[Federal Register Volume 64, Number 29 (Friday, February 12, 1999)]
[Notices]
[Pages 7219-7223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3511]
[[Page 7219]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41025; File No. SR-MSRB-97-12]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Approving Proposed Rule Change Relating to Political
Contributions and Prohibitions on Municipal Securities Business
February 8, 1999.
I. Introduction
On December 18, 1997, the Municipal Securities Rulemaking Board
(``Board'' or ``MSRB'') submitted to the Securities and Exchange
Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change. The proposed rule change
consists of amendments to Rule G-37, on political contributions and
prohibitions on municipal securities business, Rule G-8, on
recordkeeping, Rule G-9, on preservation of records, and G-38, on
consultants. In addition, the MSRB submitted new proposed Form G-37x.
On December 3, 1998, the Board filed Amendment No. 1 which superseded
the original proposal.\3\ The proposed rule change, as amended, was
published for comment in the Federal Register on January 5, 1999.\4\
The Commission received one comment on the proposal.\5\ This order
approves the proposal, as amended.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The original proposal did not require Rule G-37 disclosures
by dealers who have not engaged in municipal securities transactions
for 2 years. In addition, the original proposal would not have
required dealers subject to reporting requirements to make any
filing in the event they had nothing to disclose. After discussions
between the Commission and the MSRB, the MSRB filed Amendment No. 1.
While the revised proposal maintains the exemptions to the
disclosure requirements, it includes a dealer certification as a
precondition to the effectiveness of the exemptions created in the
original proposal.
\4\ Securities Exchange Act Release No. 40845 (December 28,
1998), 64 FR 539.
\5\ See letter from Sarah M. Starkweather, Vice President and
Associate General Counsel, The Bond Market Association, to Mr.
Jonathan G. Katz, Secretary, SEC, dated January 26, 1999. The
comment letter supported the proposed rule change.
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II. Description of the Proposal
Rule G-37 prohibits a broker, dealer, or municipal securities
dealer (``dealer'') that effects transactions in municipal securities
from engaging in municipal securities business \6\ with an issuer
within two years after certain contributions (other than certain de
minimis contributions) to an official of an issuer made by the dealer,
any municipal finance professional (``MFP'') associated with such
dealer or any political action committee (``PAC'') controlled by the
dealer or any MFP. In addition, Rules G-37 and G-38 require dealers to
make disclosures of certain contributions to issuer officials payments
to state and local political parties, consultant arrangements and
municipal securities business on Form G-37/G-38. Rule G-8 requires
dealers to create records of contributions, payments, consultants, and
issuers with which the dealer has engaged in municipal securities
business and Rule G-9 requires dealers to preserve these records for a
period of at least six years.
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\6\ Municipal securities business is defined in Rule G-37 to
encompass certain activities of dealers in connection with primary
offerings of municipal securities, such as acting as an underwriter
in a negotiated sale, as a placement agent, or as a financial
advisor, consultant or remarketing agent to an issuer in which the
dealer was chosen on a negotiated basis.
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Currently, every dealer is obligated to comply with the reporting
requirements of Rule G-37 by submitting Form G-37/G-38 to the Board on
a quarterly basis and to undertake the related recordkeeping
obligations under Rule G-8, even if a dealer does not engage in
municipal securities business.\7\
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\7\ The range of activities encompassed by the term municipal
securities business is significantly narrower than the types of
activities that can cause a dealer to be subject to the obligation
to comply with Board Rules. For example, a dealer that effects
municipal securities transactions that are limited to secondary
market trades for its customers or underwriting of new issues solely
through competitive sales is not, by effecting such transactions,
engaging in municipal securities business within the meaning of Rule
G-37. However, the dealer is still required to undertake the
disclosure and recordkeeping obligations under current Rules G-37
and G-8 with respect to contributions and payments.
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Upon review of the first four years of operation on Rule G-37, the
Board believes that requiring dealers that do not engage in municipal
securities business to comply with these disclosure and recordkeeping
obligations does not substantially further Rule G-37's stated purpose
of exposing to public scrutiny contributions and payments that may be
linked to the awarding of municipal securities business. The Board
believes that Rule G-37 has been successful in reducing the number of
political contributions used to gain awards of municipal securities
business. The Board stated that it continues to be vigilant in
prohibiting improper political contributions from affecting the
awarding of municipal securities business.
Therefore, the Board has proposed certain amendments to Rules G-37
and G-8 to exempt dealers that do not engage in municipal securities
business from reporting and recordkeeping obligations.\8\ Dealers
invoking this new exemption (hereinafter referred to as the ``No
Business Exemption'') will be required to meet two preconditions and
will be subject to a third requirement if they later begin engaging in
municipal securities business. To invoke the No Business Exemption, a
dealer must: (1) not have engaged in municipal securities business for
a period of at least two years; and (2) submit to the Board the new
Form G-37x. If the dealer thereafter begins to engage in municipal
securities business, it would become subject to a disclosure and
recordkeeping look back requirement (hereinafter referred to as the
``Look Back Requirement'') that will obligate the dealer to create
records of, and to disclose on Form G-37/G-38, certain contributions
made to issuer officials and payments to state and local political
parties made during the preceding two year period.
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\8\ This exemption would not extend to the reporting
requirements under Rule G-38. Therefore, as amended, the rule would
continue to require submission of information on Form G-37/G-38
concerning the use of consultants pursuant to Rule G-38.
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The Board has also proposed an amendment to Rule G-37 which
codifies a previously recognized exemption to the Form G-37/G-38
submission requirement for any quarter in which a dealer has no
information to report (hereinafter referred to as the ``No Information
Exemption''). The Board also proposed certain technical amendments to
consolidate the provisions currently found separately in Rules G-37 and
G-38 relating to the submission of Form G-37/G-38, to clarify Rule G-37
by eliminating certain cross-referencing to Rule G-8, and to provide
for the maintenance and preservation under Rules G-8 and G-9 of any
Forms G-37x submitted to the Board.
a. No Business Exemption for Dealers Not Engaged in Municipal
Securities Business
A dealer that qualifies for the No Business Exemption under amended
Rule G-37(e)(ii)(A)(2) will not be required to report information to
the Board on Form G-37/G-38 regarding contributions to issuer officials
and payments to state and local political parties and will not be
required to create records of these contributions and payments pursuant
to new clause (K) of
[[Page 7220]]
Rule G-8(a)(xvi).\9\ If a dealer engages in municipal securities
business after invoking the No Business Exemption, the dealer will
become subject to the Look Back Requirement under new paragraph (iii)
of Rule G-37(e).
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\9\ Dealers will still be required to maintain copies of any
Forms G-37/G-38 submitted to the Board during the period of
exemption (e.g., in connection with information relating to the use
of consultants) and of any Forms G-37x submitted to the Board to
invoke the No Business Exemption. In addition, the recordkeeping
exemption would not entitle a dealer to discontinue preservation of
any records previously created under Rule G-8(a)(xvi) unless the
period for preserving the records under Rule G-9(a)(viii) has
lapsed.
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i. No Municipal Securities Business for at Least Two Years
The first proposed condition for invoking the No Business Exemption
in any calendar quarter, as set forth in amended Rule G-
37(e)(ii)(A)(2)(a), is that the dealer must not have engaged in
municipal securities business during the calendar quarter and during
the seven consecutive calendar quarters immediately preceding the
calendar quarter. Any dealer that has previously engaged in municipal
securities business may qualify for the No Business Exemption if it has
ceased business for the requisite period of time. In addition, any
dealer that has never engaged in municipal securities business may also
qualify for the No Business Exemption, regardless of how long the
dealer has been in existence.\10\
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\10\ For this purpose, the Board will deem that a dealer that
has been subject to the rules of the Board for a period of less than
two years (for example, because it came into existence during such
period or because it previously effected only non-municipal
securities transactions) and has not engaged in any municipal
securities business since becoming subject to Board rules would
automatically satisfy the two-year requirement of the No Business
Exemption.
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ii. Submission of Form G-37x
The second proposed condition for invoking the No Business
Exemption, as set forth in amended Rule G-37(e)(ii)(A)(2)(b), is that
the dealer must have sent, by certified or registered mail or some
other equally prompt means that provides a record of sending, two
copies of new Form G-37x to the Board. Form G-37x would include a
certification that the dealer did not engage in municipal securities
business during the eight consecutive calendar quarters immediately
preceding the date of the certification. A Form G-37x submitted to the
Board would remain in effect for so long as the dealer continues to
refrain from engaging in municipal securities business.\11\
Notwithstanding the submission of Form G-37x, a dealer will remain
responsible for determining whether it continues to qualify for an
exemption from the Form G-37/G-38 submission for each calendar
quarter.\12\
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\11\ Thus, the Board explained, if after submitting Form G-37x,
the dealer undertakes any municipal securities business (thereby
subjecting itself to the Look Back Requirement) and thereafter again
seeks to invoke the No Business Exemption after a new two-year
period of not engaging in municipal securities business, the dealer
would be required to submit a new Form G-37x. The Commission
believes that dealers should carefully consider the advisability of
alternating between periods of undertaking municipal securities
business and periods of invoking the No Business Exemption,
particularly in view of the potential difficulties of complying with
the strict Look Back Requirement.
\12\ The Board explained that a dealer must continually
determine whether it has met the requirement for the No Business
Exemption or the No Information Exemption for each quarter.
Moreover, a dealer will still be required to submit Form G-37/G-38
for any calendar quarter in which it has information to report
regarding consultants under Rule G-38 even if it continues to
qualify for the No Business Exemption.
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The Board will make available to the public all Forms G-37x that
are submitted to the Board in the same manner currently used for G-37/
G-38. They will be available for review and photocopying at the Board's
Public Access Facility in Alexandria, Virginia and will be posted on
the Board's Internet Web site (http://www.msrb.org). The forms will
also be available in CD-ROM format on a quarterly basis.\13\
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\13\ CD-ROMS are currently priced at $10.00 (plus delivery or
postage charges and any applicable sales tax) for each CD-ROM
containing copies of Form G-37/G-38 and at $11.50 (plus delivery or
postage charges and any applicable sales tax) for each CD-ROM that
is bundled with the software necessary to access and read the forms
on a computer. See Securities Exchange Act Rel. No. 39488 (December
23, 1997), 63 FR 280 (January 5, 1998). The Board anticipates that
Forms G-37x will be included on these CD-ROMs at no additional cost.
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ii. Look Back Requirement Upon Engaging in Municipal Securities
Business
The Board stated that a dealer that has invoked the No Business
Exemption but later begins engaging in municipal securities business
will become subject to a two-part Look Back Requirement under proposed
paragraph (iii) of Rule G-37(e). First, the proposed Look Back
Requirement provides that the dealer must create records of political
contributions and payments to state and local political parties under
Rule G-8(a)(xvi) for the current calendar year and the two preceding
calendar years and must continue to create such records thereafter
unless the dealer again qualifies for, and invokes, the No Business
Exemption.\14\ The dealer will be responsible for reviewing the newly
created records to ensure that it has not been banned from business
with an issuer as a result of a contribution to an official of the
issuer during the No Business Exemption period, before the dealer
engages in municipal securities business with the issuer.
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\14\ The Board explained that a dealer that is creating records
under the Look Back Requirement must re-create the records that it
would have made during the current calendar year and the two
preceding calendar years but for the No Business Exemption. This
includes the political contributions and payments to state and local
political parties made by an individual who was an MFP or a non-MFP
executive officer during this look back period. The dealer must also
create records of the contributions and payments of individuals who
become MFPs or non-MFP executive officers during the look back
period. Rule G-37 does not require a dealer to create records of
contributions or payments made prior to the look back period.
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Moreover, the Board stated that a dealer that engages in municipal
securities business after invoking the No Business Exemption must
disclose all reportable contributions to issuer officials and payments
to state and local political parties made during the preceding two
years by the dealer, any MFP, and non-MFP executive officer or any
dealer-controlled or MFP controlled PAC, not reported previously
because of the No Business Exemption.\15\ These disclosures must be
made on Form G-37/G-38 for the calendar quarter during which the dealer
first engages in municipal securities business. The dealer will also be
required to send Form G-37/G-38 to the Board for each calendar quarter
thereafter unless the dealer qualifies for the No Information Exemption
or again qualifies for, and invokes, the No Business Exemption.
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\15\ When reporting prior contributions and payments on the
calendar quarter's Form G-37/G-38, a dealer will be required to
include the year and calendar quarter in which each such prior
contribution or payment was made. A dealer, however, will not be
required to include contributions or payments made more than two
years prior to such quarter, even if not previously reported to
comply with Rule G-37.
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The Board explained that the Look Back requirement is intended to
prevent circumvention of the rule and to promote public scrutiny of all
contributions to issuer officials and payments to state and local
political parties (other than qualifying de minimis contributions and
payments) that may influence the awarding of municipal securities
business to any dealer that is newly engaging in, or is again becoming
engaged in, municipal securities business.
The Board stated that the No Business Exemption is best suited to
dealers that do not intend to engage in municipal securities business
in the foreseeable future. Thus, the Board asserted that dealers that
qualify for the No Business Exemption but plan to engage in municipal
securities business at a later time should carefully consider whether
[[Page 7221]]
the burden of having to comply with the Look Back Requirement outweighs
the short term benefit of not having to create and maintain these
records and not having to submit Form G-37/G-38 on a current basis. The
Look Back Requirement may cause great burden to dealers that must
recreate at least two full years of records under Rule G-8(a)(xvi).
Dealers also run the risk of unknowingly becoming banned from municipal
securities business as a result of a contribution made to an issuer
official during the exemption period. Any dealer that engages in
municipal securities business after invoking the No Business Exemption
should be prepared to produce evidence that it has created records and
disclosed information required under the Look Back Requirement.
iv. No effect on Disclosure and Recordkeeping Obligations Relating to
Consultants
The use of consultants in attempting to obtain municipal securities
business is required to be disclosed to the Board pursuant to Rule G-
38. The proposed rule change amends Rule G-37(e)(ii)(B) to require this
disclosure to be reported on Form G-37/G-38 even during periods when a
dealer qualifies for the No Business Exemption. This amendment requires
that dealers report to the Board their use of consultants to obtain
municipal securities business during the no business period. The
submission of Form G-37/G-38 in any quarter will not cause the No
Business Exemption or the related Form G-37x submission to lapse unless
the dealer engages in municipal securities business. The Board
suggested that any dealer that has retained a consultant to obtain
municipal securities business carefully consider the advisability of
invoking (or continuing to invoke) the No Business Exemption. If
business is obtained as a result of a consultant's efforts, then, the
dealer will need to comply with the Look Back Requirement, and in
particular, confirm that it is not banned from undertaking municipal
securities business with that issuer.
v. No Effect on Two-Year Ban on Municipal Securities Business or
Prohibition of Certain Solicitation and Coordination Under Rule G-37(b)
and (c)
The proposed rule change and the new No Business Exemption do not
provide exemptions from the operation of sections (b) and (c) of Rule
G-37.\16\ Therefore, a political contribution (other than an MFP's de
minimis contribution) to an official of an issuer that was not
disclosed on Form G-37/G-38 and not recorded under Rule G-8(a)(xvi) by
virtue of the No Business Exemption could cause a ban on municipal
securities business with such issuer under section (b). Moreover,
solicitation or coordination of contributions to an official of an
issuer with which the dealer is seeking to engage in muncipal
securities business continues to be prohibited under section (c) even
if the No Business Exemption is in effect. Dealers that qualify for the
No Business Exemption but are considering future municipal securities
business are directed to be aware of the continuing applicability of
section (b) and (c) of Rule G-37.
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\16\ Section (b) provides that no dealer shall engage in
municipal securities business with an issuer within two years after
any contribution to an official of such issuer made by the dealer,
an MFP or a PAC controlled by the dealer or MFP. Section (c)
provides that no dealer or MFP shall solicit any person or PAC to
make any contribution, or shall coordinate any contributions, to an
official of an issuer with which the dealer is engaging or seeking
to engage in municipal securities business.
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b. No Information Exemption for Dealers With No Information to Report
in a Quarter
The proposed rule change amends Rule G-37(e)(ii)(A)(1) to codify a
previously recognized No Information Exemption to the quarterly Form G-
37/G-38 submission requirement.\17\ The proposed amendment provides
that a dealer would not be required to send Form G-37/G-38 to the Board
for any calendar quarter in which all of the following apply: (1) the
dealer has not engaged in municipal securities business; (2) the dealer
has no reportable political contributions to issuer officials or
payments to state and local political parties; and (3) the dealer has
no reportable use of consultants. This No Information Exemption will
continue to obviate the need for a dealer to submit a Form G-37/G-38
that does not reflect reportable activity under any category. However,
a dealer is required to send Form G-37/G-38 to the Board in any
subsequent calendar quarter in which it does not qualify for the No
Information Exemption, unless the dealer qualifies for, and invokes,
the No Business Exemption.\18\
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\17\ See Securities Exchange Act Release No. 34161 (June 6,
1994), 59 FR 30379 (June 14, 1994), Question and Answer No. 34, See
also, MSRB Reports, Vol. 14, No. 3 (June 1994) at 15-16, and
``Instructions for Completing and Filing Form G-37/G-38,'' reprinted
in MSRB Reports, Vol. 16, No. 1 (January 1996) at 11.
\18\ A dealer that qualifies for the No Business Exemptions may,
however, be required to submit G-37/G-38 if such dealer has engaged
consultants to obtain municipal securities business, pursuant to
Rule G-38.
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c. Technical Amendments
Amend Rule G-37(e)(i) consolidates the Form G-37/G-38 submission
procedures that are currently found separately in paragraphs (i) and
(ii) of Rule G-37(e) and in Rule G-38(d). The proposal also contains
certain related amendments to Rule G-38(d).
In addition, the existing exemption from reporting requirements
under Rule G-37 for de minimis contributions made by MFPs and non-MFP
executive officials of issuers\19\ and to state and local political
parties\20\ is effected by a cross-reference to the recordkeeping
requirements of Rule G-8(a)(xvi). To clarify the nature of such de
minimis exemptions, amended Rule G-37(e)(i)(A) incorporates into the
language of Rule G-37, but does not change, the specific requirements
of the de minimis exemption.
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\19\ A de minimis contribution to an official of an issuer not
requiring disclosure consists of a contribution made by an MFP or
non-MFP executive officer to an official of an issuer for whom the
person is entitled to vote if all contributions by the person to
such official, in total, do not exceed $250 per election.
\20\ A de minimis payment to a political party of a state or
political subdivision not requiring disclosure consists of a payment
made by an MFP or a non-MFP executive officer to a political party
of a state or political subdivision in which the person is entitled
to vote if all payments by the person to the political party, it
total, do not exceed $250 per year.
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d. Amendments Relating to Records of Form G-37x
The proposed rule change amends section H of Rule G-8(a)(xvi) to
require that dealers maintain copies of Form G-37x submitted to the
Board along with the corresponding records of sending. Under amended
Rule G-9(a)(viii), dealers will be required to keep copies of Form G-
37x during the period of effectiveness and for at least six years
following the end of effectiveness.
III. Discussion
The Commission believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder.\21\ In particular, the Commission finds that the proposed
rule change is consistent with Section 15B(b)(2)(C) of the Act.\22\
Section 15B(b)(2)(C) of the Act, requires,
[[Page 7222]]
among other things, that the rules of the Board be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market, and, in general, to protect
investors and the public interest.
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\21\ In reviewing this proposal, the Commission has considered
the proposed rule's impact on efficiency, competition, and capital
formation. The proposed rule change should improve efficiency
because it reduces the filing and recordkeeping burden of municipal
securities dealers who do not engage in municipal securities
business. In addition, the proposed rule change should maintain fair
competition because all municipal securities dealers continue to be
prohibited from improper business solicitations. 15 U.S.C.
78f(b)(7).
\22\ 15 U.S.C. 78o-4(b)(2)(C).
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a. The No Business Exemption
The Commission finds that the No Business Exemption is consistent
with the requirements of Section 15B(b)(2)(C) of the Act because it
removes impedients to and perfects the meachanism of a free and open
market in municipal securities. After these rules have been
implemented, dealers that have been engaged in municipal securities
business for at least two years will not be required to report
information to the Board regarding contributions to issuer officials or
payments to state and local political parties. Furthermore, dealers
will not be required to create contribution and payment records.\23\ By
eliminating these requirements, those dealers who are not engaged in
municipal securities business will be relieved of reporting and
recordkeeping burdens, which according to the MSRB do not substantially
further the stated purpose of Rule G-37. By imposing a ban on dealers
that make financial contributions to issuers, the rule ensures that
municipal securities business is awarded based upon the business
judgment of the issuer and not improper financial incentives. Thus the
Commission agrees that the reporting requirments, amended by this
proposal, imposed on dealers that do not engage in municipal securities
business do not further this purpose and removing these reporting
burdens should allow dealers to concentrate on their other municipal
securities.
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\23\ As noted above, dealers will continued to be required to
create contribution and payment records if they are engaged in
municipal securities business. If a dealer reenters the municipal
securities business, it will be subject to the Look Back
Requirement. The Commission stresses that the amendments to the
reporting and filing requirements approved today are not to be used
as a means of avoiding deisclosure of financial payments to issuers
and political parties.
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Once a dealer qualifies for the No Business Exemption, the dealer
will be required to submit new Form G-37x. The requirement of
submitting the new Form G-37x is also consistent with the requirements
of Section 15B(b)(2)(C) of the Act because it provides for the
protection of investors and the public interest. The public will be
able to access and review all Form G-37x's that are filed and the Board
providing notice of the status of dealers. Filing Form G-37x is an
affirmative representation by the dealer certifying that it has not
engaged in municipal securities business for a least two years.
If a dealer begins or reenters the municipal securities business,
it will be subject to the Look Back Requirement. The Look Back
Requirement is consistent with the requirements of Section 15B(b)(2)(C)
because it ensures that dealers that begin or reenter the municipal
securities business are able to engage in such business with issuers in
compliance with Rule G-37. The Look Back Requirement requires dealers
to recreate and file records of political contributions and payments to
state and local political parties for the current calendar year and the
preceding two calendar years. These dealers will then be obligated to
review these recreated records to ensure that they are in fact eligible
to engage in municipal securities business with certain issuers. The
Look Back Requirement should protect investors and the public interest
because it should ensure that dealers only engage in municipal
securities business with issuers to which they have not made
contributions. It also allows public scrutiny of contributions to
issuer officials and payments to state and local political parties that
may improperly influence the award of municipal securities business.
Under the proposed rule change, dealers must continue to report the
use of consultants to obtain municipal securities business. The
proposed rule change affirmatively states in proposed Rule G-
37(e)(ii)(B) that dealers will continue to be obligated to submit Form
G-37/G-38 regarding the use of consultants to obtain municipal
securities business even during periods when the dealer qualifies for
the No Business Exemption. This is consistent with the Act because the
public will be able to monitor the dealers that engage consultants to
determine if the dealer is considering entering or reentering the
municipal securities business, which should help protect investors.
The proposed rule change is also consistent with the requirements
of Section 15B(b)(2)(C) of the Act because it removes impediments to
and perfects the mechanisms of a free and open market in municipal
securities. The proposed rule change should allow those dealers not
engaging in municipal securities business to concentrate their business
efforts on other municipal securities transactions that are pertinent
to these dealers' businesses. It releases these dealers from the
recordkeeping and reporting requirements of the MSRB rules and should
provide them with flexability to engage in business ventures not
defined as municipal securities business.
Finally, the Commission is satisfied that the proposed rule change
should continue to further the purposes of Rule G-37. The proposed rule
change does not provide exemptions from the two-year ban under Rule G-
37(b) for dealers that have made contributions to officials of issuers
or from the restrictions under Rule G-37(c) which prohibit dealers from
soliciting others to make contributions to officials of issuers with
which the dealer is engaging or seeking to engage in municipal
securities business. The proposed rule change should continue to ensure
that municipal securities business is not awarded based on improper
financial incentives, which should prevent fraudulent and manipulative
acts and practices, promote just and equitable principles of trade, and
protect investors and the public interest, consistent with the
requirements of Section 15B(b)(2)(c).
b. The No Information Exemption
The Commission finds the No Information Exemption consistent with
the requirements of Section 15B(b)(2)(C) of the Act because it removes
impediments to and perfects the mechanisms of a free and open market in
municipal securities. Dealers who are not engaged in municipal
securities business, have not made any reportable contributions or
payments, and have not engaged consultants to obtain municipal
securities business, will no longer be required to file a Form G-37/G-
38 with the Board. This proposed rule change also relieves the
reporting burdens of dealers that are not engaged in municipal
securities business allowing them to concentrate on other municipal
securities activities. Moreover, the No Information Exemption should
not harm investors and the public interest because the proposed rule
change only obviates the need to report that the dealer does not have
any information to report. However, once a dealer engages in municipal
securities business or uses consultants to obtain municipal securities
business, its reporting obligations again become mandatory.
c. Technical Amendments
The proposed rule change contains technical amendments which
provide cross references and consolidations to the proposed rule
changes. These technical amendments are consistent with Section
15B(b)(2)(C) of the Act because they promote just and equitable
principles of trade by providing clarity to the rules of the Board
which govern the actions of dealers of municipal securities.
[[Page 7223]]
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) \24\ of the
Act, that the proposed rule change, as amended, (SR-MSRB-97-12) is
approved.
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\24\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-3511 Filed 2-11-99; 8:45 am]
BILLING CODE 8010-01-M
