MSRB NOTICE 2008-33 (JULY 29, 2008)

MSRB FILES PROPOSAL TO ESTABLISH A CONTINUING DISCLOSURE SERVICE OF THE ELECTRONIC MUNICIPAL MARKET ACCESS SYSTEM (EMMA)

The Municipal Securities Rulemaking Board (the “MSRB”) has filed today with the Securities and Exchange Commission (the “SEC”) a proposal to establish a continuing disclosure service (the “continuing disclosure service”) of the MSRB’s Electronic Municipal Market Access system (“EMMA”).[1]  The continuing disclosure service would receive electronic submissions of, and would make publicly available on the Internet on the EMMA website at emma.msrb.org (the “EMMA portal”), continuing disclosure documents and related information from issuers, obligated persons and their agents pursuant to continuing disclosure undertakings entered into consistent with Exchange Act Rule 15c2-12.  The MSRB has requested that the SEC approve the continuing disclosure service to commence operation on the later of January 1, 2009 or the effective date of any provisions of Rule 15c2-12 providing for the MSRB to serve as the sole central repository for all electronic continuing disclosure information provided pursuant to Rule 15c2-12.

EMMA Pilot

EMMA began operation on March 31, 2008 as a pilot facility of the MSRB’s existing Official Statement and Advance Refunding Document (OS/ARD) system of the Municipal Securities Information Library (“MSIL”) system.[2]  In its pilot phase, EMMA provides public access to the complete historical collection of official statements and advance refunding documents submitted to the MSIL system by brokers, dealers and municipal securities dealers (“dealers”) acting as underwriters for offerings of new issue municipal securities since 1990, as well as official statements and advance refunding documents submitted on a current-basis for new issues of municipal securities.  The EMMA pilot also provides free public access to real-time transaction price information reported by dealers to the MSRB’s Real-Time Transaction Reporting System (“RTRS”) for current transactions and historical RTRS price data for transactions since January 31, 2005.

Continuing Disclosure Proposal

The proposal filed with the SEC would establish, as a component of EMMA, the continuing disclosure service for the receipt and public availability of continuing disclosure documents and related information to be submitted by issuers, obligated persons and their agents pursuant to continuing disclosure undertakings entered into consistent with Exchange Act Rule 15c2-12.[3]  As proposed, all continuing disclosure documents and related information would be submitted to the MSRB, free of charge, through an Internet-based electronic submitter interface or electronic computer-to-computer data connection, at the election of the submitter.  Public access to the documents and information would be provided through the continuing disclosure service on the EMMA portal at no charge as well as through a paid real-time data stream subscription service.  The establishment of the continuing disclosure service would be dependent upon the concurrent establishment by the SEC of a provision under Rule 15c2-12 providing for the MSRB to serve as the sole central repository for all electronic continuing disclosure information provided pursuant to the rule.

Continuing Disclosure Provisions of Rule 15c2-12 .  Under Rule 15c2-12(b)(5), an underwriter for a primary offering of municipal securities subject to the rule currently is prohibited from underwriting the offering unless the underwriter has determined that the issuer or an obligated person[4] for whom financial information or operating data is presented in the final official statement has undertaken in writing to provide certain items of information to the marketplace.[5]  Rule 15c2-12(b)(5) provides that such items include:  (A) annual financial information concerning obligated persons;[6] (B) audited financial statements for obligated persons if available and if not included in the annual financial information; (C) notices of certain events, if material;[7] and (D) notices of failures to provide annual financial information on or before the date specified in the written undertaking.[8]

Continuing Disclosure Documents to Be Accepted by EMMA.  As proposed, the continuing disclosure service would accept submissions of (i) continuing disclosure documents as described in Rule 15c2-12, and (ii) other disclosure documents specified in continuing disclosure undertakings entered into consistent with Rule 15c2-12 but not specifically described in Rule 15c2-12.  With regard to any such disclosure documents not covered by Rule 15c2-12, the MSRB understands that issuers and obligated persons have often sought to disseminate to the marketplace items of continuing disclosure that are in addition to the specific baseline items of continuing disclosure described in the rule.  Such additional items may include, but are not limited to, quarterly or monthly financial information and notices of other events.  In some cases, such additional items of disclosure may be specified under a continuing disclosure undertaking entered into consistent with Rule 15c2-12, which items would be accepted by the continuing disclosure service.[9]

Related Information Submissions.  In connection with documents submitted to the continuing disclosure service, the submitter would provide, at the time of submission, information necessary to accurately identify:  (i) the category of information being provided; (ii) the period covered by any annual financial information, financial statements or other financial information or operating data; (iii) the issues or specific securities to which such document is related or otherwise material (including CUSIP number, issuer name, state, issue description/securities name, dated date, maturity date, and/or coupon rate); (iv) the name of any obligated person other than the issuer; (v) the name and date of the document; and (vi) contact information for the submitter.[10]  Submitters would be responsible for the accuracy and completeness of all documents and information submitted to EMMA.

Document Format .  The MSRB proposes that submissions to the continuing disclosure service be made as portable document format (PDF) files configured to permit documents to be saved, viewed, printed and retransmitted by electronic means.  If the submitted file is a reproduction of the original document, the submitted file must maintain the graphical and textual integrity of the original document.

In addition, starting in the first calendar quarter beginning at least nine months after approval by the SEC of the proposal, such PDF files must be word-searchable (that is, allowing the user to search for specific terms used within the document through a search or find function available in most standard software packages), provided that diagrams, images and other non-textual elements would not be required to be word-searchable due to current technical hurdles to uniformly producing such elements in word-searchable form without incurring undue costs.  Although the MSRB would strongly encourage submitters to immediately begin making submissions as word-searchable PDF files (preferably as native PDF or PDF normal files, which generally produce smaller and more easily downloadable files as compared to scanned PDF files), implementation of this requirement would be deferred as noted above to provide issuers, obligated persons and their agents with sufficient time to adapt their processes and systems to provide for the routine creation or conversion of continuing disclosure documents as word-searchable PDF files.

The MSRB intends to work with issuer organizations to assist issuers in adapting to the process for submitting continuing disclosure documents to EMMA, including coordinated efforts targeted at issuers making submissions under continuing disclosure undertakings entered into prior to the continuing disclosure service becoming operational, with a view to ensuring that means for making submissions of continuing disclosure documents through EMMA are available for issuers that have not yet fully adapted to EMMA’s all-electronic submission process.

Submitters of Continuing Disclosure Documents .  All submissions to the continuing disclosure service pursuant to the proposal would be made through password protected accounts on EMMA by:  (i) issuers, which may submit any documents with respect to their municipal securities; (ii) obligated persons, which may submit any documents with respect to any municipal securities for which they are obligated; and (iii) designated agents, which may be designated by issuers or obligated persons to make submissions on their behalf.

Issuers and obligated persons would be permitted under the proposal to designate agents to submit documents and information on their behalf, and would be able to revoke the designation of any such agents, through the EMMA on-line account management utility.  Such designated agents would be required to register to obtain password-protected accounts on EMMA in order to make submissions on behalf of the designating issuers or obligated persons.  Any party identified in a continuing disclosure undertaking as a dissemination agent or other party responsible for disseminating continuing disclosure documents on behalf of an issuer or obligated person would be permitted to act as a designated agent for such issuer or obligated person, without a designation being made by the issuer or obligated person as described above, if such party certifies through the EMMA on-line account management utility that it is authorized to disseminate continuing disclosure documents on behalf of the issuer or obligated person under the continuing disclosure undertaking.  The issuer or obligated person, through the EMMA on-line account management utility, would be able to revoke the authority of such party to act as a designated agent.

Submission Process .  Continuing disclosure submitters would have a choice of making submissions to the proposed continuing disclosure service either through a web-based electronic submission interface or through electronic computer-to-computer data connections with EMMA designed to receive submissions on a bulk or continuous basis.  When making submissions using the web-based interface, related indexing information would be entered into an on-line form or uploaded through an extensible markup language (XML) file, and documents would be uploaded as PDF files.  Computer-to-computer submissions would utilize XML files for data and PDF files for documents.  Appropriate schemas for on-line XML uploads and computer-to-computer submissions will be published on the EMMA portal and the MSRB website.[11]  There will be no charge for making submissions to the continuing disclosure service.

Public Access to Continuing Disclosure Documents .  All documents and information submitted through the continuing disclosure service pursuant to the proposal would be available to the public for free through the EMMA portal on the Internet, with documents made available for the life of the securities as PDF files for viewing, printing and downloading.[12]  Submissions made through the continuing disclosure service accepted during the hours of 8:30 am to 6:00 pm Eastern time on an MSRB business day would be posted on the EMMA portal within 15 minutes of acceptance, although during peak traffic periods posting may occur within one hour of acceptance.  Submissions outside of such hours often will be posted within 15 minutes although some submissions outside of the MSRB’s normal business hours may not be processed until the next business day. 

As proposed, the EMMA portal would provide on-line search functions to enable users to readily identify and access documents that relate to specific municipal securities based on a broad range of search parameters.  The MSRB would integrate the collection of continuing disclosure documents with the primary market and price transparency information currently provided on EMMA to provide a free comprehensive centralized public access portal for the integrated display of primary market disclosure information, continuing disclosure information and transaction price information.

In addition, the MSRB proposes that real-time data stream subscriptions to continuing disclosure documents submitted to EMMA would be made available for a fee.[13]  The subscription service would make available to subscribers all continuing disclosure documents and related indexing information posted on the EMMA portal simultaneously with the posting thereof.  The subscription service would be provided through a web service accessible by subscribers using various commercially available products.  Data would be streamed, depending on the subscriber’s own software settings, using XML files with embedded, or accompanying transmissions of, PDF files of continuing disclosure documents.

The MSRB would not be responsible for the content of the information or documents submitted by submitters displayed on the EMMA portal or distributed to subscribers through the continuing disclosure subscription service.  The MSRB has designed EMMA, including the EMMA portal, as a scalable system with sufficient current capacity and the ability to add further capacity to meet foreseeable usage levels based on reasonable estimates of expected usage, and the MSRB would monitor usage levels in order to assure continued capacity in the future.

The MSRB may restrict or terminate malicious, illegal or abusive usage for such periods as may be necessary and appropriate to ensure continuous and efficient access to the EMMA portal and to maintain the integrity of EMMA and its operational components.  Such usage may include, without limitation, usage intended to cause the EMMA portal to become inaccessible by other users, to cause the EMMA database or operational components to become corrupted or otherwise unusable, to alter the appearance or functionality of the EMMA portal, or to hyperlink to or otherwise use the EMMA portal or the information provided through the EMMA portal in furtherance of fraudulent or other illegal activities (such as, for example, creating any inference of MSRB complicity with or approval of such fraudulent or illegal activities or creating a false impression that information used to further such fraudulent or illegal activities has been obtained from the MSRB or EMMA).  Measures taken by the MSRB in response to such unacceptable usage shall be designed to minimize any potentially negative impact on the ability to access the EMMA portal.

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Comments on the proposal should be submitted to the SEC and should reference File No. SR-MSRB-2008-05.  Questions regarding the proposal may be directed to Ernesto A. Lanza, Senior Associate General Counsel, at (703) 797-6720.

July 29, 2008

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Text of Proposal

MUNICIPAL SECURITIES RULEMAKING BOARD
ELECTRONIC MUNICIPAL MARKET ACCESS SYSTEM –
EMMA

EMMA CONTINUING DISCLOSURE SERVICE

The EMMA continuing disclosure service, established as a service of EMMA, receives submissions of continuing disclosure documents, together with related indexing information to allow the public to readily identify and access such documents, from issuers, obligated persons and their agents pursuant to continuing disclosure undertakings entered into consistent with Exchange Act Rule 15c2-12, at no charge to the submitter.  Submissions may be made through a choice of an Internet-based electronic submission interface or electronic computer-to-computer streaming connections.  The EMMA continuing disclosure service makes continuing disclosures available to the public, at no charge, on the Internet through the EMMA portal.  The EMMA continuing disclosure service also makes continuing disclosures available by subscription for a fee.

Submissions to the EMMA Continuing Disclosure Service

Designated Electronic Format for Documents.   All documents submitted to the EMMA continuing disclosure service must be in portable document format (PDF), configured to permit documents to be saved, viewed, printed and retransmitted by electronic means.  If the submitted file is a reproduction of the original document, the submitted file must maintain the graphical and textual integrity of the original document. For any document submitted to the EMMA continuing disclosure service on or after the first day of the first calendar quarter beginning at least nine months after Commission approval of the EMMA continuing disclosure service, such PDF documents shall be word-searchable (without regard to diagrams, images and other non-textual elements).

Method of Submission .  Documents and related indexing information may be submitted to the EMMA continuing disclosure service either through a secure, password-protected, web-based electronic submitter interface or through a secure, authenticated computer-to-computer data connection with EMMA, at the election of the submitter.  When making submissions using the web-based interface, related indexing information is entered into an on-line form or uploaded through an extensible markup language (XML) file, and documents are uploaded as PDF files.  Computer-to-computer submissions utilize XML files for data and PDF files for documents.  Appropriate schemas for on-line and computer-to-computer submissions are published on the EMMA portal and the MSRB website.

Timing of Submissions .  The EMMA continuing disclosure service’s submission processes are available for submissions throughout the day, subject to the right of the MSRB to make such processes unavailable between the hours of 3:00 am and 6:00 am each day, Eastern time, for required maintenance, upgrades or other purposes, or at other times as needed to ensure the integrity of EMMA and its systems.  The MSRB shall provide advance notice on the EMMA portal of any planned periods of unavailability and shall endeavor to provide information on the EMMA portal as to the status of the submission interface during unanticipated periods of unavailability, to the extent technically feasible.

Document Types .  The EMMA continuing disclosure service accepts submissions of (i) continuing disclosure documents as described in Rule 15c2-12, and (ii) other disclosure documents specified in continuing disclosure undertakings entered into consistent with Rule 15c2-12 but not specifically described in Rule 15c2-12.

Continuing disclosure documents consist of the following categories of documents, as set forth in Rule 15c2-12:

●          annual financial information concerning issuers or other obligated persons as described in paragraph (b)(5)(i)(A) of Rule 15c2-12, or other financial information and operating data provided by issuers or other obligated persons as described in paragraph (d)(2)(ii)(A) of Rule 15c2-12;

●          financial statements for issuers or other obligated persons if not included in the annual financial information as described in paragraph (b)(5)(i)(B) of Rule 15c2-12;

●          notices of certain events, if material, as described in paragraph (b)(5)(i)(C) of Rule 15c2-12; and

●          notices of failures to provide annual financial information on or before the date specified in the written undertaking as described in paragraph (b)(5)(i)(D) of Rule 15c2-12.

Information to be Submitted .  In connection with documents submitted to the EMMA continuing disclosure service, the submitter shall provide, at the time of submission, information necessary to accurately identify:

●          the category of information being provided (such as annual financial information; financial statements; material event notice, including designation of which specific type or types of events; notice of failure to make timely filing of annual financial information; or other information provided pursuant to a continuing disclosure undertaking);

●          in the case of annual financial information, financial statements and other financial information or operating data, the period covered by such documents;

●          the issues or specific securities to which such document is related or otherwise material (including CUSIP number, issuer name, state, issue description/securities name, dated date, maturity date, and/or coupon rate);

●          the name(s) of the obligated person(s) (if other than the issuer) to which such document applies;

●          the name and date of the document; and

●          the identity of and contact information for the person submitting the document.

Submitters.  Submissions to the EMMA continuing disclosure service may be made solely by authorized submitters using password-protected accounts on EMMA.  Submissions may be made by the following classes of submitters:

●          issuer, which may submit any documents with respect to such issuer’s municipal securities;

●          obligated person, which may submit any documents with respect to any municipal securities for which such obligated person is obligated; and

●          designated agent, which may submit documents otherwise permitted to be submitted by the issuer or obligated person which has designated such agent, as provided below.

Issuers and obligated persons may designate agents to submit documents and related indexing information on their behalf, and may revoke the designation of any such agents, through the EMMA on-line account management utility.  Such designated agents must register to obtain password-protected accounts on EMMA in order to make submissions on behalf of the designating issuers or obligated persons.  Any party identified in a continuing disclosure undertaking as a dissemination agent or other party responsible for disseminating continuing disclosure documents on behalf of an issuer or obligated person may act as a designated agent for such issuer or obligated person, without a designation being made by the issuer or obligated person as described above, if such party certifies through the EMMA on-line account management utility that it is authorized to disseminate continuing disclosure documents on behalf of the issuer or obligated person under the continuing disclosure undertaking.  The issuer or obligated person, through the EMMA on-line account management utility, may revoke the authority of such party to act as a designated agent.

Public Availability of Continuing Disclosure Documents

EMMA Portal Submissions made through the EMMA continuing disclosure service accepted during the hours of 8:30 am to 6:00 pm Eastern time on an MSRB business day are, in general, posted on the EMMA portal within 15 minutes of acceptance, although during peak traffic periods posting may occur within one hour of acceptance.  Submissions outside of such hours often are posted within 15 minutes although some submissions outside of the MSRB’s normal business hours may not be processed until the next business day.  Continuing disclosure documents and related indexing information submitted to EMMA shall be made available to the public through the EMMA portal for the life of the related securities.

The EMMA portal provides on-line search functions utilizing available indexing information to allow users of the EMMA portal to readily identify and access documents and related information provided through the EMMA continuing disclosure service.  Basic identifying information relating to specific municipal securities and/or specific issues accompanies the display of continuing disclosure documents.

The EMMA portal is available without charge to all members of the public.  The MSRB has designed EMMA, including the EMMA portal, as a scalable system with sufficient current capacity and the ability to add further capacity to meet foreseeable usage levels based on reasonable estimates of expected usage, and the MSRB will monitor usage levels in order to assure continued capacity in the future.

The MSRB reserves the right to restrict or terminate malicious, illegal or abusive usage for such periods as may be necessary and appropriate to ensure continuous and efficient access to the EMMA portal and to maintain the integrity of EMMA and its operational components.  The MSRB is not responsible for the content of the information or documents submitted by submitters displayed on the EMMA portal or distributed to subscribers of the EMMA continuing disclosure subscription service.

Subscriptions.  Users wishing to obtain the continuing disclosure documents provided through the EMMA continuing disclosure service through a data stream rather than through viewing on and downloading from the EMMA portal may purchase a subscription for such documents from the MSRB.  The EMMA continuing disclosure subscription service makes available to subscribers all continuing disclosure documents and related indexing information posted on the EMMA portal simultaneously with the posting thereof on the EMMA portal.  The EMMA continuing disclosure service subscription is provided through a web service accessible by subscribers using various commercially available products.  Data is streamed, depending on the subscriber’s own software settings, using XML files with embedded, or accompanying transmissions of, PDF files of continuing disclosure documents.  The MSRB makes the EMMA continuing disclosure subscription service available on an equal and non-discriminatory basis.  In addition, the MSRB does not impose any limitations on or additional charges for redistribution of such documents by subscribers to their customers, clients or other end-users.


[1] File No. SR-MSRB-2008-05.  Comments on the proposal should be submitted to the SEC and should reference this file number.  See File No. SR-MSRB-2008-05, posted on the MSRB website at www.msrb.org/msrb1/rulesandforms/sec/SR-MSRB-2008-05.pdf, which includes a discussion of comments previously received by the MSRB on issues related to the inclusion of continuing disclosure documents on the MSRB’s proposed Internet-based public access site.  Copies of the comment letters are available for public inspection at the MSRB website.

[2] See Securities Exchange Act Release No. 57577 (March 28, 2008), 73 FR 18022 (April 2, 2008) (File No. SR-MSRB-2007-06) (approving operation of the EMMA pilot to provide free public access to the MSIL system collection of official statements and advance refunding documents and to the MSRB’s Real-Time Transaction Reporting System historical and real-time transaction price data).  The MSRB expects to file with the SEC in the future to transition the pilot primary market and price transparency components of EMMA to permanent status in connection with the establishment of an “access equals delivery” standard for official statement dissemination in the new issue municipal securities market, based on the “access equals delivery” rule for prospectus delivery for registered securities offerings adopted by the SEC in 2005.  See Securities Act Release No. 8591 (July 19, 2005), 70 FR 44722 (August 3, 2005)See also MSRB Notice 2007-33 (November 15, 2007); MSRB Notice 2007-05 (January 25, 2007).

[3] The MSRB expects to file with the SEC in the future a proposal to establish a pilot system for submission and public display of continuing disclosure documents on a voluntary basis (the “continuing disclosure pilot”) prior to the establishment of, and as a means by which to transition to, the permanent continuing disclosure service.

[4] Rule 15c2-12(f)(10) defines “obligated person” as any person, including an issuer of municipal securities, who is either generally or through an enterprise, fund, or account of such person committed by contract or other arrangement to support payment of all or part of the obligations on the municipal securities sold in a primary offering (other than providers of bond insurance, letters of credit, or other liquidity facilities).

[5] See also Rule 15c2-12(d)(2).

[6] Rule 15c2-12(f)(9) defines “annual financial information” as financial information or operating data, provided at least annually, of the type included in the final official statement with respect to an obligated person, or in the case where no financial information or operating data was provided in the final official statement with respect to such obligated person, of the type included in the final official statement with respect to those obligated persons that meet the objective criteria applied to select the persons for which financial information or operating data will be provided on an annual basis.

[7] Under Rule 15c2-12(b)(5)(C), such events currently consist of principal and interest payment delinquencies; non-payment related defaults; unscheduled draws on debt service reserves reflecting financial difficulties; unscheduled draws on credit enhancements reflecting financial difficulties; substitution of credit or liquidity providers, or their failure to perform; adverse tax opinions or events affecting the tax-exempt status of the security; modifications to rights of security holders; bond calls; defeasances; release, substitution, or sale of property securing repayment of the securities; and rating changes.

[8] Under Rule 15c2-12(b)(5)(i), annual filings are to be sent to all existing nationally recognized municipal securities information repositories (“NRMSIRs”) and any applicable state information depositories (“SIDs”), while material event notices may be sent to all existing NRMSIRs or to the MSRB, as well as to any SIDs. The MSRB, which currently operates CDINet to process and disseminate notices of material events submitted to the MSRB, previously petitioned the SEC to amend Rule 15c2-12 to remove the MSRB as a recipient of material event notices due to the very limited level of submissions received by the MSRB, constituting a negligible percentage of material event notices currently provided to the marketplace.  See Letter from Diane G. Klinke, General Counsel, MSRB, to Jonathan G. Katz, Secretary, SEC, dated September 8, 2005.  The SEC has published proposed amendments to Rule 15c2-12 to this effect.  See Exchange Act Release No. 54863 (December 4, 2006), 71 Fed. Reg. 71109 (December 8, 2006).  In light of the current proposal, the MSRB is considering at this time whether to withdraw its petition. In addition, the MSRB intends, on a future date, to file a proposal with the SEC for permission to discontinue CDINet in view of the establishment of EMMA’s continuing disclosure service.

[9] The MSRB supports the dissemination of additional continuing disclosures beyond the baseline established by Rule 15c2-12 and may consider in the future the possible expansion of the continuing disclosure service to include additional voluntary secondary market disclosures (beyond those specified in a continuing disclosure undertaking), which would be the subject of future filings with the SEC.

[10] In connection with any new issue of municipal securities, the MSRB anticipates collecting from the underwriter certain key indexing information relating to subsequent continuing disclosure submissions for such issues, such as (i) whether a continuing disclosure undertaking exists; (ii) the identity of any obligated persons other than the issuer as of initial issuance; (iii) the timing described in the undertaking for dissemination of annual financial information as of initial issuance; and (iv) certain issuer contact information.  Such information would be collected simultaneously with the underwriter’s required submission of the official statement and related indexing information under EMMA’s permanent primary market disclosure service.  See footnote 2 supra.  The collection of this continuing disclosure indexing information would initially be instituted, pursuant to a future filing with the SEC, on a voluntary pilot basis in connection with the establishment of the continuing disclosure pilot and would transition to a permanent basis along with the transition to EMMA’s permanent continuing disclosure service.  See footnote 3 supra.

[11] The MSRB anticipates that appropriate schemas will be published in advance of the establishment of the continuing disclosure pilot.  See footnote 3 supra.

[12] The MSRB understands that software currently is generally available for free that permits users to save, view and print PDF files, as well as to conduct word searches in word-searchable PDF documents.  The MSRB would provide links for downloading such software on the EMMA portal.

[13] Fees for subscriptions to the continuing disclosure collection would be established in a separate filing to be submitted to the SEC pursuant to Section 19(b)(2) of the Exchange Act prior to the commencement of operation of the continuing disclosure service, if approved by the SEC.