive than Form
MA-T. Nevertheless, the Commission believes that the estimated time to
complete Form MA-T, rather than Form ADV, is the more appropriate basis
to estimate the time to complete Form MA. Accordingly, the Commission
estimates that the average amount of time for a municipal advisory firm
to complete Form MA would be 3.5 hours. This estimate would apply to
all municipal advisory firms, because even those that had already
completed Form MA-T under the temporary registration regime must
register anew.
    In addition, pursuant to proposed rule 15Ba1-4(e)(1), a municipal
advisory firm would be required at the time it initially files Form MA
to conduct an initial review of its business and certify that, among
other things, it and every natural person associated with the municipal
advisory firm meet standards required by the Commission, the MSRB, or
any other relevant SRO to engage in municipal advisory activities. To
estimate the initial burden for this self-certification, the Commission
examined burden estimates for Form N-CSR (``Certified Shareholder
Report of Registered Management Investment Companies'') and Form N-Q
(``Quarterly Schedule of Portfolio Holdings of Registered Management
Investment Company''), which include similar self-certification
requirements.\310\ Based on its prior burden estimates, Commission
staff estimates that the initial burden to

comply with the Form MA self-certification requirement would be, on
average, approximately 3.0 hours per applicant. Thus, the total average
initial burden for Form MA would be 6.5 hours per applicant.\311\
---------------------------------------------------------------------------

    \310\ See Exchange Act Release No. 34-47262 (January 27, 2003),
68 FR 5348 (February 3, 2003); Exchange Act Release No. 34-49333
(February 27, 2004), 69 FR 11244 (March 9, 2004).
    \311\ 3.5 hours (average time required to complete Form MA) +
3.0 hours (average time required to complete self-certification) =
6.5 hours per applicant.
---------------------------------------------------------------------------

    The Commission recognizes that depending on the specific
circumstances of the municipal advisory firm, the initial burden to
complete Form MA may vary from respondent to respondent. For example,
as discussed above, a non-resident municipal advisor would be required
to attach a legal opinion to its Non-Resident Municipal Advisor
Execution Page to Form MA.\312\
---------------------------------------------------------------------------

    \312\ See supra Section II.A.2.b. For a discussion of the
estimated burden for a non-resident municipal advisor to provide
opinion of counsel, see infra Section IV.D.5.
---------------------------------------------------------------------------

    As discussed above, Commission staff estimates that approximately
1,000 municipal advisory firms would be required to fill out Form MA.
Thus, the Commission estimates that the total initial paperwork burden
for completion and submission of Form MA would be 6,500 hours.\313\ The
Commission notes that respondents may have potential one-time burdens
associated with Form MA. For example, respondents may need to develop
internal controls associated with procedures for obtaining the
information required by Form MA, and they would need to familiarize
themselves with the proposed rules and the form. For purposes of this
analysis, these potential one-time burdens are included in the
estimates noted above.
---------------------------------------------------------------------------

    \313\ 1,000 (persons required to submit Form MA) x 6.5 hours
(average estimated time required to complete Form MA and initial
self-certification) = 6,500 hours.
---------------------------------------------------------------------------

    The Commission estimates that the average number of new Form MA
applicants per year would be 100,\314\ and the annual paperwork burden
for new completions and submissions of Form MA would be 650 hours.\315\
The Commission notes that respondents may have potential recurring
burdens associated with Form MA, such as systemic ongoing monitoring
and maintenance of the information required by the form. For the
purposes of this analysis, these potential recurring burdens are
included in the estimates with respect to amendments to Form MA.\316\
---------------------------------------------------------------------------

    \314\ See supra Section IV.C.
    \315\ 100 (new Form MA applicants per year) x 6.5 hours (average
estimated time required to complete Form MA and initial self-
certification) = 650 hours.
    \316\ See infra Section IV.D.3.
---------------------------------------------------------------------------

    The collection of information made pursuant to Form MA would not be
confidential and would be made publicly available. Some information,
such as social security numbers, would be kept confidential to the
extent permitted by law.
2. Form MA-I
    Form MA-I, which is to be completed by natural persons (including
sole proprietors) registering under the proposed permanent registration
regime, would require more comprehensive disclosure compared to the
information already collected and submitted on Form MA-T. As discussed
above, natural person municipal advisors required to register with the
Commission by filing Form MA-I would be required to provide, among
other things:
    1. Identifying information;
    2. Residential history for the five years preceding filing of the
application;
    3. Employment history for the ten years preceding filing of the
application;
    4. Any other businesses in which the advisor is currently engaged;
    5. Disclosures relating to regulatory, civil, and criminal
disciplinary history; and
    6. A self-certification, filed on an initial and annual basis,
indicating, among other things, that the municipal advisor has met or
will meet qualification standards required by the Commission, the MSRB,
or any other relevant SRO for municipal advisors.
    Moreover, Form MA-I would require disclosure forms for reporting
disciplinary proceedings, including criminal, regulatory, and civil
judicial actions.
    To estimate the average amount of time required to complete Form
MA-I, the Commission compares the average amount of time required for
an applicant to complete Form MA-T. As described above, the Commission
previously estimated that the average amount of time for a municipal
advisor to complete Form MA-T would be approximately 2.5 hours.\317\
This estimate includes all of the time necessary to research, evaluate,
and gather all of the information that is requested in Form MA-T and
all of the time necessary to complete and submit the form. The
Commission believes that the paperwork burden of completing Form MA-I
would not be significantly greater than the amount of time required to
complete Form MA-T, because some of the information required for Form
MA-I would have already been gathered for completing Form MA-T. The
Commission anticipates that the most burdensome portion of the form
would be the disclosure of the advisor's disciplinary history, but the
Commission believes that this burden should only be substantial for a
small number of applicants. Overall, the Commission estimates that the
average amount of time for a natural person municipal advisor to
complete Form MA-I would be 3.0 hours.\318\ This estimate would apply
to all natural person municipal advisors, because even those who had
already completed Form MA-T under the temporary registration regime
must register anew.
---------------------------------------------------------------------------

    \317\ See supra note 308, and accompanying text.
    \318\ The Commission notes that pursuant to proposed rule 15Ba1-
4(e)(1), a natural person municipal advisor would also be required
at the time he or she initially files Form MA-I to certify that,
among other things, he or she meets standards required by the
Commission, the MSRB, or any other self-regulatory organization to
engage in municipal advisory activities. For purposes of this
analysis, the Commission believes that the initial burden for a
natural person to complete Form MA-I self-certification would be
minimal, because it would not require the more burdensome initial
review of a municipal advisory firm. Thus, the Commission includes
the average amount of time for initial self-certification as part of
its estimate of the average amount of time for a natural person
municipal advisor to initially complete Form MA-I.
---------------------------------------------------------------------------

    The Commission estimates that approximately 21,800 natural person
municipal advisors would be required to register on Form MA-I.\319\
Thus, the Commission estimates that the total paperwork burden for
completion and submission of Form MA-I would be 65,400 hours.\320\ The
Commission notes that respondents may have potential one-time burdens
associated with Form MA-I. For example, respondents may need to locate
information not previously required for other registrations, but
required by Form MA-I, and they would need to familiarize themselves
with the proposed rules and the form. For purposes of this analysis,
these potential one-time burdens are included in the estimates noted
above.
---------------------------------------------------------------------------

    \319\ See supra Section IV.C.
    \320\ 21,800 (persons required to submit Form MA-I) x 3.0 hours
(average estimated time required to complete Form MA-I and initial
self-certification) = 65,400 hours.
---------------------------------------------------------------------------

    The Commission estimates that the average number of new Form MA-I
applicants per year would be 1,800,\321\ and the annual paperwork
burden for new completions and submissions of Form MA-I would be 5,400
hours.\322\ The Commission notes that respondents may have potential
recurring burdens associated with Form MA-I, such as tracking ongoing
updates to the information required by the form. For

the purposes of this analysis, these potential recurring burdens are
included in the estimates with respect to amendments to Form MA-I.\323\
---------------------------------------------------------------------------

    \321\ See supra Section IV.C.
    \322\ 1,800 (new Form MA-I registrants per year) x 3.0 hours
(average estimated time required to complete Form MA-I and initial
self-certification) = 5,400 hours.
    \323\ See infra Section IV.D.3.
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    The collection of information made pursuant to Form MA-I would not
be confidential and would be made publicly available. Some information,
such as social security numbers, would be kept confidential to the
extent permitted by law.
3. Amendments to Form MA and Form MA-I
    Under proposed rule 15Ba1-4, once a municipal advisor is registered
on Form MA, the municipal advisor would be required to electronically
amend Form MA at least annually, within 90 days of the end of the
advisor's fiscal year, if a firm, or within 90 days of the end of the
calendar year, if a sole proprietor; and more frequently, as set forth
in the General Instructions to Form MA, as applicable. A natural person
municipal advisor registered on Form MA-I would be required to
electronically amend Form MA-I whenever the information previously
provided in Form MA-I becomes inaccurate.
    The Commission notes that in addition to preparing amendments for
Form MA and/or Form MA-I as described above, a respondent would also be
required to certify annually that, among other things, it meets
qualification standards required by the Commission, the MSRB, or any
other relevant SRO to engage in municipal advisory activities. For
purposes of this analysis, the Commission includes the annual self-
certification as part of the amendment requirements, and the Commission
addresses their associated burdens together below.
    The Commission estimates that the average time necessary to prepare
an annual amendment for Form MA would be approximately 1.5 hours
because only certain parts of Form MA would need to be completed for
amendments. The Commission recognizes that depending on the extent of
the amendments, the burden to complete the annual amendment may vary
greatly from respondent to respondent, and that some would require
significantly more time than 1.5 hours to submit annual amendments
while others would require significantly less time than 1.5 hours. For
example, as discussed above, a non-resident municipal advisory firm
would be required to file an amendment to Form MA promptly and include
a revised opinion of counsel after any changes in the legal or
regulatory framework that would impact its ability or the manner in
which it provides the Commission with the required access to its books
and records or impacts the Commission's ability to inspect to examine
the municipal advisory firm onsite.\324\
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    \324\ See supra Section II.A.4. For a discussion of the
estimated burden for a non-resident municipal advisor to provide
opinion of counsel, see infra Section IV.D.5.
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    In addition, pursuant to proposed rule 15Ba1-4(e)(2), a municipal
advisory firm would be required to conduct an annual review of its
business and certify that, among other things, it and every natural
person associated with the municipal advisory firm has met, or will
meet, qualification standards required by the Commission, the MSRB, or
any other relevant SRO to engage in municipal advisory activities. To
estimate the annual burden, the Commission examined burden estimates
for Form N-CSR and Form N-Q.\325\ Based on its prior burden estimates,
Commission staff estimates that the annual burden to comply with the
Form MA self-certification requirement would be, on average,
approximately one hour per respondent. Therefore, the total average
annual burden for Form MA amendments would be 2.5 hours per
respondent.\326\
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    \325\ See supra note 310.
    \326\ 1.5 hours (average time required to amend Form MA) + 1.0
hour (average time required to complete annual self-certification) =
2.5 hours per respondent.
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    To estimate the average amount of time necessary to prepare an
additional updating amendment for Form MA (i.e., any additional
amendment other than the required annual amendment), the Commission
relies on its estimate for the amount of time required to prepare an
interim updating amendment for Form ADV. The Commission estimated that
an updating amendment for Form ADV would require 0.5 hours per
amendment, because interim amendments typically only amend one or two
items in Form ADV and thus should not require as much time to prepare
as an annual amendment.\327\ For the purposes of this PRA analysis, the
Commission believes that the amount of time to complete an updating
amendment for Form MA would also be 0.5 hours.
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    \327\ See Release No. IA-3060, supra note 286, at 49257.
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    Under proposed rule 15Ba1-4(a)(1), all 1,000 municipal advisory
firms registered on Form MA would be required to amend their Form MA
once every fiscal or calendar year, as applicable. It is also possible
that some of these 1,000 municipal advisory firms would have to submit
more than one amendment. To estimate the average number of amendments
in addition to the annual amendment, the Commission relies on its prior
estimate for the average number of additional amendments for Form ADV.
The Commission estimated that, on average, each adviser filing Form ADV
would likely amend its form two times during the year--one annual
amendment, and one interim updating amendment.\328\ For the purposes of
this PRA analysis, the Commission believes that the same estimate of
two Form MA amendments per year on average--one annual amendment and
one interim updating amendment--would be appropriate, although the
Commission recognizes that the actual number of amendments per advisor
might be higher or lower, depending on how frequently respondents must
amend Form MA for material changes. The total estimated burden for
updates to Form MA per year, including compliance with the annual self-
certification requirement, would be 3,000 hours.\329\
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    \328\ Id.
    \329\ 1,000 (persons required to amend Form MA) x 2.5 (average
estimated time to amend Form MA and complete self-certification
annually) x 1.0 (number of annual amendments per year) + 1,000
(persons required to amend Form MA) x 0.5 (average estimated time to
prepare an interim updating amendment for Form MA) x 1.0 (number of
interim updating amendments per year) = 3,000 hours per year.
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    To estimate the average amount of time necessary to prepare an
updating amendment for Form MA-I (i.e., a required amendment whenever
any information previously provided becomes inaccurate), the Commission
relies on its estimate for the amount of time required to prepare an
interim updating amendment for Form ADV. As noted above, the Commission
estimated that an updating amendment for Form ADV would require 0.5
hours per amendment, because interim amendments typically only amend
one or two items in Form ADV and thus should not require as much time
to prepare as an annual amendment.\330\ For the purposes of this PRA
analysis, the Commission believes that the amount of time to complete
an updating amendment for Form MA-I would also be 0.5 hours.
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    \330\ See supra note 327.
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    The Commission estimates that the time required to complete the
Form MA-I annual self-certification requirement would be approximately
five minutes, or 0.1 hours. The Commission believes that, given the
short time required to read and review the self-certification statement
and sign the section, this estimate is appropriate.

    To estimate the average number of Form MA-I amendments per
respondent per year, the Commission relies on FINRA Form U4
registration data. FINRA estimates that from October 2008 to the
present, there was an average of 1,088,637 Form U4 amendment filings
per year, regardless of the information updated. For purposes of
estimating the paperwork burden, the Commission believes that the
proportion of Form U4 amendment filings compared to all Form U4
registrants may be similar to the proportion of Form MA-I amendments
compared to all Form MA-I respondents. Thus, the Commission estimates
that the average number of amendments that a Form MA-I respondent would
submit would be 1.7 per year.\331\ The Commission recognizes, however,
that because Form U4 is significantly longer than Form MA-I and
contains sections that are not required for Form MA-I registration, the
actual number of Form MA-I amendments per applicant may be less than
1.7 per year.\332\ The total burden for these Form MA-I amendments per
year would be 18,500 hours.\333\
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    \331\ (1,088,637/637,000) (proportion of Form U4 amendment
filings to all Form U4 registrants) = 1.7.
    \332\ Information requested in Form U4 that is not requested in
Form MA-I include fingerprint information, SRO registration
requests, jurisdictions for broker-dealer agent and/or investment
adviser representative registration requests, and FINRA examination
requests.
    \333\ 21,800 (persons required to amend Form MA-I during any
given year) x 0.5 (average estimated time to prepare any updating
amendment for Form MA-I) x 1.7 (average number of amendments per
year) = 18,530 hours per year.
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    The Commission estimates that the annual burden attributable to the
requirement to certify on Form MA-I would equal approximately 2,200
hours.\334\ The total burden associated with updates to Form MA-I,
including compliance with the annual self-certification requirement,
would be approximately 20,700 hours.\335\
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    \334\ 21,800 (persons required to complete annual self-
certification on Form MA-I) x 0.1 (average estimated time to
complete self-certification) = 2,180 hours per year.
    \335\ 18,530 + 2,180 = 20,710 hours per year.
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    The collection of information made pursuant to amendments to Forms
MA and MA-I would not be confidential and would be made publicly
available. Some information, such as social security numbers, would be
kept confidential to the extent permitted by law.
4. Withdrawal From Municipal Advisor Registration
    Pursuant to proposed rule 15Ba1-3, municipal advisors that withdraw
from municipal advisor registration with the Commission would be
required to electronically file Form MA-W. The Commission has
previously estimated that, in the case of Form ADV-W--a similar form to
Form MA-W--the average time necessary to complete the form is
approximately 0.5 hours.\336\ Based on this prior estimate, the
Commission estimates that the average time necessary to complete Form
MA-W would be approximately 0.5 hours.
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    \336\ See Form ADV-W (Paper Version), at 1 (under ``OMB
Approval,'' estimated average burden hours per response is 0.5
hours).
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    To estimate the annual number of withdrawals for Form MA
registrants, the Commission relies on investment adviser registration
data, which indicates that annually, investment adviser withdrawals
comprise, on average, approximately 6.4% of the total number of
registered investment advisers.\337\ The Commission expects the
proportion of Form MA withdrawals compared to all Form MA registrants
would be similar. Thus, the average number of withdrawals from Form MA
registration per year would be 60,\338\ and the total burden would be
approximately 30 hours.\339\
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    \337\ As of October 2010, there were 11,888 investment advisers
registered with the Commission. From 2002 to 2009, there was an
average of 760 investment adviser withdrawals per year. (760/11,888)
= 6.4%.
    \338\ 1,000 (all Form MA applicants) x 6.4% = 64 Form MA
withdrawals per year.
    \339\ 60 (estimated number of persons withdrawing from Form MA
registration each year) x 0.5 hours (average estimated time to
complete Form MA-W) = 30 hours per year.
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    Meanwhile, to estimate the number of Form MA-I withdrawals per
year, the Commission relies on FINRA Form U4 registration data. FINRA
estimates that from October 2008 to the present, there was an average
of 79,722 individuals per year who fully terminated FINRA registration
and had not returned to the industry. For purposes of establishing the
paperwork burden, the Commission believes that the proportion of
individuals who fully terminated FINRA registration compared to all
Form U4 registrants may be similar to the proportion of Form MA-I
withdrawals compared to all Form MA-I registrants. Thus, the average
number of withdrawals from Form MA-I registration per year would be
2,700,\340\ and the total burden would be 1,350 hours.\341\
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    \340\ 21,800 (all Form MA-I applicants) x (79,722/637,000)
(proportion of individuals who fully terminated FINRA registration
to all Form U4 registrants) = 2,728.
    \341\ 2,700 (estimated number of persons withdrawing from Form
MA-I registration each year) x 0.5 hours (average estimated time to
complete Form MA-W) = 1,350 hours per year.
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    The collection of information made pursuant to Form MA-W would not
be confidential and would be made publicly available.
5. Non-Resident Municipal Advisors
    As discussed above, proposed rule 15Ba1-5 sets forth the general
procedures for serving non-resident municipal advisors, non-resident
general partners and non-resident managing agents. A non-resident
municipal advisor, or a non-resident general partner or non-resident
managing agent of a municipal advisor must, among other things, furnish
to the Commission a written irrevocable consent and power of attorney
on Form MA-NR to appoint an agent in the United States, other than a
Commission member, official, or employee, upon whom may be served any
process, pleadings, or other papers in any action brought against the
non-resident municipal advisor, non-resident general partner, or non-
resident managing agent.\342\ In addition, proposed rule 15Ba1-5(d)
would require each non-resident municipal advisory firm to provide an
opinion of counsel that the non-resident municipal advisory firm can,
as a matter of law, provide the Commission with access to the advisory
firm's books and records and that the advisory firm can, as a matter of
law, submit to onsite inspection and examination by the Commission.
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    \342\ See supra Section II.A.5, and accompanying text
(discussing proposed rule 15Ba1-5 and Form MA-NR).
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    The Commission has previously estimated that, in the case of Form
ADV-NR--a form with a similar purpose to Form MA-NR--the average time
necessary to complete the form is approximately one hour.\343\ The
Commission estimates that, because of the additional time required to
find and designate an agent, the process to complete Form MA-NR would
take longer, or approximately 1.5 hours on average. The burden
associated with this process would primarily involve the designation
and authorization of a

United States person as agent for service of process.