SEC Notice of Intent to Issue Order Regarding MSRB Rule G-37 and FINRA Rule 2030

Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Proposed Rules 60651 in any format other than a completed OSC Form. If a filer does not use the OSC Form to submit a complaint, OSC will provide the filer with information about the Form. The complaint will be considered to be filed on the date on which OSC receives a completed Form. (4) The OSC Form is available: (i) Online, at: http://www.osc.gov (to complete online); (ii) By calling OSC, at: (800) 872–9855 (toll-free), or (202) 653–7188 (in the Washington, DC area); or (iii) By writing to OSC, at: U.S. Office of Special Counsel, Complaints Examining Unit, 1730 M Street NW., Suite 218, Washington, DC 20036–4505. (5) A complainant can file a completed Form with OSC by any of the following methods: (i) Electronically, at: http:// www.osc.gov (for completion and filing electronically); (ii) By fax, to: (202) 653–5151; or (iii) By mail, to: U.S. Office of Special Counsel, Complaints Examining Unit, 1730 M Street NW., Suite 218, Washington, DC 20036–4505. (d) Procedures for filing complaints alleging violation of the Hatch Act. (1) Complaints alleging a violation of the Hatch Act may be submitted in any written form, but use of the Form established by OSC is encouraged. Complaints should include: (i) The complainant’s name, mailing address, telephone number, and a time when OSC can contact that person about his or her complaint (unless the matter is submitted anonymously); (ii) The department or agency, location, and organizational unit complained of; and (iii) A concise description of the actions complained about, names and positions of employees who took the actions, if known to the complainant, and dates of the actions, preferably in chronological order, together with any documentary evidence that the complainant can provide. (2) The OSC Form for filing a complaint is available as described in paragraphs (c)(4)(i) through (iii) of this section. (3) A written Hatch Act complaint can be filed with OSC by any of the methods listed in paragraphs (c)(5)(i) through (iii) of this section. ■ 3. Section 1800.2 is revised to read as follows: § 1800.2 Filing disclosures of information. (a) General. OSC is authorized by law (at 5 U.S.C. 1213) to provide an independent and secure channel for use by current or former Federal employees and applicants for Federal employment in disclosing information that they reasonably believe shows wrongdoing by a Federal agency. OSC must determine whether there is a substantial likelihood that the information discloses a violation of any law, rule, or regulation; gross mismanagement; gross waste of funds; abuse of authority; or a substantial and specific danger to public health or safety. If it does, the law requires OSC to refer the information to the agency head involved for investigation and a written report on the findings to the Special Counsel. The law does not authorize OSC to investigate the subject of a disclosure. (b) Procedures for filing disclosures. Current or former Federal employees, and applicants for Federal employment, may file a disclosure of the type of information described in paragraph (a) of this section with OSC. Such disclosures must be filed in writing (including electronically—see paragraph (b)(3)(i) of this section). (1) Filers are encouraged to use the Form established by OSC to file a disclosure of the type of information described in paragraph (a) of this section with OSC. The Form provides more information about OSC jurisdiction, and procedures for processing whistleblower disclosures. The Form is available: (i) Online, at: http://www.osc.gov (to complete online); (ii) By calling OSC, at: (800) 572–2249 (toll-free), or (202) 653–9125 (in the Washington, DC area); or (iii) By writing to OSC, at: U.S. Office of Special Counsel, Disclosure Unit, 1730 M Street NW., Suite 218, Washington, DC 20036–4505. (2) Filers may use another written format to submit a disclosure to OSC, but the submission should include: (i) The name, mailing address, and telephone number(s) of the person(s) making the disclosure(s), and a time when OSC can contact that person about his or her disclosure; (ii) The department or agency, location and organizational unit complained of; and (iii) A statement as to whether the filer consents to disclosure of his or her identity by OSC to the agency involved, in connection with any OSC referral to that agency. (3) A disclosure can be filed in writing with OSC by any of the following methods: (i) Electronically, at: http:// www.osc.gov (for completion and filing electronically); (ii) By fax, to: (202) 653–5151; or (iii) By mail, to: U.S. Office of Special Counsel, Disclosure Unit, 1730 M Street NW., Suite 218, Washington, DC 20036– 4505. Dated: August 22, 2016. Mark Cohen, Principal Deputy Special Counsel. [FR Doc. 2016–20527 Filed 9–1–16; 8:45 am] BILLING CODE 7405–01–P SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 275 [Release No. IA–4512; File No. S7–17–16] Political Contributions by Certain Investment Advisers: Ban on Third￾Party Solicitation; Notice of Order With Respect to MSRB Rule G–37 AGENCY: Securities and Exchange Commission. ACTION: Notice of intent to issue order. SUMMARY: The Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) intends to issue an order pursuant to section 206 of the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’) and rule 206(4)–5 thereunder (the ‘‘SEC Pay to Play Rule’’) finding that the Municipal Securities Rulemaking Board (‘‘MSRB’’) rule G–37 (the ‘‘MSRB Pay to Play Rule’’) imposes substantially equivalent or more stringent restrictions on municipal advisors than the SEC Pay to Play Rule imposes on investment advisers and is consistent with the objectives of the SEC Pay to Play Rule. DATES: Hearing requests should be received by the Commission by 5:30 p.m. on September 19, 2016. ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. FOR FURTHER INFORMATION CONTACT: Sirimal R. Mukerjee, Senior Counsel, Melissa Roverts Harke, Senior Special Counsel, or Sara Cortes, Assistant Director, at (202) 551–6787 or IArules@ sec.gov, Investment Adviser Regulation Office, Division of Investment Management, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–8549. SUPPLEMENTARY INFORMATION: Hearing or Notification of Hearing An order will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary. Hearing requests should be received by the Commission by 5:30 p.m. on September 19, 2016. Pursuant to rule 0– 5 under the Advisers Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and VerDate Sep<11>2014 15:10 Sep 01, 2016 Jkt 238001 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 E:\FR\FM\02SEP1.SGM 02SEP1 Lhorne on DSK30JT082PROD with PROPOSALS

60652 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Proposed Rules 1 15 U.S.C. 80b. Unless otherwise noted, all references to statutory sections are to the Advisers Act, and all references to rules under the Advisers Act, including rule 206(4)–5, are to Title 17, Part 275 of the Code of Federal Regulations [17 CFR part 275]. 2Political Contributions by Certain Investment Advisers, Investment Advisers Act Rel. No. 3043 (July 1, 2010) [75 FR 41018 (July 14, 2010)] (‘‘SEC Pay to Play Rule Release’’). 3See id. at section II.B.2.(b). See also 17 CFR 275.206(4)–5(a)(2)(i)(A). 4See 17 CFR 275.206(4)–5(f)(9)(i). 5See 17 CFR 275.206(4)–5(f)(9)(ii). 6See 17 CFR 275.206(4)–5(f)(9)(iii). On June 22, 2011, the Commission amended the SEC Pay to Play Rule to add municipal advisors to the definition of ‘‘regulated persons.’’ See Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers Act Rel. No. 3221 (June 22, 2011) [76 FR 42950 (July 19, 2011)] (‘‘Municipal Advisor Addition Release’’). The Commission adopted final rules with respect to the registration of municipal advisors on September 20, 2013. See Registration of Municipal Advisors, Exchange Act Rel. No. 70462 (Sept. 20, 2013) [78 FR 67468 (Nov. 12, 2013)] (‘‘Municipal Advisor Registration Release’’). 7See 17 CFR 275.206(4)–5(f)(9). 8See SEC Pay to Play Rule Release, supra footnote 2, at section III. 9See Municipal Advisor Addition Release, supra footnote 6, at section II.D.1. 10See Political Contributions by Certain Investment Advisers: Ban on Third-Party Solicitation; Extension of Compliance Date, Investment Advisers Act Rel. No. 3418 (June 8, 2012) [77 FR 35263 (June 13, 2012)]. 11The final date on which a municipal advisor must file a complete application for registration was October 31, 2014. See Municipal Advisor Registration Release, supra footnote 6, at section V. 12See Political Contributions by Certain Investment Advisers: Ban on Third-Party Solicitation; Notice of Compliance Date, Investment Advisers Act Rel. No. 4129 (June 25, 2015) [80 FR 37538 (July 2, 2015)]. On June 25, 2015, the Division of Investment Management published an FAQ that provides that the Division would not recommend enforcement action to the Commission against any investment adviser or its covered associates for the payment to any third person to solicit a government entity for investment advisory services until the later of (i) the effective date of a pay to play rule adopted by the Financial Industry Regulatory Authority or (ii) the effective date of a pay to play rule adopted by the MSRB. See http:// www.sec.gov/divisions/investment/pay-to-play￾faq.htm#1.4. 13See Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change Consisting of Proposed Amendments to Rule G–37, on Political Contributions and Prohibitions on Municipal Securities Business, Rule G–8, on Books and Records, Rule G–9, on Preservation of Records, and Forms G–37 and G–37x, Exchange Act Rel. No. 76763 (Dec. 24, 2015) [80 FR 81710 (Dec. 30, 2015)] (the ‘‘MSRB Pay to Play Release’’). 14On August 4, 2016, the MSRB published a regulatory notice announcing that it filed with the Commission an amendment to the MSRB Pay to Play Rule, effective on August 17, 2016, to clarify that contributions by persons who become associated with a dealer and become municipal finance professionals of the dealer, if made prior to August 17, 2016, are subject to the two-year look￾back and may subject a dealer to a prohibition on municipal securities business. This amendment does not change the rule’s application to municipal advisors. See MSRB Files Amendment to Rule G– 37 to Clarify its Application to Contributions before August 17, 2016, Regulatory Notice 2016–18, dated August 4, 2016, available at http://msrb.org/∼/ media/Files/Regulatory-Notices/Announcements/ 2016-18.ashx?n=1. A dealer may become subject to a ban on municipal securities business for a period of two years from the making of a contribution, even if the contribution is made by a person who, although not a municipal finance professional of the dealer at the time of the contribution, becomes a municipal financial professional of the dealer within two years of making the contribution (frequently referred to as the ‘‘two-year look-back’’). See Proposed Rule Change to Clarify an Existing Requirement in Rule G–37 Regarding the Two-Year Look-Back, SR–MSRB–2016–10 (Aug. 4, 2016), available at http://msrb.org/∼/media/Files/SEC￾Filings/2016/MSRB-2016-10.ashx. 15See section 211(c) of the Advisers Act (requiring the Commission to provide appropriate notice and opportunity for hearing for orders issued under the Advisers Act). the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. The Commission intends to issue an order under the Advisers Act.1 I. Background The Commission adopted the SEC Pay to Play Rule [17 CFR 275.206(4)–5] under the Advisers Act [15 U.S.C. 80b] to prohibit an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or certain of its executives or employees (‘‘covered associates’’) make a contribution to certain elected officials or candidates.2 Rule 206(4)–5 also prohibits an adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any third-party for a solicitation of advisory business from any government entity on behalf of such adviser, unless such third-party is a ‘‘regulated person’’ (‘‘third-party solicitor ban’’).3 Rule 206(4)–5 defines a ‘‘regulated person’’ as an SEC-registered investment adviser,4 a registered broker or dealer subject to pay to play restrictions adopted by a registered national securities association that prohibit members from engaging in distribution or solicitation activities if certain political contributions have been made,5 or a registered municipal advisor subject to pay to play restrictions adopted by the MSRB that prohibit members from engaging in distribution or solicitation activities if certain political contributions have been made.6 In addition, in order for a broker-dealer or municipal advisor to be a regulated person under rule 206(4)–5, the Commission must find, by order, that these pay to play rules: (i) Impose substantially equivalent or more stringent restrictions on broker-dealers or municipal advisors than the SEC Pay to Play Rule imposes on investment advisers; and (ii) are consistent with the objectives of the SEC Pay to Play Rule.7 Rule 206(4)–5 became effective on September 13, 2010 and the compliance date for the third-party solicitor ban was set to September 13, 2011.8 When the Commission added municipal advisors to the definition of regulated person, the Commission also extended the third￾party solicitor ban’s compliance date to June 13, 2012.9 In the absence of a final municipal advisor registration rule, the Commission extended the third-party solicitor ban’s compliance date from June 13, 2012 to nine months after the compliance date of the final rule,10 which was July 31, 2015.11 On June 25, 2015, the Commission issued notice of the July 31, 2015 compliance date.12 On December 16, 2015, the MSRB filed with the Commission proposed amendments to the MSRB Pay to Play Rule to extend its application to municipal advisors, which the Commission published for notice and comment on December 23, 2015 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’) and rule 19b–4 thereunder.13 On February 17, 2016, the MSRB published a regulatory notice announcing that the proposed amendments to the MSRB Pay to Play Rule were deemed approved by the Commission under section 19(b)(2)(D) of the Exchange Act on February 13, 2016 and the effective date of the rule is August 17, 2016.14 Prior to its amendment, the MSRB Pay to Play Rule only applied to brokers, dealers and municipal securities dealers. II. Discussion of Order Pursuant to section 206 of the Advisers Act and rule 206(4)– 5(f)(9)(iii)(B) thereunder, the Commission is providing notice 15 that the Commission intends to issue an order finding that the MSRB Pay to Play Rule (i) imposes substantially equivalent or more stringent restrictions on municipal advisors than the SEC Pay to Play Rule imposes on investment advisers and (ii) is consistent with the objectives of the SEC Pay to Play Rule. The MSRB Pay to Play Rule imposes substantially similar requirements for municipal advisors as the SEC Pay to Play Rule imposes on investment advisers. For example, the MSRB Pay to Play Rule will: • Prohibit a municipal advisor from engaging in municipal advisory business with a municipal entity for two years, subject to exceptions, following the making of a contribution to certain officials of the municipal entity by the municipal advisor, a municipal advisor professional of the municipal advisor, or a political action committee controlled VerDate Sep<11>2014 15:10 Sep 01, 2016 Jkt 238001 PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 E:\FR\FM\02SEP1.SGM 02SEP1 Lhorne on DSK30JT082PROD with PROPOSALS

Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Proposed Rules 60653 16MSRB Pay to Play Release, supra footnote 13, at 81712. 17 Id. 18 Id. 19 Id. 20 Id. 1 15 U.S.C. 80b. Unless otherwise noted, all references to statutory sections are to the Advisers Act, and all references to rules under the Advisers Act, including rule 206(4)–5, are to Title 17, Part 275 of the Code of Federal Regulations [17 CFR part 275]. 2Political Contributions by Certain Investment Advisers, Investment Advisers Act Rel. No. 3043 (July 1, 2010) [75 FR 41018 (July 14, 2010)] (‘‘SEC Pay to Play Rule Release’’). 3See id. at section II.B.2.(b). See also 17 CFR 275.206(4)–5(a)(2)(i)(A). 4See 17 CFR 275.206(4)–5(f)(9)(i). 5See 17 CFR 275.206(4)–5(f)(9)(ii). While rule 206(4)–5 applies to any registered national securities association, FINRA is currently the only registered national securities association under section 19(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78s(b)] (the ‘‘Exchange Act’’). As such, for convenience, we will refer directly to FINRA in this Notice when describing the exception for certain broker-dealers from the third-party solicitor ban. 6See 17 CFR 275.206(4)–5(f)(9)(iii). by the municipal advisor or a municipal advisor professional of the municipal advisor; 16 • Prohibit municipal advisors and municipal advisor professionals from soliciting contributions, or coordinating contributions, to certain officials of a municipal entity with which the municipal advisor is engaging, or seeking to engage, in municipal advisory business; 17 • Prohibit municipal advisors and certain municipal advisor professionals from soliciting payments, or coordinating payments, to political parties of states and localities with which the municipal advisor is engaging in, or seeking to engage in, municipal advisory business; 18 • Prohibit municipal advisors and municipal advisor professionals from committing indirect violations of the MSRB Pay to Play Rule; 19 • Extend applicable interpretive guidance under the existing MSRB pay to play rule to municipal advisors; 20 and • Include a new defined term (‘‘municipal advisor third-party solicitor’’) for municipal advisors that undertake a solicitation of a municipal entity on behalf of a third-party dealer, municipal advisor or investment adviser. Certain aspects of the rule will apply to this distinct type of municipal advisor. The Commission believes that the rule imposes substantially equivalent or more stringent restrictions on municipal advisors than rule 206(4)–5 imposes on investment advisers and would be consistent with the objectives of rule 206(4)–5. By the Commission. Dated: August 25, 2016. Brent J. Fields, Secretary. [FR Doc. 2016–20890 Filed 9–1–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 275 [Release No. IA–4511; File No. S7–16–16] Political Contributions by Certain Investment Advisers: Ban on Third￾Party Solicitation; Notice of Order With Respect to FINRA Rule 2030 AGENCY: Securities and Exchange Commission. ACTION: Notice of intent to issue order. SUMMARY: The Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) intends to issue an order pursuant to section 206 of the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’) and rule 206(4)–5 thereunder (the ‘‘SEC Pay to Play Rule’’) finding that Financial Industry Regulatory Authority (‘‘FINRA’’) rule 2030 (the ‘‘FINRA Pay to Play Rule’’), which was approved by the Commission on August 25, 2016, imposes substantially equivalent or more stringent restrictions on brokers￾dealers than the SEC Pay to Play Rule imposes on investment advisers and is consistent with the objectives of the SEC Pay to Play Rule. DATES: Hearing requests should be received by the Commission by 5:30 p.m. on September 19, 2016. ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. FOR FURTHER INFORMATION CONTACT: Sirimal R. Mukerjee, Senior Counsel, Melissa Roverts Harke, Senior Special Counsel, or Sara Cortes, Assistant Director, at (202) 551–6787 or IArules@ sec.gov, Investment Adviser Regulation Office, Division of Investment Management, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–8549. SUPPLEMENTARY INFORMATION: Hearing or Notification of Hearing An order will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary. Hearing requests should be received by the Commission by 5:30 p.m. on September 19, 2016. Pursuant to rule 0– 5 under the Advisers Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. The Commission intends to issue an order under the Advisers Act.1 I. Background The Commission adopted the SEC Pay to Play Rule [17 CFR 275.206(4)–5] under the Advisers Act [15 U.S.C. 80b] to prohibit an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or certain of its executives or employees (‘‘covered associates’’) make a contribution to certain elected officials or candidates.2 Rule 206(4)–5 also prohibits an adviser and its covered associates from providing or agreeing to provide, directly or indirectly, payment to any third-party for a solicitation of advisory business from any government entity on behalf of such adviser, unless such third-party is a ‘‘regulated person’’ (‘‘third-party solicitor ban’’).3 Rule 206(4)–5 defines a ‘‘regulated person’’ as an SEC-registered investment adviser,4 a registered broker or dealer subject to pay to play restrictions adopted by a registered national securities association that prohibit members from engaging in distribution or solicitation activities if certain political contributions have been made,5 or a registered municipal advisor subject to pay to play restrictions adopted by the Municipal Securities Rulemaking Board (the ‘‘MSRB’’) that prohibit members from engaging in distribution or solicitation activities if certain political contributions have been made.6 In addition, in order for a broker-dealer or municipal advisor to be a regulated person under rule 206(4)–5, the Commission must find, by order, that these pay to play rules: (i) Impose substantially equivalent or more stringent restrictions on broker-dealers or municipal advisors than the SEC Pay to Play Rule imposes on investment VerDate Sep<11>2014 15:10 Sep 01, 2016 Jkt 238001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\02SEP1.SGM 02SEP1 Lhorne on DSK30JT082PROD with PROPOSALS