MSRB Seeks Comment on Draft Amendments to and Clarifications of Rule on CUSIP Numbers

Date: March 1, 2017

Contact: Jennifer A. Galloway, Chief Communications Officer


Washington, DC – The Municipal Securities Rulemaking Board (MSRB) is seeking comment on draft amendments to its regulation on the role of underwriters and financial advisors in obtaining CUSIP numbers for new issue municipal securities. The draft amendments to MSRB Rule G-34 clarify the application of the rule to private placement transactions and expand it to include non-dealer municipal advisors when advising on new issue municipal securities sold in a competitive offering. The MSRB is also taking this opportunity to remind underwriters of their existing obligation to obtain CUSIP numbers in certain secondary market securities.

Rule G-34 has been in place since 1983 and was established to improve efficiencies in the processing and clearance activities of the municipal securities industry. As adopted, the rule ensured that all eligible municipal securities had CUSIP numbers assigned to and printed on them to facilitate identification of securities in receiving, delivering and safekeeping them.

The draft amendments to Rule G-34 clarify its application to private placements, including direct purchases where the dealer acts as a placement agent. Some municipal market participants, including banks in direct purchase transactions, may believe a CUSIP number is not required or is optional. There also is inconsistency in the application of Rule G-34 to secondary market securities when their characteristics have been altered, for example, through a remarketing.

The MSRB is seeking comment from interested industry participants on draft amendments to Rule G-34 to revise the definition of “underwriter” to clarify that it applies to private placement securities transactions, including direct purchases of municipal securities in which the dealer acts as placement agent. The MSRB historically has taken the view that private placements of municipal securities are subject to the requirements of Rule G-34; however, this view is not uniformly adopted by all market participants. Commenters should address whether the proposed amendment to the definition of “underwriter” in Rule G-34 clarifies that CUSIP numbers are needed in public offerings and private placements, or suggest a more effective way of achieving this desired result.

The MSRB also would like public comment on expanding the scope of Rule G-34 to include all municipal advisors advising on competitive new issue transactions. A significant number of non-dealer municipal advisors participate in these transactions and are not required to obtain CUSIP numbers, resulting in a regulatory imbalance between dealer and non-dealer municipal advisors. The draft amendments would include a definition of “municipal advisor” that would clarify that the CUSIP number requirements apply to all municipal advisors acting as a financial advisor in a competitive sale of new issue municipal securities and would not apply on the grounds that the municipal advisor is a solicitor or is advising on municipal financial products. MSRB seeks comment on this draft amendment and the impact of this requirement on dealer and non-dealer municipal advisors alike. 

Comments should be submitted no later than March 31, 2017. Read the request for comment.

The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is overseen by the Securities and Exchange Commission and Congress.