[Federal Register Volume 63, Number 14 (Thursday, January 22, 1998)]
[Notices]
[Pages 3368-3370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1424]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39545; File No. SR-MSRB-97-10]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Municipal Securities
Rulemaking Board Relating to Forms G-36(OS) and G-36(ARD) and
Recordkeeping, Operative on January 1, 1998
January 13, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November
26, 1997, the Municipal Securities Rulemaking Board (``Board'' or
``MSRB'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a proposed rule change (File No. SR-MSRB-
97-10). The proposed rule change is described in Items I, II, and III
below, which Items have been prepared by the Board. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Board has filed with the Commission a proposed rule change
consisting of revised Forms G-36(OS) and G-36(ARD) under rule G-36 and
amendments to section (a)(xv) of rule G-8, on recordkeeping. The
proposed rule change becomes operative on January 1, 1998.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Board included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
texts of these statements may be examined at the places specified in
Item IV below. The Board has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Rule G-36 requires that a broker, dealer or municipal securities
dealer acting as underwriter in a primary offering of municipal
securities (with certain limited exceptions) send to the Board copies
of the official statement and completed Form G-36(OS). If the
securities advance refund an outstanding issue of municipal securities,
rule G-36 requires that the underwriter also send to the Board copies
of the advance refunding document and completed Form G-36(ARD). Forms
G-36(OS) and G-36(ARD) are being revised to provide greater clarity to
brokers, dealers and municipal securities dealers in the process of
completing the forms as well as to provide additional information that
would assist the enforcement agencies in their enforcement activities
relating to rules G-36 and G-32.
The revisions to Form G-36(OS) add the following new data elements:
the date materials are received from the issuer, the date materials are
sent to the Board, whether materials submitted consist of more than one
document, the actual or expected date of delivery of securities to
underwriters, whether the securities advance refund another issue, the
SEC registration number, information regarding CUSIP-6 number
assignments and the fax number of the preparer. The revisions to Form
G-36(ARD) add the following new data elements: the date materials are
received from the issuer, the date materials are sent to the Board,
whether materials submitted consist of more than one document, the date
of delivery of securities to underwriters, the SEC registration number
and the fax number of the preparer. In addition, the layout of both
forms is reorganized.
Rule G-8(a)(xv) currently requires brokers, dealers and municipal
securities dealers acting as underwriters in most primary offerings of
municipal securities to maintain certain records relating to such
primary offerings and the receipt and sending of materials as required
under rule G-36. Rule G-8(a)(xv) is being amended to require such
brokers, dealers and municipal securities dealers to record and
maintain additional information regarding the date of delivery of the
issue to the underwriters, as well as to retain a copy of the receipt
of sending the required forms and documents to the Board and a copy of
the forms and documents sent. The additional records required under the
amended rule will assist the enforcement agencies in their enforcement
activities relating to rule G-36.
2. Basis
The Board believes the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act, which provides that the Board's rules
shall:
be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal 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.
As discussed above, the Board believes that the proposed rule
change will provide greater clarity to brokers, dealers and municipal
securities dealers
[[Page 3369]]
in completing Forms G-36(OS) and G-36(ARD) and will provide additional
information to the enforcement agencies that would assist them in their
enforcement activities relating to rules G-36 and G-32.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act since it would apply equally to
all brokers, dealers and municipal securities dealers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
In May 1997, the Board published a notice (``Notice'') that, among
other things, urged brokers, dealers and municipal securities dealers
to review their compliance procedures in connection with rules G-36 and
G-32.\1\ To assist the agencies charged with enforcing rules G-36 and
G-32, the Board proposed in the Notice certain revisions to Forms G-
36(OS) and G-36(ARD). These revisions would require underwriters to
include information regarding the dates underwriters receive official
statements and advance refunding documents from issuers, the date of
delivery of the issue to the underwriters, whether a new issue is an
advance refunding and the date the documents are sent to the Board. In
addition, the Board proposed an amendment to rule G-8(a)(xv) to require
underwriters to record the date of delivery of the issue to the
underwriters and to retain a copy of the receipt of sending the
required forms and documents to the Board, as well as a copy of the
forms and documents sent.
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\1\ ``Board Review of Underwriting Process,'' MSRB Reports, Vol.
17, No. 2 (June 1997) at 3-16.
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In response to its request for comments, the Board received comment
letters addressing the proposed revisions to Forms G-36(OS) and G-
36(ARD) and the proposed amendments to rule G-8(a)(xv) from eight
commentators.
Several commentators state that they supported \2\ or did not
oppose \3\ the proposed changes to Forms G-36(OS) and G-36(ARD) and the
related change to rule G-8. One commentator \4\ supported the
collection and retention of the additional information as a deterrent
to issuers for the untimely provision of official statements to
underwriters and as a source of information about the frequency and
severity of any problem in the municipal market with the delivery of
official statements and advance refunding documents. Another
commentator \5\ stated that the proposal would evidence any late
delivery by the issuer of official statements to underwriters.
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\2\ Goldman, Sachs & Co., Government Finance Officers
Association (``GFOA''), Newman & Associates, Inc. and Rauscher
Pierce Refsnes, Inc. (``Rauscher Pierce'').
\3\ Lehman Brothers Inc.
\4\ GFOA.
\5\ Rauscher Pierce.
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NASD Regulation, Inc. suggested additional changes to the forms. It
suggested that the forms include a clarifying statement which indicates
whether the ``date of delivery'' is synonymous with ``settlement or
closing date''; that a glossary or definition of terms be included as
part of the forms, or alternatively, that the forms contain a reference
to the appropriate rule or interpretation which provides appropriate
definitions; that, in addition to the managing underwriter, the forms
identify each syndicate member and percent participation, when
applicable, to be used in compliance activities under rule G-37; and
that when firms are identified by name on the forms they also be
identified by their broker-dealer number or SEC-8 number. The Board has
incorporated most of these suggestions in the revised forms.
Information regarding syndicate members and participants was not
included since this information would in several respects not be
compatible with the type of information mandated by rule G-37 and would
require that the forms be enlarged to three pages to add data elements
that are entirely unrelated to rule G-36.
Although another commentator \6\ did not specifically oppose the
changes in the forms, it expressed some concern regarding the revisions
by stating that the ``undisguised purpose'' of the proposed revisions
to Forms G-36(OS) and G-36(ARD) was to require brokers, dealers and
municipal securities dealers to advise the Board whenever a filing is
late under rule G-36. The Board acknowledges that one of the stated
purposes of the revisions to Forms G-36(OS) and G-36(ARD) is to assist
the enforcement agencies in their enforcement activities.
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\6\ Smith Barney Inc.
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One commentator \7\ opposed the proposed amendments to rule G-
8(a)(xv), stating that it would increase the burden on brokers, dealers
and municipal securities dealers without solving the underlying
problem. The Board believes that the proposed amendments to rule G-
8(a)(xv) will at most constitute a negligible compliance burden while
providing significant assistance to the enforcement agencies in their
enforcement activities relating to rule G-36.
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\7\ Wachovia Bank, N.A.
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III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Because the foregoing proposed rule change: (i) does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
(iii) was provided to the Commission for its review at least five
business days prior to the filing date; and (iv) does not become
operative for at least thirty (30) days from the date of its filing,
the proposed rule change has become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder and become
operative on January 1, 1998. At any time within sixty days of the
filing of the proposed rule change, the Commission may summarily
abrogate 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.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
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 inspection and copying in the
Commission's Public Reference Room. Copies of the filing will also be
available for inspection and copying at the Board's principal offices.
All submissions should refer to File No. SR-MSRB-97-10 and should be
submitted by February 12, 1998.
[[Page 3370]]
For the Commission by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-1424 Filed 1-21-98; 8:45 am]
BILLING CODE 8010-01-M
