[Federal Register Volume 63, Number 56 (Tuesday, March 24, 1998)]
[Notices]
[Pages 14160-14162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7518]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39768; File No. SR-MSRB-98-3]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Municipal Securities
Rulemaking Board Relating to Rule G-36
March 17, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 10, 1998, the Municipal Securities Rulemaking Board (``Board''
or ``MSRB'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a proposed rule change (SR-MSRB-98-3). The
proposed rule change is described in Items I and II below, which Items
have been prepared by the Board. The Board has designated the proposed
rule change as constituting a ``non-controversial'' rule change under
paragraph (e)(6) of Rule 19b-4 under the Act which renders the proposal
effective upon receipt of this filing by the Commission.\3\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On March 4, 1998, pursuant to Rule 19b-4(e)(b)(iii), the
Board provided the required five day advance notice to the
Commission of its intent to file this proposed rule change. In this
notice, the Board has represented that this proposed rule change:
(1) Will not significantly affect the protection of investors; (2)
will not impose any significant burden on competition; and (3) will
not become operative for thirty days after the date of this filing.
See letter from Ernesto A. Lanza, Assistant General Counsel, MSRB,
to Katherine A. England, Esq., Assistant Director, Division of
Market Regulation, SEC, dated March 2, 1998.
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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 an amendment to section (c)(iii) of Rule G-36, on
delivery of official statements, advance refunding documents, and Forms
G-36(OS) and G-36(ARD) to the Board. The proposed rule change will
become operative on April 9, 1998.\4\
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\4\ Id.
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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
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). The rule was
adopted by the Board for the purpose of creating a repository for
official statements that would function much like a public library that
stores, indexes and provides copies of official statements.\5\ This
library \6\ was intended to serve as a central source for information
regarding municipal securities trading in the primary and secondary
markets. As originally adopted by the Board and approved by the
Commission, Rule G-36 did not apply to any primary offering that
qualified for an exemption under current section (d)(1) of Rule 15c2-12
under the Act, including, among other things, commercial paper that
qualified for the exemption set forth in paragraph (ii) of Rule 15c2-
12(d)(1).\7\ In 1992, Rule G-36 was amended to make commercial paper
and certain other categories of municipal securities subject to the
rule if an official statement in final form had been prepared by or on
behalf of the issuer, thereby extending the reach of Rule G-36 beyond
the scope of Rule
[[Page 14161]]
15c2-12.\8\ the 1992 amendment was adopted because the Board believed
there existed an interest among market participants in obtaining
official statements relating to such municipal securities. By expanding
the scope of the rule to include such offerings, the Board believed a
more complete collection of disclosure documents would result and the
overall integrity, efficiency and liquidity of the municipal securities
market would be increased.
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\5\ See Securities Exchange Act Rel. No. 28081 (June 1, 1990),
55 FR 23333 (June 7, 1990).
\6\ The library is now known as the Municipal Securities
Information Library (MSIL) system. Municipal
Securities Information Library and MSIL are registered trademarks of
the Board.
\7\ Prior to Rule 15c2-12 amendments adopted by the Commission
on November 10, 1994, this section was labeled ``(c)(2).'' See
Securities Exchange Act Rel. No. 26985 (June 28, 1989), 54 FR 28799
(July 10, 1989) (Adopting Release for Rule 15c2-12).
\8\ Thus, only primary offerings that qualified for the limited
placement exemption from Rule 15c2-12 under current paragraph (i) of
section (d)(1) (formerly section (c)(1)) remained exempt from Rule
G-36. See Securities Exchange Act Rel. No. 32086 (March 31, 1993),
58 FR 18290 (April 8, 1993) (order approving SR-MSRB-92-7).
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Rule G-36(c)(i) currently requires that the underwriter in a
primary offering of commercial paper send to the Board a copy of the
official statement, if any, prepared by or on behalf of the issuer
within one business day of the bond closing.\9\ Some concern has been
expressed that each roll-over under a commercial paper program may
technically constitute a primary offering that might trigger the rule's
official statement submission requirement if there exists an official
statement in final form prepared by or on behalf of the issuer, even if
such official statement has previously been submitted to the Board in
connection with the initial sale of commercial paper under the
commercial paper program. Such a conclusion is not consistent with the
intent of the Board in adopting Rule G-36. The Board had sought to
build a library that included a substantially complete set of official
statements rather than to impose, for reasons unrelated to the central
purpose of building such library, a filing requirement in connection
with each primary offering.\10\ No purpose is served under these
circumstances by having the same official statement submitted to the
Board repeatedly.\11\
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\9\ The official statement for a commercial paper issue is often
referred to as an offering memorandum.
\10\ Form G-36(OS) is also used to assist the Board in invoicing
underwriters for underwriting assessments that are due under Rule A-
13 in connection with primary offerings. However, as commercial
paper issues fall within the exemption from the underwriting
assessment set forth in Rule A-13(a)(ii), this function is not
served by requiring that Form G-36(OS) be submitted in connection
with each primary offering of commercial paper.
\11\ In contrast, in certain situations where different
underwriters or syndicates have underwritten different portions of
the securities offered in a single official statement, separate
submissions of Form G-36(OS) and of the official statement (thereby
causing multiple copies of the official statement to be filed with
the Board) serve the purpose of ensuring that underwriting
assessments are invoiced to the applicable underwriters in the
appropriate amounts.
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The Board proposed the rule change to clarify that underwriters of
commercial paper issues are required to submit to the Board the
official statement in final form, if any, prepared by or on behalf of
the issuer only once rather than each time outstanding commercial paper
is rolled-over. Under the amendment, once the official statement for a
commercial paper issue has been submitted to the Board, such official
statement would not be required to be submitted in connection with
future roll-overs or issuances of new tranches of commercial paper,
even if it is used in connection with such offering, so long as the
official statement has not been modified from the form previously
submitted to the Board. If the official statement is revised or
otherwise modified (e.g., a periodic revision or a modification due to
the occurrence of a material event), then the revised or modified
official statement would be subject to the rule's submission
requirement the first time it is used in connection with a primary
offering of the commercial paper, such as a roll-over or issuance of a
new tranche. Such revised or modified official statement would
thereafter qualify for the submission exemption until it is again
revised or modified.
The Board believes the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act.\12\ The Board believes that the
proposed rule change will provide greater clarity to brokers, dealers
and municipal securities dealers in complying with Rule G-36.
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\12\ Section 15B(b)(2)(C) states in pertinent part that the
rules of the Board ``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.''
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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, because it would apply equally
to all brokers, dealers and municipal securities dealers and would
reduce the burden of complying with Rule G-36 for brokers, dealers and
municipal securities dealers that underwrite commercial paper programs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
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 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 will become operative on April 9,
1998.\13\
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\13\ See supra note 3.
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In particular, the Commission believes the proposed rule change
qualifies as a ``non-controversial filing'' in that the proposed rule
change does not significantly affect the protection of investors or the
public interest and does not impose any significant burden on
competition. 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, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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
[[Page 14162]]
the Board's principal offices. All submissions should refer to File No.
SR-MSRB-98-3 and should be submitted by April 14, 1998.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-7518 Filed 3-23-98; 8:45 am]
BILLING CODE 8010-01-M
