MSRB NOTICE 2009-20 (MAY 12, 2009)

REQUEST FOR COMMENT REGARDING SETTLEMENT OF SYNDICATE ACCOUNTS UNDER RULE G-11 AND SECONDARY MARKET TRADING ACCOUNTS UNDER RULE G-12

The Municipal Securities Rulemaking Board (the “MSRB”) is requesting comment on draft amendments to Rule G-11, on new issue syndicate practices, and Rule G-12, on uniform practice.  The draft amendments would accelerate the settlement of syndicate accounts and secondary market trading accounts, and the payment of designations, by shortening certain time periods within the rules.  These proposals are designed to reduce the exposure of syndicate and secondary market trading account members to the risk of potential deterioration in the credit of the syndicate or account manager during the pendency of account settlements.  Since the existing rules were adopted in the 1970s, brokers, dealers and municipal securities dealers (“dealers”) and those firms who invoice them for syndicate expenses have adopted significantly more efficient billing and accounting systems.  The MSRB believes that such systems make reductions in the time periods for distribution of syndicate and secondary market trading account profits feasible and not unduly burdensome to dealers.  Furthermore, many fees are agreed upon in advance or can be estimated with considerable accuracy soon after settlement.   

DRAFT AMENDMENTS TO RULE G-11

Currently, Rule G-11(i), on settlement of syndicate or similar account, requires that final settlement of a syndicate or similar account be made within 60 calendar days following the date all securities have been delivered by the syndicate or account manager to the syndicate or account members.  Rule G-11(j), on payments of designations, requires that any credit designated by a customer in connection with the purchase of securities as due to a member of a syndicate shall be distributed to such member by any dealer handling such order within 30 calendar days following the date the issuer delivers the securities to the syndicate.

The draft amendments would change the deadlines in Rule G-11 to 30 calendar days after settlement of an issue for distributions (currently 60 calendar days) and 10 calendar days after settlement of an issue for designations (currently 30 calendar days).  To facilitate implementation of these reduced time periods, the MSRB also determined to add a new requirement that all syndicate members submit their designations to the syndicate manager within two business days after settlement of an issue. 

DRAFT AMENDMENTS TO RULE G-12

Rule G-12(i), on settlement of joint or similar account, contains requirements for the settlement of joint or similar accounts formed in the secondary market.  The rule currently requires that the settlement of these accounts be made within 60 days following settlement.  The draft amendments would change the deadline in the rule to 30 calendar days following settlement. 

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Comments about the draft amendments should be submitted to the MSRB by June 26, 2009, and may be directed to Margaret C. Henry, Associate General Counsel.  Written comments will be available for public inspection upon request and also will be posted on the MSRB website.[1]

May 12, 2009

TEXT OF DRAFT AMENDMENTS [2]

Rule G-11: New Issue Syndicate Practices

(a) – (h) No change.

(i) Settlement of Syndicate or Similar Account. Final settlement of a syndicate or similar account formed for the purchase of securities shall be made within 60 30 calendar days following the date all securities have been delivered by the syndicate or account manager the issuer delivers the securities to the syndicate or account members.

(j) Payments of Designations. All syndicate or similar account members shall submit the allocations of their designations according to the rules of the syndicate or similar account to the syndicate or account manager within two business days following the date the issuer delivers the securities to the syndicate.  Any credit designated by a customer in connection with the purchase of securities as due to a member of a syndicate or similar account shall be distributed to such member by the broker, dealer or municipal securities dealer handling such order within 30 10 calendar days following the date the issuer delivers the securities to the syndicate. 

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Rule G-12: Uniform Practice

(a) – (h) No change.

(i) Settlement of Joint or Similar Secondary Market Trading Account. Final settlement of a joint or similar secondary market trading account formed for the purchase of securities shall be made within 60 30 calendar days following the date all securities have been delivered by the syndicate or account manager to the syndicate or account members. 

(j) No change.


[1] All comments received will be made publicly available without change.  Personal identifying information, such as names or e-mail addresses, will not be edited from submissions.  Therefore, commentators should submit only information that they wish to make available publicly.

[2] Underlining indicates new language; strikethrough denotes deletions.