Notice of Filing of Proposed Amendments to Rule G-40 on Electronic Mail Contacts

On October 16, 2007, the Municipal Securities Rulemaking Board (“MSRB”) filed with the Securities and Exchange Commission (“SEC”) proposed amendments to Rule G-40, on e-mail contacts, that would more fully conform MSRB requirements to Financial Industry Regulatory Authority (“FINRA”) requirements relating to contact information.[1]  The MSRB has proposed that the amendments become effective on December 31, 2007 to coincide with the effective date of recently-approved FINRA requirements.[2] 

In 2002, the MSRB adopted Rule G-40, on e-mail contacts, to establish a reliable method for electronic communication with brokers, dealers and municipal securities dealers (collectively, “dealers”).[3]   The rule requires, among other things, that dealers use Form G-40 to appoint a “Primary Contact” for purposes of electronic communication between the dealer and the MSRB.  The Primary Contact must be either a Series 53-registered municipal securities principal or a Series 51-registered municipal fund securities limited principal.[4]  Dealers are required to submit their original forms and any subsequent changes electronically through their electronic G-40 account using the appropriate user ID and password.  The rule also requires that each dealer maintain an Internet electronic mail account to permit communication with the MSRB, and to review and, if necessary, update its Primary Contact information within 17 business days after the end of each calendar quarter. 

Rule G-40 was based on similar NASD (now FINRA) requirements.[5]  The MSRB attempts, whenever possible, to adopt rule provisions and language similar to FINRA rules in order to facilitate dealer understanding of and compliance with such provisions, as well as inspection and enforcement.  

The Commission recently approved a FINRA proposal, which becomes effective December 31, 2007, that: (i) changes the quarterly review/update requirement to an annual requirement; (ii) requires firms to update their required contact information promptly but not later than 30 days following any change in such information; and (iii) requires firms to comply with any FINRA request for such information promptly but not later than 15 days following such request, or such longer period that may be agreed to by FINRA staff.[6] 

The MSRB has determined to similarly amend Rule G-40 to ensure a coordinated regulatory approach in this area.  Thus, the proposed amendments to Rule G-40 would require dealers to: (i) promptly update any change in the required information for their Primary Contact but not later than 30 days following such change; (ii) review and, if necessary, update required information on their Primary Contact within 17 business days after the end of each calendar year; and (iii) promptly comply with any request by the appropriate regulatory agency (as defined in Section 3(a)(34) of the Act) for such information but not later than 15 days following such request, or such longer period that may be agreed to by the appropriate regulatory agency.

The MSRB believes that by substantially conforming Rule G-40 to comparable FINRA requirements relating to e-mail contact information, the proposed rule change will promote regulatory consistency by facilitating dealer compliance with such requirements, as well as the inspection and enforcement thereof.

Questions concerning this notice should be directed to Jill C. Finder, Associate General Counsel.

October 16, 2007

 

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TEXT OF AMENDMENTS [7]

Rule G-40:  Electronic Mail Contacts

(a) – (b)(i)  No change.

(ii) A broker, dealer or municipal securities dealer may change the name of its Electronic Mail Contacts or other information previously provided by electronically submitting to the MSRB an amended Form G-40.  In addition, each broker, dealer or municipal securities dealer shall update its required Primary Electronic Mail Contact information promptly, but in any event not later than 30 days following any change in such information.

(c)(i) Each broker, dealer or municipal securities dealer shall [must] review and, if necessary, update information on its Primary Electronic Mail Contact and submit such information electronically to the MSRB within 17 business days after the end of each calendar year [quarter].

(ii) Any broker, dealer or municipal securities dealer that, during the 17 business-day update period, submits its initial Form G-40 or modifies or affirms information relating to its Primary Electronic Mail Contact shall be deemed to be in compliance with the annual [quarterly] update requirement applicable to the year [quarter] immediately preceding that 17 business-day update period.

(d)  Each broker, dealer or municipal securities dealer shall promptly comply with any request by the appropriate regulatory agency (as defined in Section 3(a)(34) of the Act) for required Primary Electronic Mail Contact information, but in any event not later than 15 days following any such request, or such longer period that may be agreed to by the appropriate regulatory agency.

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