Skip to Content

Notice

Self-Regulatory Organizations; Order Granting Approval of a Proposed Rule Change by the Municipal Securities Rulemaking Board Relating to Rule G-28, on Transactions with Employees and Partners of Other Municipal Securities Professionals

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble February 24, 2003.

On December 20, 2002, the Municipal Securities Rulemaking Board (“MSRB”) filed with the Securities & Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),[1] and Rule 19b-4 thereunder,[2] a proposed rule change (File No. SR-MSRB-2002-15). The proposed rule change was published for notice and comment in the Federal Register on January 22, 2003.[3] The Commission did not receive comment letters on the proposed rule change.

I. Description of the Proposed Rule Change

The MSRB's rule change creates an exemption from Rule G-28 for transactions and accounts involving municipal fund securities. Rule G-28, on transactions with employees and partners of other municipal securities professionals, requires a broker, dealer or municipal securities dealer (“dealer”) that opens a municipal securities account for an employee of another dealer (or a spouse or child of such employee) to first provide written notice to such other dealer and to subsequently follow any instructions provided by the other dealer with respect to transactions for the employee. The transacting dealer is also required to provide copies of all confirmations to the other dealer. The rule was adopted to prevent an employee of a dealer from effecting transactions that are contrary to the interests of the dealer or from otherwise acting illegally or improperly with Start Printed Page 10560respect to transactions in municipal securities.

The MSRB proposed the exemption because it believes that transactions in municipal fund securities appear not to present the same potential for adverse impact on an employing dealer as might exist with respect to transactions in other types of municipal securities. Furthermore, fulfilling Rule G-28 requirements may impose an unnecessary burden in the context of municipal fund securities, particularly 529 college savings plans, without any countervailing benefit. The MSRB notes that transactions in registered mutual fund shares are currently exempted from similar requirements imposed under NASD Rule 3050. Since there is no trading market in municipal fund securities, the MSRB believes the safeguards provided by Rule G-28 are not needed in the context of this market.

II. Summary of Comments

The Commission did not receive any comment letters relating to the MSRB's proposed rule change.

III. Discussion

The Commission has reviewed carefully the proposed rule change and finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder, which govern the MSRB.[4] The language of section 15B(b)(2)(C) of the Act requires that the MSRB's rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principals of trade, to foster cooperation and coordination with persons engaged in regulating, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest.[5] The rule change is consistent with the Act in that it amends an existing MSRB rule to accommodate the unique characteristics of municipal fund securities. Furthermore, the rule change removes impediments to a free and open market in such securities and promoting the protection of investors and the public interest.

IV. Conclusion

It is therefore ordered, pursuant to section 19(b)(2) of the Exchange Act,[6] that the proposed rule change (File No. SR-MSRB-2002-15) be and hereby is, approved.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[7]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Securities Exchange Act Release No. 47189 (Jan. 15, 2003), 68 FR 03073.

Back to Citation

4.  Additionally, in approving this rule, the Commission notes that it has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f).

Back to Citation

[FR Doc. 03-5083 Filed 3-4-03; 8:45 am]

BILLING CODE 8010-01-P