Rule G-38 Solicitation of Municipal Securities Business

(a) Prohibited Payments. Subject to section (c) of this rule, no broker, dealer or municipal securities dealer may provide or agree to provide, directly or indirectly, payment to any person who is not an affiliated person of the broker, dealer or municipal securities dealer for a solicitation of municipal securities business on behalf of such broker, dealer or municipal securities dealer.


(b) Definitions. For purposes of this rule, the following terms shall have the following meanings:

(i) The term "solicitation" means a direct or indirect communication by any person with an issuer for the purpose of obtaining or retaining municipal securities business.

(ii) The term "affiliated person of the broker, dealer or municipal securities dealer" means any person who is a partner, director, officer, employee or registered person of the broker, dealer or municipal securities dealer (or, in the case of a bank dealer, any person occupying a similar status or performing similar functions for the bank dealer) or of an affiliated company of the broker, dealer or municipal securities dealer.

(iii) The term "affiliated company of the broker, dealer or municipal securities dealer" means any entity directly or indirectly controlling, controlled by, or under common control with the broker, dealer or municipal securities dealer whose activities with respect to the broker, dealer or municipal securities dealer or with respect to any other affiliated company of the broker, dealer or municipal securities dealer are not limited solely to the solicitation of municipal securities business.

(iv) The term "registered person" means any associated person of the broker, dealer or municipal securities dealer duly qualified in one or more categories of qualification under Rule G-3 or duly qualified and registered in one or more categories of registration under the rules of a registered securities association.

(v) The terms "issuer," "municipal securities business" and "payment" shall have the meanings set forth in Rule G-37(g).


(c) Transitional Payments.

(i) A broker, dealer or municipal securities dealer may make payments to a person other than an affiliated person of the broker, dealer or municipal securities dealer for a solicitation of municipal securities business on behalf of such broker, dealer or municipal securities dealer if such payment is made with respect solely to solicitation activities undertaken by such person on or prior to the effective date of this rule pursuant to a Consultant Agreement under former Rule G-38, but only if:

(A) such person has not solicited municipal securities business from any issuer on behalf of the broker, dealer or municipal securities dealer at any time after the effective date of this rule; and

(B) the broker, dealer or municipal securities dealer sends to the Board, by the last day of the month following the end of each calendar quarter during which payments to such person are made or remain pending, Form G-38t, setting forth, in the prescribed format, the information required to be disclosed to the Board pursuant to section (e) of former Rule G-38; provided that each item of municipal securities business for which payment remains pending (together with a specific dollar amount or objective formula for determining the specific dollar amount of the pending payment) must be listed on the first quarterly Form G-38t due after the effective date of this rule and on each subsequent quarterly Form G-38t until such quarter in which payment is finally made. The broker, dealer or municipal securities dealer shall send two copies of Form G-38t to the Board by certified or registered mail, or some other equally prompt means that provides a record of sending. The Board shall make public a copy of each Form G-38t received from any broker, dealer or municipal securities dealer.

(ii) For purposes of this section (c), the term "effective date of this rule" means August 29, 2005, and the term "former Rule G-38" means Rule G-38 of the Board in effect on the day prior to the effective date of this rule.

View former Rule G-38 relating to consultants as in effect prior to August 29, 2005