text: Federal Register :: Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of Revisions to the Study Outline and Selection Specifications for the Municipal Securities Representative Qualification Examination (Series 52) Program
  Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of Revisions to the Study Outline and Selection Specifications for the Municipal Securities Representative Qualification Examination (Series 52) Program
  A Notice by the Securities and Exchange Commission on 11/18/2010
  75 FR 70760
  70760-70763 (4 pages)
  Release No. 34-63310
  File No. SR-MSRB-2010-12
  2010-29078
  Part One: Municipal Securities
  Part One—I: Types of Municipal Securities
  Special type bonds
  Part One—II: Characteristics
  Part One—III: The Market for Municipal Securities
  Methods of primary financing
  Syndicate operational procedures
  Secondary market procedures
  Other market-level indicators
  Part One—IV: Analyzing Municipal Credit
  Part One—V: Mathematical Calculations and Methods
  Relationship of bond prices to change in:
  Underwriting computations
  Part Two: U.S. Government, Federal Agency and Other Financial Instruments
  Part Two—I: Types
  Obligations of Federal agencies
  Part Two—II: Characteristics of Var ious U.S. Government, Federal Agency and Other Financial Instruments
  Part Two—III: The Market for U.S. Government, Federal Agency and Other Financial Instruments
  Part Four: Federal Legal Considerations
  Part Four—I: Regulation of Municipal Market Professionals Securities Exchange Act of 1934
  Part Four—II: Securities Investor Protection Act of 1970
  Part Four—III: MSRB rules
  ATTACHMENT A: Contents of a Typical Notice of Bond Sale
  ATTACHMENT B: Outline of a Typical Official Statement
  https://www.federalregister.gov/d/2010-29078 https://www.federalregister.gov/d/2010-29078
  Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ("the Act") [1] and Rule 19b-4 thereunder,[2] notice is hereby given that on November 10, 2010, the Municipal Securities Rulemaking Board ("Board" or "MSRB") filed with the Securities and Exchange Commission ("SEC" or "Commission") a proposed rule change (File No. SR-MSRB-2010-12) ("the proposed rule change") as described in Items I, II, and III below, which Items have been prepared by the MSRB. The MSRB has designated the proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the self-regulatory organization pursuant to Section 19(b)(3)(A)(i) [3] of the Act and Rule 19b-4(f)(1) thereunder,[4] which renders the proposal effective upon filing with the Commission. The MSRB proposes to implement the revised Series 52 examination program on January 3, 2011. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
  Start Printed Page 70761
  The MSRB is filing with the Commission revisions to the study outline and selection specifications for the Municipal Securities Representative Qualification Examination (Series 52) program.[5]
  The revised study outline is available on the MSRB's Web site at http://www.msrb.org/​Rules-and-Interpretations/​SEC-Filings/​2010-Filings.asp, at the MSRB's principal office, and at the Commission's Public Reference Room.
  Section 15B(b)(2)(A) of the Act [6] authorizes the MSRB to prescribe standards of training, experience, competence, and such other qualifications as the Board finds necessary or appropriate in the public interest or for the protection of investors and municipal entities or obligated persons. The MSRB has developed examinations that are designed to establish that persons associated with brokers, dealers and municipal securities dealers that effect transactions in municipal securities have attained specified levels of competence and knowledge. The MSRB periodically reviews the content of the examinations to determine whether revisions are necessary or appropriate in view of changes pertaining to the subject matter covered by the examinations.
  MSRB Rule G-3(a)(i) states that the activities of a municipal securities representative include one or more of the following activities relating to municipal securities: Underwriting, trading or selling municipal securities; rendering financial advisory or consultant services to issuers of municipal securities; research or investment advice, or communications with customers, about any of the activities named heretofore. A municipal securities representative may also qualify as such by taking the General Securities Representative Examination (Series 7). An individual who takes the Investment Company Products/Variable Contracts Examination (Series 6) may qualify as a limited representative, but activities are limited to those in municipal fund securities.
  A committee of industry members and MSRB staff recently undertook a review of the Series 52 examination program. As a result of this review, the MSRB is proposing to make revisions to the study outline to regroup certain topics to allow more detailed testing of certain product knowledge and MSRB rules and eliminate redundancy; delete dated references to certain topics in the current outline; provide detail about products covered in the examination; and incorporate generic terms instead of proprietary names. The revised examination continues to cover areas of knowledge required to conduct municipal securities activities.
  A summary of the changes to the content outline for the Series 52 Examination, detailed by major topic headings, is provided below. Changes are stated as revisions to the current outline.
  The emphasis given this section has been increased from 55% to 57% of the examination.
  "Variable rate securities" is moved and tested as "Variable rate demand obligations" under "Short-term obligations."
  "Taxable municipals" are tested under a new section entitled "Taxable municipal securities."
  "Build America Bonds (BABs)," "Taxable municipal bonds" and "Other tax credit bonds" are added.
  "Variable rate demand notes" are tested as "Variable rate demand obligations."
  "Municipal fund securities (Basic characteristics, ownership and contribution limits)" are added.
  "Basis price" is removed from "Method of quotations."
  "Bearer" and "Registered as to principal only" are deleted from "Forms of Ownership."
  The subtopics "Interchangeable with bearer" and "Non-interchangeable" are deleted from "Fully registered."
  "When as and if issued (WI)" under "Delivery procedures" is moved to "Syndicate operational procedures."
  "As mutually agreed upon" becomes a descriptor for "Special settlement."
  "Forwards (forward delivery)" is stated as "Forward delivery."
  "Zeros" are added as a subtopic under "Rates."
  "Convertible" is changed to "Convertible/stepped coupons."
  "Original issue discount" is tested as "Original issue discount/premium."
  "Market discount/premium" is added.
  "Quality" is deleted.
  "Dollar price" is changed to "Dollar/yield price."
  "Registered, bearer, or book-entry only form" is deleted.
  "Credit and liquidity support," "Denominations," "Type of issuance" and "Source of funds" are added.
  "Limited offering" is added as a parenthetical after "Private placement."
  "Direct mail from issuers or financial advisors" is stated as "Issuers or financial advisors."
  The following topics have been deleted: "The Bond Buyer;" "Munifacts;" "Dalnet;" "Newspaper and publications;" "Bond Buyer New Issue Worksheets;" "Moody's Bond Survey;" "Bloomberg;" and "Other sources (e.g., Bond Express and Bondtrac)."
  The following subtopics are added: "EMMA;" "New issue wires;" and "Print and electronic news services."
  The parenthetical descriptor "eastern account" is deleted from the topic "Undivided."
  The parenthetical descriptor "western account" is deleted from the topic "Divided."
  "Formation of selling groups" is changed to "Selling groups."
  "Bid form" under topic "Determination of syndicate bid" is deleted.
  "Terms and conditions" and "Submission of bid" are added under "Computation of bid."Start Printed Page 70762
  "Gross interest cost" is added as a subtopic under "Basis for award."
  "Bond years" is added under "Computation of bid."
  "Retail orders" is added as a subtopic under "Priority provisions."
  "Establish time of first trade" is added.
  "Required disclosures" is added with subtopics "(a) EMMA;" "(i) Primary offerings;" "(ii) Material event notices;" "(b) NIIDS;" "(c) SHORT;" and "(d) Delivery of official statement."
  Heading "Characteristics" and subtopic "Negotiated versus auction" are deleted.
  Subtopic "Over-the-Counter (OTC)" is changed to "Traded over-the-counter (OTC)."
  "The Bond Buyer," "Munifacts," and "Bloomberg" are deleted; "Alternative trading systems (ATS)," "EMMA," and "Electronic information services" are added.
  "Dealers" is added.
  "Quote," "Firm bid," "Firm offering," and "Multiples of" are deleted from "Trading terms."
  "Offering," "Minimums and multiples," and "Cover bid" are added to "Trading terms."
  The heading "The Bond Buyer" and subtopics "Placement ratio" and "Indices" (and indices listed thereunder) are deleted.
  The following topics are added under new heading "Published indices:" "Bond Buyer indices" and subtopics "Visible supply" and "Placement ratio" thereunder; "MMD curve;" "SIFMA index;" subtopic "U.S. Treasuries;" and "London Interbank Offered Rate (LIBOR)."
  The following topics are deleted: "Secondary market activity;" "Dollar bond market activity;" "Financial futures" and subtopics "Municipal bond contract" and "Municipal over bond (MOB) spread" thereunder.
  The following topics are added: "Legislative risk;" "Price risk;" "Selection risk;" "Timing risk;" and "Liquidity risk."
  "Non-discrimination covenant" under the topic "Bond indenture" is deleted.
  The word "fund" has been deleted in each of the types of funds named under "Flow of funds."
  The parenthetical "depreciation" has been deleted from "Renewal and replacement."
  "Continuing disclosure information (EMMA)" has been added.
  "Enhanced securities" and "Guaranteed investment contract (GIC)" have been deleted.
  "Insured" has been changed to "Insurance."
  "Escrow" has been added.
  The order of certain topics under this section has been changed to facilitate assignment of questions on the test. Changes in content are as indicated below.
  "Call/put features" has been added.
  Parenthetical "OID" has been added.
  This header has been removed with each topic thereunder ("Bond years;" "Production;" "Spread;" "Net interest cost;" and "True interest cost") because all are covered under "Underwriting procedures."
  The emphasis given this section has decreased from 7% to 4% of the examination.
  "TIPS" has been added.
  "Student Loan Marketing Association (SLMA or Sallie Mae)" has been deleted.
  "Bankers acceptances" has been deleted.
  Topics detailed under this heading have been removed; revised heading is "Other financial instruments (corporate bonds, CMOs, etc.)."
  "Ratings" and "Economic indicators" are added.
  Detail under this topic ("Book-entry only;" "Bearer;" and "Registered") has been deleted; revised header is "Form of Delivery."
  The major heading for this section has been revised: "The Market for U.S. Government, Federal Agency and Other Financial Instruments—Impact and Relationship to Other Fixed Income Markets."
  These topics and all associated subtopics have been deleted: "New Issue Marketing Methods;" "Secondary market;" and "Federal Reserve's open-market participation in the market for each security, where applicable."
  The topics "Index floaters" and "Credit spreads" have been added.
  The emphasis given to this section has increased to 26% from 25% of the examination.
  The reference to "National Association of Securities Dealers Regulation, Inc. (NASDR)" under "Enforcement" has been changed to "FINRA."
  Heading "Inapplicable to bank dealers" has been deleted.
  Detail under "Advertising (G-21)" has been deleted.
  "Delivery of Official Statements, Advance Refunding Documents and Forms G-36 (OS) and G-36 (ARD) to the Board or Its Designee (G-36)" has been deleted.
  "Anti-money laundering compliance program (G-41)" has been added.
  "Terms and Conditions" has been added.
  "Organization and management" has been revised to "Organization" under "Description of issuer."
  The MSRB is proposing similar changes to the Series 52 selection specifications and question bank. The increased length of the examination permits testing of certain key concepts or rules without decreasing representation of related topics under the general topic heading. The examination will consist of 115 multiple choice-questions assigned to the four areas of the examination as shown below. The percentages given for each section are rounded to an even number.
  Municipal Securities 57%
  U.S. Government, Federal Agency and Other Financial Instruments 4%
  Economic Activity, Government Policy and the Behavior of Interest Rates 13%
  Federal Legal Considerations 26%
  Candidates will now be allowed three and one-half hours (instead of the current three hours) for each testing session because of the increase in the length of the examination from 100 to 115 questions. Each question will continue to count one point, and each candidate must correctly answer 70 percent of the questions in order to receive a passing grade.
  The MSRB believes that the proposed revisions to the Series 52 examination program are consistent with the provisions of Section 15B(b)(2)(A) of the Act, which authorizes the MSRB to prescribe standards of training, Start Printed Page 70763experience, competence, and such other qualifications as the Board finds necessary or appropriate in the public interest or for the protection of investors and municipal entities or obligated persons. Section 15B(b)(2)(A) of the Act also provides that the Board may appropriately classify municipal securities brokers, municipal securities dealers, and municipal advisors, and persons associated with municipal securities brokers, municipal securities dealers, and municipal advisors and require persons in any such class to pass tests prescribed by the Board.
  The MSRB believes that the proposed revisions to the Series 52 examination program are consistent with the provisions of Section 15B(b)(2)(A) of the Act in that the revisions will provide more updated material covered on the examination as well as ensure that certain key concepts or rules are tested on each administration of the examination in order to test the competency of individuals seeking to qualify as municipal securities representatives with respect to their knowledge about MSRB rules and the municipal securities market.
  The proposed rule change has become effective pursuant to Section 19(b)(3)(A)(i) of the Act [7] and Rule 19b-4(f)(1) [8] thereunder, in that the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the self-regulatory organization. The MSRB proposes to implement the revised Series 52 examination program on January 3, 2011. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.[9]
  Send an e-mail to rule-comments@sec.gov. Please include File Number SR-MSRB-2010-12 on the subject line.
  All submissions should refer to File Number SR-MSRB-2010-12. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Web site (http://www.sec.gov/​rules/​sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the MSRB's offices. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-MSRB-2010-12 and should be submitted on or before December 9, 2010.
  5. The MSRB is also proposing corresponding revisions to the Series 52 question bank, but based upon instructions from the Commission staff, the MSRB is submitting SR-MSRB-2010-12 for immediate effectiveness pursuant to Section 19(b)(3)(A)(i) of the Act and Rule 19b-4(f)(1) thereunder, and is not filing the question bank for Commission review. See letter to Diane G. Klinke, General Counsel, MSRB, from Belinda Blaine, Associate Director, Division of Market Regulation, SEC, dated July 24, 2000. The question bank is available for Commission review.