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khammond on DSKJM1Z7X2PROD with NOTICES

Federal Register / Vol. 86, No. 159 / Friday, August 20, 2021 / Notices regulatory authority. As discussed above, prior to the 2017 rule amendments, Rule G10 only required dealers to send a paper copy of the brochure outlining protections under MSRB rules to investors who had already complained to a dealer. The 2017 amendments replaced the postcomplaint delivery requirement with an annual written notification requirement to all customers of a dealer regardless of whether a customer ever effects a municipal securities transaction or owns municipal securities in the account.15 To reduce the compliance burden on dealers and ensure the greatest utility to customers receiving the notifications, the MSRB proposes to amend Rule G10a to narrow the obligation of dealers to provide the required notifications to only customers who traded municipal securities or held a municipal securities position at the dealer during each calendar year. For all other customers, dealers would be permitted to make such notifications available on their websites in accordance with the rule. Similarly, the MSRB is proposing related amendments to Rule G48, so that all SMMPs would be exempt as long as dealers make such notifications available on their websites.
The MSRB assessed other regulatory alternatives and determined that the proposed amendments to Rule G10 and Rule G48 are superior to these alternatives. One alternative would be to revert the rule back to the pre-2017
version that contained a post-complaint delivery requirement and adding the electronic delivery option. By rolling back the 2017 changes, a dealer would no longer have to provide the notifications to all customers, regardless of whether they transacted in municipal securities or own municipal securities.
This alternative would alleviate the burden to dealers of sending out thousands of notifications to investors but would still not solve the problem of providing investors with more timely access to information about how to file a complaint and the protections provided under MSRB rules. Another alternative would be to amend Rule G
10 to eliminate the annual notifications delivery requirement. The MSRB
already requires dealers to communicate certain information to investors under Rule G15, on customer confirmations.16 By amending Rule G
10 to require dealers to also provide a hyperlink to MSRB.org and a statement 15 See
supra note 4.
Rule G15aiD4, the dealer is required to provide a hyperlink to EMMA for publicly available information on a specific security.
16 Under
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that the dealer is registered with the SEC and the MSRB, dealers would be able to minimize their direct outreach to investors by utilizing an existing required form of communication i.e., customer confirmations. However, with this alternative, only customers who have recently transacted in a municipal security would be notified of the information, but not customers who hold municipal securities in their accounts.
Benefits and Costs The MSRB believes by amending the rule to limit the scope of the delivery obligation to customers who either held or transacted in municipal securities during a 12-month period, compliance burdens to dealers would be lessened.
The volume of notifications sent by dealers to customers, many of those who do not own or transact in municipal securities, and therefore receive no utility from such notifications, would be reduced. Additionally, other customers of dealers who do not own or transact in municipal securities would not be subjected to receipt of additional unnecessary communications, which could create noise and confusion for these customers. Furthermore, in striving to focus communications that are appropriate to the customer, the resulting effect may be that customers pay more attention to communications from dealers. Finally, dealers may incur savings from sending out less correspondence to customers due to the narrowed scope of the dealers obligations; and due to the flexibility provided pursuant to the rule and related proposed amendments to Rule G48 that exempt other customers and SMMPs.
To evaluate the potential costs to customers, the MSRB divided all dealer customers into four segments to separately compare the future expected state to the current baseline state of each group.
Customers who currently hold municipal securities and plan to transact again in the future. These customers would not be impacted by the proposed amendments to Rule G10
since they are expected to receive the required notifications the same way as they receive the notifications now;
Customers who have never held municipal securities and do not plan to transact in them in the foreseeable future. These customers are currently receiving the notifications even though they do not hold any municipal securities nor effect any municipal securities transactions. The proposed amendments to Rule G10 would not impact these customers since the
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notifications are, likely, not relevant to these customers;
New customers of a dealer. These customers are currently receiving the notifications by the end of each calendar year irrespective of their holding of municipal securities or effecting a transaction in municipal securities. The proposed amendments to Rule G10
would impact these customers, as they would not receive a notification unless they effected a transaction in municipal securities or held municipal securities at the time the dealer remitted the notifications that calendar year.
However, these customers would receive the notification the next calendar year and in no event more than 12 months from the time such customers effected a transaction in municipal securities or held municipal securities;
Existing customers who have never transacted in municipal securities before but may do so in the future.
These customers currently receive notifications even though they have not transacted or held a position in municipal securities. Under the proposed amendments to Rule G10, these customers would not receive the notifications, required to be delivered once every calendar year, until such time as they have a municipal securities transaction or hold a position in municipal securities. The MSRB has been careful to balance the stated objective of utility of information to customers against the slight risk that could be born out of not providing such required notifications to all customers, once every calendar year. The MSRB
notes that such customers would be able to avail themselves of the information provided in the notifications by reviewing a dealers website. The MSRB
also notes that the anecdotal evidence provided by a commenter shows less than one percent of all existing customers who had previously not transacted or owned any municipal security would effect a transaction in municipal securities; 17 and lastly, SMMPs who have traded municipal securities or hold a municipal securities position. All SMMPs currently receive annual notifications, but under the proposed amendments to Rule G48, these customers would not receive the notifications; instead, SMMPs would 17 Letter from Leslie M. Norwood, Managing Director and Associate General Counsel, the Securities Industry and Financial Markets Association SIFMA Letter or SIFMA dated June 28, 2021: SIFMA members state that their estimated percentage of customers that effect a municipal securities transaction that have not previously effected a transaction in municipal securities is anecdotally reported to be less than 1%.

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