[Federal Register Volume 60, Number 63 (Monday, April 3, 1995)]
[Notices]
[Pages 16896-16898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8088]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35544; File No. SR-MSRB-95-02]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Municipal Securities
Rulemaking Board Relating to Interpretation of Rule G-37 on Political
Contributions and Prohibitions on Municipal Securities Business
March 28, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), and Rule 19b-4 thereunder, notice is
hereby [[Page 16897]] given that on March 23, 1995, the Municipal
Securities Rulemaking Board (``Board'' or ``MSRB'') filed with the
Securities and Exchange Commission (``Commission'' or ``SEC'') a
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Board. The purpose of the proposed rule
change is to provide interpretative guidance concerning rule G-37 on
political contributions and prohibitions on municipal securities
business. The Board has designated this proposal as constituting a
stated policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule of the Board under
section 19(b)(3)(A) of the Act, which renders the proposal effective
upon receipt of this filing by the Commission. 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 is filing the proposed rule change to provide
interpretative guidance concerning rule G-37 on political contributions
and prohibitions on municipal securities business.\1\ Proposed new
language is in italics.
\1\The Board plans to publish the interpretations in the April
1995 MSRB Reports (Vol. 15, no. 1).
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Rule G-37 Questions and Answers
* * * * *
1. Definition of Municipal Finance Professional: Solicitation of
Municipal Securities Business (Rule G-37(g)(iv)(B))
Q. Any associated person who solicits municipal securities
business is deemed a municipal finance professional under rule G-37.
The Board previously noted that ``solicitation'' may encompass a
number of activities, including, for example, making presentations
of public finance and/or municipal securities marketing capabilities
to issuer officials, and engaging in other activities calculated to
appeal to issuer officials for municipal securities business, or
which effectively do so (MSRB Reports, Vol. 14, No. 5 (Dec. 1994) at
8). If an associated person of a dealer attends a presentation by
dealer personnel of public finance capabilities, would this also
constitute ``solicitation'' under rule G-37?
A: Yes. If an associated person of a dealer attends such a
presentation, then he or she is assumed to have solicited municipal
securities business and therefore is deemed a municipal finance
professional under rule G-37. Accordingly, any contributions given
to issuer officials by that person within the last two years could
subject the dealer to the rule's two-year prohibition on business
with such issuers. For additional guidance in this area, please
refer to O&A number 4 in the June 1994 issue of MSRB Reports (Vol.
14, No. 3), CCH Manual paragraph 3681; and Q&A numbers 1, 2 and 3 in
the December 1994 issue of MSRB Reports (Vol. 14, No. 5), CCH Manual
paragraph 3681.
2. Definition of Municipal Finance Professional: Supervisors
(Rule G-37(g)(iv)(C))
Q: A sales representative at a branch office solicits municipal
securities business for the dealer. Such activity results in that
person becoming a ``municipal finance professional'' under rule G-
37(g)(iv)(B). Would that person's branch manager also be considered
a municipal finance professional?
A: Yes. Rule G-37(g)(iv)(C) provides that the definition of
municipal finance professional includes, among others, any
associated person who is both a (i) municipal securities principal
or a municipal securities sales principal and (ii) a supervisor of
any associated person who solicits municipal securities business (or
who is primarily engaged in municipal securities representative
activities). If a sales person is soliciting municipal securities
business, then the supervisor of that person (i.e., the branch
manager) also is included within the definition of municipal finance
professional. Prior to the most recent revision to this portion of
the definition of municipal finance professional (which was approved
on March 6, 1995 in Securities Exchange Act Release No. 34-35446),
the definition included any ``direct supervisor'' of any associated
person who solicited municipal securities business (or who was
primarily engaged in municipal securities representative
activities). Under both definitions, branch managers are included
within the definition of municipal finance professional in the
circumstances described above. For additional information in this
area, please refer to MSRB Reports, Vol. 14, No. 4 (August 1994) at
28-29, CCH Manual paragraph 3681.
* * * * *
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
text 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
On April 7, 1994, the Commission approved Board rule G-37,
concerning political contributions and prohibitions on municipal
securities business.\2\ Since that time, the Board has received
numerous inquiries concerning the application of the rule. In order to
assist the municipal securities industry and, in particular, brokers,
dealers and municipal securities dealers in understanding and complying
with the provisions of the rule, the Board published three prior
notices of interpretation which set forth, in question-and-answer
format, general guidance on rule G-37.\3\ In prior filings with the
Commission, the Board stated that it will continue to monitor the
application of rule G-37, and, from time to time, will publish
additional notices of interpretations, as necessary.\4\ In light of
questions recently received from market participants concerning certain
provisions of the rule, the Board has determined that it is necessary
to provide further guidance to the municipal industry. Accordingly, the
Board is publishing this fourth set of questions and answers which
focuses on those provisions of the rule relating to: (1) solicitation
of municipal securities business; and (2) the definition of municipal
finance professional. As previously stated, the Board will continue to
monitor the application of rule G-37, and, from time to time will
publish additional notices of interpretations, as necessary.
\2\Securities Exchange Act Release No. 33868 (April 7, 1994), 59
FR 17621 (April 13, 1994). The rule applies to contributions made on
and after April 25, 1994
\3\See Securities Exchange Act Release No. 34161 (June 6, 1994),
59 FR 30379 (June 14, 1994), Securities Exchange Act Release No.
34603 (Aug. 25, 1994); 59 FR 45049 (Aug. 31, 1994); and Securities
Exchange Act Release No. 35128 (Dec. 20, 1994); 59 FR 66989 (Dec.
28, 1994). See also MSRB Reports Vol. 14, No. 3 at 11-16 (June
1994); Vol. 14, No. 4 at 31-32 (August 1994); and Vol. 14, No. 5 at
8 (December 1994)
\4\File Nos. SR-MSRB-94-6, SR-MSRB-94-15 and SR-MSRB-94-16.
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The Board believes that 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
Because the proposed rule change would apply equally to all
brokers, dealers and municipal securities dealers, the Board does not
believe that [[Page 16898]] the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
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
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A)(i) of the Act and subparagraph (e) of Rule 19b-4
thereunder because the rule change constitutes a stated policy,
practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule of the Board.
At any time within 60 days of the filing of a rule change pursuant
to Section 19(b)(3)(A) of the Act, the Commission may summarily
abrogate the 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, 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 the principal office of the
Board. All submissions should refer to File No. SR-MSRB-95-02 and
should be submitted by April 24, 1995.
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. 95-8088 Filed 3-31-95; 8:45 am]
BILLING CODE 8010-01-M
