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MSRB NOTICE 2004-32 (SEPTEMBER 29, 2004)
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INTRODUCTION The Municipal Securities Rulemaking Board (“MSRB”) has noted that some practices of consultants who solicit municipal securities business[1] on behalf of brokers, dealers and municipal securities dealers (“dealers”) could potentially present challenges to maintaining the integrity of the municipal securities market. The MSRB believes that, as a proactive measure, it may be appropriate to apply the basic standards of fair practice and professionalism embodied in MSRB rules to those who solicit municipal securities business on behalf of dealers. Such actions would raise the ethical standards under which municipal securities business is solicited by independent solicitors to the standards already applicable to dealer personnel. The MSRB published a notice on April 5, 2004 (the “April Notice”) requesting comments on draft amendments replacing the existing language of Rule G-38 relating to consultants with a provision limiting paid solicitations of municipal securities business on behalf of a dealer solely to persons associated with the dealer.[2] The MSRB received comments from 28 commentators. After reviewing these comments, the MSRB has determined to republish the draft amendments, with certain modifications, for further comment from industry participants. EXECUTIVE SUMMARY OF REVISED DRAFT AMENDMENTS The revised draft amendments to Rule G-38 would:
In addition, amendments would be made to Rules G-37 and G-8 (on books and records), as well as to Forms G-37/G-38 and G-37x, consistent with the provisions described above. The revised draft amendments are described more fully below. This notice also makes clear that the definition of solicitation included in the revised draft amendments is consistent with how such term is currently used in existing Rules G-37 and G-38. The MSRB notes that the concept of solicitation under existing Rules G-37 and G-38 includes the element of intent in that a communication must have a purpose of obtaining municipal securities business in order to be considered a solicitation. This notice illustrates how the element of intent may be applied to various types of communications, including certain limited communications with issuer representatives, promotional communications, work-related communications and communications with conduit borrowers. BACKGROUND Current Rule G-38 was adopted by the MSRB to address actual and perceived abuses associated with the awarding of municipal securities business to dealers. The rule was intended to limit undisclosed relationships that could pose potential conflicts-of-interest or result in potentially improper conduct by consultants attempting to obtain business for dealers. As initially adopted, the rule required that the relationship between a dealer and its consultant be embodied in a formal agreement setting forth, among other things, the role of the consultant and compensation arrangement.[3] In addition, the rule required that the dealer disclose information about its consulting arrangements to any issuer from which a consultant would solicit municipal securities business on its behalf so that the issuer would be aware of the existence and nature of the relationship when making its decision to award business. Furthermore, to help deter and detect attempts by dealers to avoid the limitations placed on certain activities by Rule G-37 and Rule G-20 (on gifts and gratuities),[4] Rule G-38 also required disclosure to the MSRB on Form G-37/G-38 of the terms of the consulting arrangements and the business obtained by consultants. These Forms G-37/G-38 are made available to the public through the MSRB web site at www.msrb.org. The MSRB subsequently amended Rule G-38 to provide further safeguards against undisclosed conflicts-of-interests and potential circumvention of Rule G-37.[5] As amended and currently in effect, Rule G-38 requires dealers to obtain from their consultants, and to disclose on Form G-37/G-38, information on contributions made by their consultants to officials of issuers with which the consultants have communicated and payments made by consultants to state and local political parties operating within the jurisdiction of such issuers. The MSRB believes that its consultant disclosure requirements have been extremely effective in bringing to light many aspects of dealer practices relating to the use of consultants to solicit municipal securities business. However, as noted in the April Notice, several factors have caused the MSRB to consider whether some consultant practices may present challenges to the municipal securities market if left unchecked. As a proactive measure to forestall the potential growth of questionable practices that could imperil the high level of integrity of the municipal securities market, the MSRB published the original draft amendments to Rule G-38 to raise the ethical standards of the municipal securities industry. The amendments would apply the basic standards of fair practice and professionalism embodied in MSRB rules to the process by which municipal securities business is solicited. The MSRB appreciates the comments it received from industry participants on the April Notice and, where appropriate, has made certain revisions to the draft amendments to reflect these comments. However, the majority of the comments received by the MSRB related to the political activities of consultants and the potential application, either in whole or in part, of Rule G-37 to contributions made by consultants, with only limited commentary on the other facets of the proposal. Although the possibility of circumvention of Rule G-37 was one important factor in the MSRB’s decision to seek comment on the proposal, the MSRB also believes that the basic standards of fair practice and professionalism embodied in MSRB rules, which apply to all other municipal securities activities undertaken on behalf of dealers, should be made applicable to the process by which municipal securities business is solicited. Furthermore, the MSRB is concerned whether increases in levels of compensation paid to consultants for successfully obtaining municipal securities business could motivate consultants to use more aggressive tactics in their contacts with issuers. Both of these concerns served as critical bases for the MSRB’s rulemaking proposal to ensure that the activities of persons who solicit municipal securities business on behalf of dealers are appropriately supervised and subject to the industry’s ethical standards of fair practice and professionalism. Thus, the MSRB is publishing for further industry comment a revised version of the draft amendments to Rule G-38. The revision would include the requirement that paid solicitations of municipal securities business on behalf of a dealer be undertaken only by persons associated with the dealer, as in the original draft amendments. However, with respect to the solicitation activities of certain categories of persons, the revised version of draft Rule G-38 would differ from the original draft amendments by retaining many of the requirements relating to contractual arrangements and disclosure of various items of information (with certain modifications) that exist under current Rule G-38 with respect to consultants. The MSRB also is publishing related revised draft amendments to Rule G-37, Rule G-8 and Forms G-37/G-38 and G-37x.[6] The MSRB seeks comments on all facets of the revised draft amendments. The principal provisions of the revised draft amendments are summarized below.[7] This is followed by a discussion of the principal comments received on the original draft amendments. To the extent that the MSRB received substantive comments on the April Notice, the MSRB considered the merits of the comments and made certain revisions to the proposal, as noted below. SUMMARY OF REVISED DRAFT AMENDMENTSSummary of Revised Draft Amendments to Rule G-38 Existing Rule G-38 on consultants would be deleted in its entirety. In its place, new draft Rule G-38, on solicitation of municipal securities business, is proposed for comment. Revised draft Rule G-38 would establish further requirements for paid solicitors of a dealer, other than partners, directors, officers or employees of the dealer (“independent solicitors”), that were not included in the original draft Rule G-38 but are similar in many respects to the consultant requirements under existing Rule G-38. Prohibited Payments. As originally proposed in the April Notice, new Rule G-38 would prohibit dealers from making any direct or indirect payment to any person, other than an associated person of the dealer, for any solicitation of municipal securities business on behalf of the dealer. This prohibition is retained in the revised draft amendments. Definition of Solicitation. The original draft amendments defined solicitation as a direct or indirect communication with an issuer for the purpose of obtaining or retaining municipal securities business. In addition, the April Notice included a discussion regarding how this definition should be applied and sought comment from the industry in this regard. The revised draft amendments do not modify the original language of this definition. However, the MSRB provides a more extensive discussion below on how this definition should be applied. New Requirements with Respect to Independent Solicitors. The revised draft amendments establish certain requirements for independent solicitors that were not included in the original draft amendments. In most respects, these requirements are modeled after similar requirements under existing Rule G-38 that apply to consultants. These requirements would not apply to the solicitation activities of partners, directors, officers or employees of the dealer. Solicitation Agreement – The dealer would be required to enter into a written agreement with an independent solicitor (a “solicitation agreement”) before the independent solicitor engages in communication with an issuer. A solicitation agreement must include the following:
Disclosure to Issuers
– The dealer would be required to make disclosures to issuers on the use of
independent solicitors in a manner similar to the disclosures required under
current Rule G-38 relating to consultants.[10] The disclosures to the issuer would consist
of the following:
Disclosure to MSRB on Form G-37/G-38 – The dealer would be required to make disclosures on revised draft Form G-37/G-38 regarding the use of independent solicitors in a manner similar to the disclosures required under current Form G-37/G-38 with respect to consultants. The disclosures on Form G-37/G-38 would consist of the following:
Form G-37/G-38 would be revised to include such items of information. Since contributions to issuer officials and payments to state or local political parties made by independent solicitors, their solicitor personnel and PACs they control would be treated as contributions and payments made by MFPs, such disclosures would be made on Form G-37/G-38 in the same manner as contributions and payments made by any other MFP. Therefore, revised draft Form G-37/G-38 would not include a separate section for reporting these contributions and payments, as currently is the case with consultant contributions and payments in existing Form G-37/G-38. Summary of Revised Draft Amendments to Rule G-37 and Forms G-37/G-38 and G-37x The original draft amendments to Rule G-37 published in the April Notice inserted references to the definition of solicitation in new Rule G-38, deleted references to the information required to be provided under existing Rule G-38 and changed references from Form G-37/G-38 to Form G-37. The revised draft amendments to Rule G-37 make several changes from the original draft amendments. The revised draft amendments would:
Summary of Revised Draft Amendments to Rules G-8 As published in the April Notice, Rules G-8 and G-9 would have been amended to delete recordkeeping requirements in connection with the consultant provisions of existing Rule G-38. Under the current proposal, no amendments would be made to Rule G-9. The language relating to consultants in Rule G-8 that were to be deleted pursuant to the original draft amendments would largely be retained but modified to make them applicable solely with respect to independent solicitors. However, the portions relating to records of political contributions and payments to state or local political parties would remain deleted.[15] The revised draft amendments to Rule G-8 adds recordkeeping requirements relating to the list of solicitor personnel of independent solicitors and of any arrangement (other than a solicitation agreement required under revised draft Rule G-38) with an independent solicitor or any of its solicitor personnel under which direct or indirect payments are or may be payable to the independent solicitor or its solicitor personnel for activities of the independent solicitor relating to municipal securities. DISCUSSION OF COMMENTS ON THE ORIGINAL DRAFT AMENDMENTSConstitutionality of Proposal Comments Received. One commentator states that the draft amendments would violate the First Amendment of the U.S. Constitution by requiring consultants to become MFPs. This commentator argues that the U.S. Supreme Court has equated political contributions with protected speech, and any restriction on speech must be narrowly tailored to advance a compelling governmental interest. The commentator asserts that, assuming for the sake of argument that pay-to-play problems exist relating to consultants, the draft amendments’ restrictions “far exceed what would be necessary to address that problem.” MSRB Response. In upholding the constitutionality of Rule G-37 in Blount vs. SEC,[16] the Supreme Court recognized that, at its core, the rule was intended to sever the connection between the making of political contributions and the awarding of municipal securities business. The rule as then written (and as found constitutional) applied to various categories of associated persons in addition to associated persons who solicit municipal securities business. For example, the rule covers associated persons who underwrite or trade municipal securities or who supervise such activities. Persons who undertake these types of activities on behalf of dealers have always been associated persons. Given that the act of soliciting municipal securities business more closely touches on the core purpose of Rule G-37 than do some of the other municipal securities activities that are undertaken by associated persons already treated as MFPs, the MSRB firmly believes that the argument that it is unconstitutional to require a person who solicits municipal securities business on behalf of a dealer to be an associated person of that dealer, and thereby also an MFP subject to Rule G-37, has no merit. Reach of Rulemaking Proposal Comments Received. Many commentators express a belief that the MSRB’s primary concern in proposing the draft amendments related to political contributions, or suggest alternatives to the MSRB’s proposal that solely address political contribution issues. For example, many commentators propose that, in lieu of the draft amendments, the MSRB adopt a version of Rule G-37 that would apply to consultants. These proposals are discussed below. MSRB Response. As noted above, the MSRB is not concerned solely with the issue of political giving by consultants but instead seeks to have the full range of MSRB fair practice and professionalism standards apply to the process of soliciting municipal securities business. Other Unregulated Municipal Securities Industry Participants Comments Received. Many commentators are concerned that, although the problems associated with pay-to-play in the municipal securities industry are not limited to dealers, only dealers are subject to regulation in this area. They urge the MSRB to coordinate efforts with the Securities and Exchange Commission (“SEC”), NASD and others to apply pay-to-play limits to financial advisors, derivatives advisors, bond lawyers and other market participants. MSRB Response. The MSRB recognizes that other participants in the municipal securities industry face the same types of challenges as does the dealer community. However, the MSRB’s rulemaking authority is limited under the Securities Exchange Act of 1934 (the “Exchange Act”) to the activities of dealers. The MSRB strongly encourages other industry participants to take affirmative steps to ensure the integrity of their portion of the marketplace and toward severing the connection between political contributions and the awarding of contracts relating to the municipal securities, derivative products and other financial activities of issuers. Effective Date Comments Received. Several commentators express concern about existing contractual obligations if the draft amendments were to be adopted and urge the MSRB to make the effective date apply prospectively so as not to disrupt or dismantle existing contracts. MSRB Response. Should the MSRB adopt the revised draft amendments, the MSRB would seek to have their effectiveness delayed for a period of time to permit dealers to accommodate, or make the appropriate changes to, their existing contractual arrangements. Role of Consultants in the Municipal Securities Market Comments Received. Many commentators believe that consultants are beneficial and allow dealers, especially smaller regional dealers, to maximize their limited resources and compete with larger national dealers. Some of these commentators express concern that the draft amendments would negatively impact such dealers. One commentator states that the use of consultants increases competition and provides issuers with greater choice, thereby resulting in “better service at lower rates.” In addition, this commentator argues that consultants that have a local presence “have unique knowledge regarding the local issuer’s needs and requirements,” thereby improving the effectiveness of the dealer at servicing the issuer. Other commentators note that “the municipal marketplace is uniquely fragmented, covering myriad issuers in diverse locations.” They argue that consultants are necessary to providing quality service to such a diverse market. Some commentators who believe that consultants are beneficial focus on their role in providing specific expertise or services in connection with the completion of a financing, rather than their role as solicitors of municipal securities business. Other commentators believe that there is a significant problem with the use of consultants that is appropriately addressed by requiring that solicitation activity be undertaken only by associated persons of dealers. One commentator agrees “that eliminating the use of consultants who are not associated persons will advance the … standards of fair practice and professionalism embodied in the Board’s rules and in the rules and regulations that govern all activities of brokers, dealers and municipal securities dealers and their associated persons.” This commentator views the draft amendments as “a sensible regulatory response to the increasing and evolving use of third parties to solicit municipal securities business.” Another commentator states that “removing the opportunity for improper conduct by consultants would result overall in an improved environment for issuance of municipal securities.” A third commentator believes that the draft amendments have “the benefit of removing the ability of a dealer to indirectly evade the ‘pay to play’ prohibitions … through the use of consultants.” One commentator questions whether there has been a significant increase in contributions by consultants, stating that the number of consultants making reportable political contributions has “only increased by slightly over 2% (from 11.3% to 13.8%) during the last four-year period, between 2000 and 2003.” This commentator further states that, “regardless of the level of the contributions being made, there is no indication whatsoever that Consultant contributions are being used to influence decisions regarding municipal securities business.” It states that coupling Rule G-37(d), on indirect violations, with the existing disclosure requirements of Rule G-38 provides an effective means for addressing the MSRB’s concerns. With regard to compensation, one commentator argues that the increase in payments to consultants “does not in any way indicate or imply that Consultants are engaging in pay-to-play or that there is added pressure on Consultants to engage in aggressive or abusive practices. Rather, the recent increase in compensation appears to be attributable to the significant increase in the volume and size of municipal securities deals.” On the other hand, some commentators state that they would support the prohibition of contingent compensation arrangements or “success” fees paid to consultants. One commentator notes that such arrangements “have long been one of the primary traditional indicators under the securities laws as to whether a person is required to register as a broker or dealer” and therefore any person who solicits municipal securities business and has a contingent compensation arrangement should be properly registered. Another commentator states that, while success fees can often be appropriate, “this type of fee arrangement does introduce greater incentives to pursue municipal securities business more aggressively and may, especially where these fees are very large, undermine public confidence in the integrity of the municipal securities markets.” A third commentator states that success fees “inherently apply…undue pressure on Consultants and create, at the very least, a perception of impropriety.” However, another commentator opposes the imposition of restrictions on the type and amount of compensation paid to consultants. MSRB Response. The MSRB observes that current Rule G-38 applies only to persons who solicit municipal securities business. Independent contractors that provide specific expertise or services in connection with the completion of a financing and that do not solicit municipal securities business are not considered to be consultants under current Rule G-38, nor would their activities be affected under the draft amendments. The MSRB has noted that some industry participants appear to have difficulty in distinguishing between solicitors and consultants that provide technical expertise and, for this reason, the MSRB did not use the term “consultant” in draft Rule G-38 to avoid further confusion on this point. Contrary to the apparent understanding of some commentators, the draft amendments do not prohibit the use of independent solicitors but instead require that they act in accordance with MSRB rules and that they be subject to dealer supervision with respect to such actions. Thus, dealers would be free to continue using independent solicitors who are willing to operate by the rules of fair practice and professionalism under the supervision of the dealers – conditions under which the dealers themselves must operate. It is important to note that overall levels of giving have in fact increased, even though this may primarily reflect a significant increase in the amount of reportable contributions being made by those specific consultants that do make contributions rather than a sizeable increase in the number of consultants making such contributions. The MSRB believes that many of the same ethical considerations that resulted in the MSRB’s initial adoption of Rule G-37 with respect to the political giving of dealers apply with respect to contributions made by consultants to officials of issuers from whom they are attempting to obtain municipal securities business for their dealer clients. Thus, treating the political giving of solicitors as MFP contributions and payments subject to the full set of Rule G-37 requirements is appropriate given the direct connection that independent solicitors have to the awarding of municipal securities business to dealers. Further, although it may very well be that consultant compensation is rising because larger issue sizes are resulting in percentage-based success fees that produce proportionately larger pay-outs, the MSRB’s concern in this area does not arise so much from the cause of the higher compensation but rather from the potential effect on solicitors’ behavior prompted by such increase. The MSRB believes that this concern is better addressed through subjecting such behavior to MSRB standards of fair dealing and professionalism, rather than by regulating the amount or type of compensation paid to solicitors. In addition, as described above, the revised draft amendments would require that compensation and related information for independent solicitors be disclosed to issuers being solicited and on Form G-37/G-38 in a manner similar to the current disclosure requirements for consultants. Effect of Becoming an Associated Person In the April Notice, the MSRB observed that prohibiting dealers from making payments for solicitations to any person other than an associated person would necessitate that all paid solicitors be associated persons and, consequently, also MFPs under Rule G-37.[17] In addition, the MSRB clarified that other MSRB rules would apply to the municipal securities activities undertaken on behalf of the dealer by any such associated person. The MSRB provided guidance in the April Notice with regard to the nature of the relationship entailed by becoming an associated person of a dealer. The MSRB stated that, as a general matter, a person could become associated with a dealer by becoming employed by the dealer or by entering into an arrangement with the dealer whereby the dealer is given control over such person’s municipal securities activities. This “control” would include the application of MSRB rules to the municipal securities activities of such person and the subjection of such activities to supervision by the dealer. The MSRB also clarified that, if the proposed rulemaking were adopted, these “controlled” associated persons would not be subject to the fair practice rules in connection with their day-to-day activities that are not related to the municipal securities activities of the dealer, but only with respect to their municipal securities activities undertaken for the dealer. Therefore, any solicitors who become associated with a dealer would need to conform their municipal securities activities to all applicable MSRB rules. For example, in soliciting municipal securities business, the solicitor would be subject to Rules G-17 and G-20. The solicitor’s municipal securities activities also would be subject to supervision by the appropriate principal under Rule G-27. In the April Notice, the MSRB also sought comments on whether solicitors’ activities are such that they should be required to become appropriately qualified under Rule G-3(a)(i) as municipal securities representatives. Comments Received. Many commentators state that supervision of solicitors as associated persons of the dealer would be extremely burdensome or impossible, particularly where they are located at a distance from the dealer. Some commentators state that the added cost of compliance could adversely affect smaller or minority firms. Others state that, in the case where a bank employee makes a referral to an affiliated dealer, the employee would be required to function within two supervisory structures, leading to “duplicative oversight for little benefit.” In addition, some commentators note that it may be difficult to distinguish which activities undertaken by a solicitor that serves many clients would need to be supervised by a particular dealer. Some commentators sought clarification as to the nature of the relationship that would be necessary to ensure that a solicitor is considered an associated person for purposes of the rule, and whether a firm rather than an individual could be a solicitor under the proposal. Another commentator observes that the requirement to make solicitors be associated persons of the dealer can have repercussions with respect to the rules of other securities regulators as well. Some commentators state that persons whose only municipal securities activities consist of solicitation of municipal securities business should not be required to qualify as municipal securities representatives. Many commentators suggest that the applicability of MSRB rules to solicitors be limited to Rule G-37 itself, or that the MSRB draft new provisions having varying degrees of similarity to those of Rule G-37. For example, one commentator recommends that the MSRB: (1) require dealers to prohibit their consultants from making contributions to issuer officials; (2) prohibit dealers from hiring a consultant to solicit an issuer if the consultant has made a contribution to an official of that issuer; (3) require dealers to terminate their consultant agreement and cease paying the consultant upon learning of a prohibited contribution; and (4) require dealers to obtain periodic certifications from their consultants. Another commentator recommends that the MSRB: (i) apply the contribution limits of Rule G-37 to consultants; (ii) prohibit contingent fee arrangements; (iii) seek more aggressive enforcement of Rule G-37(d), on indirect violations; and (iv) clarify what it considers abusive practices and provide “best practices” guidelines regarding the use of consultants. Other commentators propose different variations similar to the two preceding examples. While some commentators believe that a contribution made by a consultant to an official of an issuer should result in a ban on business for the dealer, others disagree and instead believe that the dealer should only be required to terminate the consultant relationship. MSRB Response. The MSRB notes that many dealers currently supervise associated persons who are located in widely dispersed offices, sometimes consisting of one-person offices throughout the country in geographically isolated locations. In some cases, these supervised persons are not employees of the dealer, such as “independent” brokers who are nonetheless associated persons of the dealer subject to the control of and supervision of the dealer with respect to brokerage functions undertaken on the dealer’s behalf. In addition, some dealers contract out the functions of municipal securities principals to independent contractors who nonetheless also are under the control of the dealer with respect to such functions. These contractors often enter into contemporaneous arrangements with multiple dealers. Furthermore, NASD member firms sometimes are obligated under NASD Rule 3030 (on outside business activities of an associated person) to supervise certain activities of their associated persons (e.g., certain investment advisory arrangements) when conducted as an employee of a different firm. It is not uncommon currently for individuals to be subject to more than one set of regulatory requirements (e.g., brokers who are also investment advisors), each relating to different aspects of their activities.[18] The same principles involved in permitting these arrangements also would apply with respect to the supervision of solicitors under the draft amendments. Thus, the MSRB believes that a dealer would be able to undertake the duties of supervision even when a solicitor is not an employee of the dealer and may in fact be an employee of another firm that serves multiple dealers. Further, the revised draft amendments make clear that, where an independent solicitor is an entity, MSRB rules would be applied to those personnel of the solicitor who undertake the communications on behalf of the dealer. The MSRB has proposed in the revised draft amendments to Rule G-38 that an independent solicitor’s contract with the dealer explicitly provide for the dealer’s control of and supervision over the independent solicitor’s solicitation activities undertaken on behalf of the dealer with respect to municipal securities business, which would thereby satisfy the requirement that the independent solicitor be an associated person for purposes of MSRB rules. The MSRB believes that this provision would eliminate any ambiguity regarding whether an independent solicitor has indeed become an associated person for purposes of Rule G-38. In addition, the language of the revised draft amendments specifically establishes that the independent solicitor’s activities which must be subject to dealer supervision are those solicitation activities undertaken on behalf of the dealer with respect to municipal securities business. The MSRB is of the view that an independent solicitor that limits its activities on behalf of a dealer to such solicitation activities would not be required to qualify as a municipal securities representative. The MSRB disagrees that only Rule G-37, and not the other rules of the MSRB, should apply to the activities of solicitors. As noted above, one of the principal purposes of this proposal was to make the process of soliciting municipal securities business subject to the standards of fair practice and professionalism that apply to the other municipal securities activities of dealers. Imposition solely of Rule G-37 would fall short of this objective. The MSRB understands that dealers and their consultants will have to weigh various considerations in determining whether to continue in their arrangements with respect to the solicitation of municipal securities business and concedes that some consultants may choose not to continue soliciting business on behalf of dealers. The MSRB believes that the benefits gained from holding solicitors to standards of fair dealing and professionalism far outweigh the cost of the possible decrease in the size of the pool of available solicitors resulting from the departure from that business of consultants who are unwilling or unable to abide by these standards. The MSRB received comments both in favor of and in opposition to the draft amendments from large national firms and small or regional firms. Taken as a whole, the comments did not provide persuasive evidence that the draft amendments would have a disparate effect on different types of dealers. Definition of Solicitation Solicitation is defined in draft new Rule G-38 as any direct or indirect communication with an issuer for the purpose of obtaining or retaining municipal securities business. In the April Notice, the MSRB stated that this is consistent with the types of communications covered by the consultant definition in existing Rule G-38. Thus, just as a consultant who currently communicates indirectly with an issuer through a third party (e.g., through issuer agents such as financial advisors, bond counsel, etc, or through conduit borrowers in connection with private activity bond issues) to obtain municipal securities business for a dealer can be subject to current Rule G-38, depending upon the specific facts and circumstances, so too could an indirect communication with an issuer through a third party be considered a solicitation under draft new Rule G-38. The MSRB noted in the April Notice that the definition of MFP in existing Rule G-37(g)(iv) is not dependent upon the person to whom a solicitation to obtain business is made. As the definition of solicitation would be amended, either direct or indirect communications with an issuer to obtain business would trigger the application of Rule G-37. The MSRB stated that it would not view this as a change in how Rule G-37 operates. The April Notice made clear that intent is an important element in determining whether a communication should be considered a solicitation under Rules G-37 and G-38, both as currently in effect and as they would be modified by the draft amendment, and provided examples of instances where a communication would not be a solicitation. The April Notice further stated that communications incidental to undertaking tasks to complete municipal securities business for which the dealer has already been engaged are not solicitations. The MSRB sought comment particularly on whether a communication with a conduit borrower to hire a dealer as an underwriter for a private activity bond issue where the issuer ultimately must approve the underwriter for the issue should be considered an indirect communication with the issuer. Comments Received. Most commentators seem to accept the draft rule language of the definition of solicitation – a direct or indirect communication with an issuer for the purpose of obtaining or retaining municipal securities business – as appropriate, although one commentator states that the term should be limited to “activity aimed at an issuer” out of concern that any communication with a third party regarding a municipal securities issue could potentially become a solicitation of an issuer if the third party passes such communication on to the issuer. Many commentators are concerned with two general scenarios where they believe that certain types of communications should not be considered solicitations. These involve communications with conduit borrowers and limited communications with issuers. Many commentators express concern over whether communications with a conduit borrower would be considered an indirect solicitation of the conduit issuer, stating that where the conduit borrower selects the underwriter, a contribution to an issuer official could not influence the selection process. One commentator argues that, in some cases, the “conduit borrower would not have any influence over the issuer or even the selection of the issuer” and therefore should “not be considered [an] agent[] of the issuer.” Another commentator asks that the MSRB clarify that, in connection with a conduit issuance in which the issuer is brought into the discussions only after the feasibility of tax-exempt financing is determined and the election of an underwriter has been made, there is no indirect communication with the issuer that is intended to obtain municipal securities business for the dealer. One commentator states that, in the alternative, if the MSRB interprets Rule G-37 to cover mere communications with private obligors, it should “carve out an exemption that reflects how conduit deals really work.” With respect to limited direct communications with issuer officials, some commentators believe that bank employees and other associated persons of a dealer should be free to inform issuers that the affiliated dealer has municipal securities capabilities and provide to issuers contact information for MFPs of the dealer without the communication becoming a solicitation. MSRB Response. The MSRB believes it would be appropriate to provide a more detailed discussion on certain issues raised by the commentators. Thus, the MSRB restates in full its discussion on solicitation set forth in the April Notice, with various modifications: Intent – The MSRB notes that the existing concept of solicitation under current Rules G-37 and G-38 includes the element of intent in that the communication has a purpose of obtaining municipal securities business. This same intent element would be continued in draft new Rule G-38’s formulation that a solicitation involves a communication “for the purpose of” obtaining business for the dealer. The determination of whether a particular communication is a solicitation is dependent upon the specific facts and circumstances relating to such communication. Limited Communications with Issuer Representative – If an issuer representative asks an associated person of a dealer whether the dealer has municipal securities capabilities, the associated person generally would not be viewed as having solicited municipal securities business if he or she provides a limited affirmative response, together with either providing the issuer representative with contact information for an MFP of the dealer or informing the issuer representative that the associated person will have dealer personnel who handle municipal securities business contact him or her. Similarly, if an issuer representative is discussing governmental cash flow management issues with an associated person of a dealer who concludes, in his or her professional judgment, that an appropriate means of addressing the issuer’s needs may be through an issue of municipal securities, the associated person generally would not be viewed as having solicited business if he or she provides a limited communication to the issuer representative that such alternative may be appropriate, together with either providing the issuer representative with contact information for an MFP or informing the issuer representative that the associated person will have dealer personnel who handle municipal securities business contact him or her. In the examples above, if the associated person receives compensation such as a finder’s or referral fee for such business or if the associated person engages in other activities that could be deemed a solicitation with respect to such business (for example, attending presentations of the dealer’s municipal finance capabilities or responding to a request for proposals), the associated person generally would be viewed as having solicited the business.[19] The examples above are intended for illustrative purposes and are not the only instances in which a solicitation may be deemed to have or have not occurred. Promotional Communications – The MSRB understands that an associated person of a dealer may provide information to potential clients and others regarding the general capabilities of the dealer through either oral or written communications. Any such communication that is not made with the purpose of obtaining or retaining municipal securities business would not be considered a solicitation. Thus, depending upon the specific facts and circumstances, a communication that merely lists the significant business lines of a dealer without further descriptive information and which does not give the dealer’s municipal securities practice a place of prominence within such listing generally would not be considered a solicitation unless the facts and circumstances indicate that it was aimed at obtaining or retaining municipal securities business. To the extent that a communication, such as a dealer brochure or other promotional materials, contains more than a mere listing of business lines, such as brief descriptions of each business line (including its municipal securities capabilities), determining whether such communication is a solicitation depends upon whether the facts and circumstances indicate that it was undertaken for the purpose of obtaining or retaining municipal securities business. The nature of the information provided and the manner in which it is presented are relevant factors to consider. Although no single factor is necessarily controlling in determining intent, the following considerations, among others, may often be relevant: (i) whether the municipal securities practice is the only business line included in the communication that would reasonably be of interest to an issuer representative; (ii) whether the portions of the communication describing the dealer’s municipal securities capabilities are designed to garner more attention than other portions describing different business lines; (iii) whether the communication contains quantitative or qualitative information on the nature or extent of the dealer’s municipal securities capabilities that is promotional in nature (e.g., quantitative or qualitative rankings, claims of expertise, identification of specific transactions, language associated with “puffery,” etc.); and (iv) whether the dealer is currently seeking to obtain or retain municipal securities business. Work-Related Communications – Another aspect of the intent element relates to communications that are incidental to undertaking tasks to complete municipal securities business for which the dealer has already been engaged. These types of communications generally are not solicitations under current Rule G-37 and would continue not to be solicitations under draft new Rule G-38. For example, if a dealer has engaged an independent contractor as a cash flow consultant to provide expert services on a negotiated underwriting for which the dealer has already been selected and the contractor communicates with the issuer on cash flow matters relevant to the financing, such communication would not be a solicitation under draft new Rule G-38. Similarly, if a dealer has already been selected to serve as the underwriter for an airport financing and a non-MFP employee of the dealer who normally works on airline corporate matters is used to provide his or her expertise to complete the financing, communications in this regard by the employee with the issuer would not be a solicitation under draft new Rule G-38. The fact that the work product of such person may be used by MFPs of the dealer in their solicitation activities would not make the producer of the work product a solicitor unless such person personally presents his or her work to the issuer in connection with soliciting the municipal securities business. Communications with Conduit Borrowers – The MSRB understands that dealers often work closely with private entities on their capital and other financing needs. In many cases, this work may evolve into a conduit borrowing through a conduit issuer. Although the ultimate obligor on such a financing is the private entity, if the dealer acts as underwriter for a financing undertaken through a conduit issuer on other than a competitive bid basis, it is engaging in municipal securities business for purposes of Rule G-37. The selection of the underwriter for such a financing frequently is made by the conduit borrower. However, contrary to some commentators’ assertions that contributions to conduit issuers could not affect the award of municipal securities business, conduit financings originate under a myriad of circumstances and the conduit issuer typically has the power to affect which dealer acts as underwriter. While in many cases conduit issuers have either formal procedures or an informal historical practice of accepting the dealer selected by the conduit borrower, some conduit issuers may set minimum standards that dealers must meet to qualify to underwrite a conduit issue, and other conduit issuers may have a slate of dealers selected by the conduit issuer from which the conduit borrower chooses the underwriter for its issue. Still other conduit issuers may defer to the conduit borrower’s selection of lead underwriter but may require the underwriting syndicate to include additional dealers selected by the issuer or selected by the conduit borrower from a slate of issuer-approved underwriters, often with the purpose of ensuring participation by local dealers or historically disadvantaged dealers. A smaller number of conduit issuers retain more significant control over which dealers act as underwriters, either by making the selection for the conduit borrower or by considering the conduit borrower’s selection to be merely a suggestion which in some cases the conduit issuer does not follow. However, in virtually all cases, the conduit issuer will maintain ultimate power to control which dealer underwrites a conduit issue since the conduit issuer has discretion to withhold its agreement to issue the securities through any particular dealer. From a literal perspective, any communication by a dealer with a conduit borrower that is intended to cause the borrower to select the dealer to serve as underwriter for a conduit issue could be considered a solicitation of municipal securities business. This is because the conduit borrower eventually communicates its selection of the dealer to act as underwriter to the conduit issuer for approval. This series of communications would, by its terms, constitute an indirect communication by the dealer through the conduit borrower to the conduit issuer with the intent of obtaining municipal securities business. However, the MSRB believes that, under certain circumstances, a dealer may establish that a communication with a conduit borrower intended to cause the borrower to select the dealer to serve as underwriter should not be deemed an indirect solicitation of the issuer. Thus, if the dealer can establish that no reasonable nexus could exist between the making of contributions to officials of the conduit issuer within the meaning of Rule G-37 and the selection of the underwriter for such conduit financing, then a communication with the borrower would not be deemed a solicitation. A determination of whether such a reasonable nexus could exist depends on the specific facts and circumstances. For example, if a conduit issuer historically defers to its conduit borrowers’ selections of underwriters and, for a particular issue, the issuer in fact has not influenced the borrower’s selection of the underwriter, communications with the conduit borrower to obtain that underwriting assignment would not be considered a solicitation. Further, regardless of whether the conduit issuer actively exercises control over the dealer selected to underwrite municipal securities business, if an associated person of a dealer who is providing investment banking services and corporate financing advice to a private company concludes, in his or her professional judgment, that an appropriate financing alternative may be a conduit financing, a limited communication to the company by the associated person that such financing alternative may be appropriate, together with the provision to the company of contact information for an MFP of the dealer, generally would not be presumed to be a solicitation. Alternatively, the associated person could inform the company that the associated person will have dealer personnel who handle municipal securities business contact it, and could provide the company’s contact information to an MFP of the dealer. Exemptions from Definition of Solicitation Existing Rule G-38 provides exemptions from the definition of consultant for certain non-associated persons, such as lawyers, accountants and engineers if their sole basis for compensation from the dealer is the actual provision of legal, accounting or engineering services. Existing Rule G-38 also has been interpreted to exclude other dealers who are members of an underwriting syndicate from the definition of consultant for purposes of such underwriting. The draft new rule does not provide such exemptions with respect to persons whose communications could be deemed solicitations. Comments Received. Some commentators ask that the MSRB create exemptions from the definition of solicitation for those communications by persons who provide legal, accounting, engineering and legislative lobbying services. MSRB Response. The current exemptions under Rule G-38 for persons providing legal, accounting or engineering services are not blanket exemptions. Rather, these exemptions effectively shield such persons from being considered consultants if they are not receiving separate payment for their solicitation activities. This treatment would continue under revised draft Rule G-38. So long as such persons are not being paid directly or indirectly for their solicitation activities (i.e., they are paid solely for their provision of legal, accounting or engineering services with respect to the issue), they would not become subject to revised draft Rule G-38. Similarly, in the case of joint ventures created by a dealer with other professionals seeking to engage in municipal securities business, so long as the members of the joint venture are making a good faith effort to be engaged to undertake a bona fide role in the business, the MSRB would view any communications by a member of the joint venture with the issuer as being made on its own behalf and not on behalf of the dealer. However, if payments are being made by or on behalf of the dealer to such other professionals separate from the payments they may receive for actual professional services rendered in connection with an issue, their communications with the issuer could be considered solicitations on behalf of the dealer. Prohibited Payments for Solicitations by Non-Associated Persons Draft new Rule G-38 would prohibit a dealer from providing or agreeing to provide, directly or indirectly, payment to non-associated persons for soliciting municipal securities business. The term payment is defined as any gift, subscription, loan, advance, or deposit of money or anything of value. Payment is not limited to cash compensation and can consist of anything of value, including reciprocal agreements to engage another party in exchange for obtaining municipal securities business. For example, if a person solicits specific municipal securities business for a dealer in exchange for being hired by the dealer to provide services for a different engagement of municipal securities business, such quid pro quo arrangement would constitute payment for purposes of draft new Rule G-38. Further, there is no requirement under draft new Rule G-38 that there exist an agreement that induces the communication on behalf of the dealer. Thus, a communication by any person could be considered a solicitation even if it is undertaken without the dealer’s prior knowledge or arrangement. In such an instance, the dealer would be prohibited under draft new Rule G-38 from paying a “finder’s fee” to such person for such communication if the person is not associated with the dealer. Comments Received. The MSRB did not receive significant commentary with respect to the nature of payments covered by the draft amendments, other than the suggestion from several commentators that the MSRB prohibit contingent or success fees. MSRB Response. As noted above, the MSRB has declined to prohibit contingent or success fees. No change has been made with respect to the nature of payments in the revised draft amendments. Disclosure Existing Rule G-38 requires that the dealer provide specific information to issuers and on Form G-37/G-38 about a consultant’s role, compensation arrangement and amounts paid to it. In addition, dealers currently are required to disclose certain non-de minimis political contributions to issuer officials and payments to state and local political parties made by consultants. Under the original draft amendments, these disclosures would no longer be required, except that certain political contributions and payments by solicitors who become MFPs under the draft rule would be subject to disclosure. The MSRB sought comment on whether it should maintain disclosure requirements for compensation arrangements and payments made to solicitors who are associated persons but not employees of a dealer. Comments Received. Many commentators state that the disclosure provisions of Rule G-38 work well in their current form, although these comments were made primarily as an argument against adopting the draft amendments.[20] MSRB Response. The MSRB did not receive significant commentary on whether some or all of the existing disclosures for consultants should be retained for solicitors. In considering further the original draft amendments, however, the MSRB has concluded that disclosure of information regarding the arrangements between dealers and their independent solicitors would be appropriate to permit continued scrutiny of such arrangements and activities as a safeguard for the industry. As a result, the MSRB is proposing in the revised draft amendments to retain the Form G-37/G-38 disclosure requirements with respect to such independent solicitors as described above. * * * * *
Comments from all interested parties are welcome. Comments should be submitted no later than December 15, 2004 and may be directed to Ernesto A. Lanza, Senior Associate General Counsel. Written comments will be available for public inspection. September 29, 2004 * * * * * Text of Revised Draft Amendments[21]Rule G-38. Solicitation of Municipal Securities
Business [The existing language of Rule G-38 would be deleted in its entirety and replaced by the following rule language:] (a) Prohibited Payments. No broker, dealer or municipal securities dealer may provide or agree to provide, directly or indirectly, payment to any person, other than an associated person of such broker, dealer or municipal securities dealer, for a solicitation on behalf of such broker, dealer or municipal securities dealer. (b) Independent Solicitors as Associated Persons. An independent solicitor that has entered into a Solicitation Agreement in compliance with the requirements of section (c) of this rule with a broker, dealer or municipal securities dealer with respect to the independent solicitor’s municipal securities activities undertaken for, on behalf of, or in furtherance of the interests of such broker, dealer or municipal securities dealer shall be considered an associated person of the broker, dealer or municipal securities dealer. (c) Solicitation Agreements With Independent Solicitors.
(d) Disclosure to Issuers. Each broker, dealer or municipal securities dealer shall submit in writing to each issuer with which the broker, dealer or municipal securities dealer is engaging or is seeking to engage in municipal securities business information on independent solicitors used, directly or indirectly, by the broker, dealer or municipal securities dealer to attempt to obtain or retain municipal securities business with such issuer, which information shall include the name of the independent solicitor, business address, role (including the state or geographic area in which the independent solicitor is working on behalf of the broker, dealer or municipal securities dealer), compensation arrangement, a list of all solicitor personnel of the independent solicitor if the independent solicitor is not an individual, and an indication as to whether the broker, dealer or municipal securities dealer has had at any time during the past year any arrangement (other than a Solicitation Agreement under section (c) of this rule) with the independent solicitor or any of its solicitor personnel under which any direct or indirect payment from the broker, dealer or municipal securities dealer is or will be made to the independent solicitor or its solicitor personnel with respect to any activities of the independent solicitor relating to such issuer. Such information shall be submitted to the issuer either:
(e) Disclosure to Board. Each broker, dealer and municipal securities dealer shall send to the Board, and the Board shall make public, reports of all independent solicitors used by the broker, dealer or municipal securities dealer during each calendar quarter. Such reports must be sent to the Board on Form G-37/G-38 by the last day of the month following the end of each calendar quarter (these dates correspond to January 31, April 30, July 31, and October 31) in the manner provided under Rule G-37. Such reports shall include, for each independent solicitor, in the prescribed format:
Contributions to officials of issuers and payments to political parties of a state or a political subdivision shall be disclosed as contributions and payments by a solicitor MFP as provided under Rule G-37(e)(i)(A) and (B). (f) Definitions. For purposes of this rule, the following terms shall have the following meanings:
* * * * * Rule G-37. Political Contributions and Prohibitions on Municipal Securities Business (a) Purpose. No change. (b) Ban on Municipal Securities Business.
provided, however, that this section shall not prohibit the broker, dealer or municipal securities dealer from engaging in municipal securities business with an issuer if the only contributions made by the persons and entities noted above to officials of such issuer within the previous two years were made by municipal finance professionals who are individuals to officials of such issuer for whom the municipal finance professionals were entitled to vote and which contributions, in total, were not in excess of $250 by any municipal finance professional to each official of such issuer, per election.
(c) Prohibition on Soliciting and Coordinating Contributions. No change. (d) Circumvention of Rule. No change. (e) Required Disclosure to Board.
The Board shall make public a copy of each Form G-37/G-38 received from any broker, dealer or municipal securities dealer.
(f) Voluntary Disclosure to Board. No change. (g) Definitions.
Each person designated by the broker, dealer or municipal securities dealer as a municipal finance professional pursuant to Rule G-8(a)(xvi) is deemed to be a municipal finance professional. Each person designated a municipal finance professional shall retain this designation for one year after the last activity or position which gave rise to the designation.
(h) Operative Date. No change. (i) Application for Exemption. No change. (j) Automatic Exemption * * * * * Rule G-8. Books and Records to be Made by Brokers, Dealers and Municipal Securities Dealers (a) Description of Books and Records Required to be Made. Except as otherwise specifically indicated in this rule, every broker, dealer and municipal securities dealer shall make and keep current the following books and records, to the extent applicable to the business of such broker, dealer or municipal securities dealer:
(b)-(g) No change.
[*] This notice was modified by MSRB Notice 2004-33 (October 12, 2004) (the “October Modification”), available at http://www.msrb.org/msrb1/archive/2004/RevisedRuleG-38SolicitationNotice.htm. Modifications made to the original notice are indicated below. [†] The October Modification inserted the language “or other associated person” to this sentence. [‡] The October Modification inserted the language “or other associated person (not otherwise described in clause (A) or (B) of this paragraph)” to this sentence. [1] Pursuant to Rule G-37(g)(vii), municipal securities business includes the purchase of a primary offering of municipal securities by a dealer from the issuer on other than a competitive bid basis (such as a negotiated underwriting), the offer or sale of a primary offering of municipal securities by a dealer on behalf of an issuer (such as a private placement or an offering of municipal fund securities), and the provision of financial advisory, consultant or remarketing agent services by a dealer to an issuer for a primary offering of municipal securities in which the dealer was chosen on other than a competitive bid basis. [2] The MSRB also sought comment on certain related amendments to Rule G-37, Rule G-8 and Rule G-9 (on preservation of records). [3] See “Consultants: Rule G-38,” January 17, 1996, MSRB Reports, Vol. 16, No. 1 (Jan. 1996). [4] Rule G-37 prohibits dealers from engaging in municipal securities business with issuers for two years after certain contributions to issuer officials are made by dealers, their MFPs or political action committees (“PACs”) controlled by the dealers or their MFPs. The rule also requires disclosure on Form G-37/G-38 of political contributions to issuer officials and payments to state and local political parties made by dealers, MFPs, other dealer executive officers, and PACs controlled by the dealers or their MFPs. Rule G-20 places limitations on gifts made to individuals in relation to the municipal securities activities of the individuals’ employers. [5] See “Requirements for Dealers to Obtain from Their Consultants Information on Political Contributions and Payments to Political Parties and for Dealers to Report Such Information to the Board,” December 9, 1999, MSRB Reports, Vol. 20, No. 1 (March 2000). [6] The revised draft amendments do not amend Rule G-9 (on preservation of records), as did the original draft amendments. As a result of changes made to the draft amendments to Rule G-38, the record retention requirement of Rule G-9 with respect to records created under Rule G-38 would be retained. [7] The full text of the revised draft amendments, as well as revised draft Forms G-37/G-38 and G-37x, appear at the end of this notice. [8] Contributions to issuer officials and payments to state or local political parties by an independent solicitor who is an individual or by solicitor personnel would be subject to the same de minimis exclusions available to MFPs under Rule G-37, in which case such contributions and payments need not be reported. [9] Under current Rule G-38, reportable contributions and payments are limited to those made to officials of issuers with which a consultant has communicated and those made to political parties operating within the geographic area of issuers with which the consultant has communicated. However, since independent solicitors would also be MFPs under Rule G-37 by virtue of their status as associated persons of the dealer, the contributions and payments covered by revised draft Rule G-38 would include (with certain limitations under the “look back” provision of Rule G-37(b)(ii)) those made to any issuer official or to any state or local political party regardless of whether the independent solicitor has communicated with the issuer, and the time frame for which contributions and payments are covered also would change. [10] The disclosure must be made either (i) prior to the selection of the dealer for the particular municipal securities business being sought or (ii) at or prior to the independent solicitor’s first communication with the issuer for any municipal securities business. [11] Some examples of existing arrangements that would be subject to this requirement include agreements under which the independent solicitor seeks, on behalf of the dealer, derivatives, public funds management or other types of business with the issuer. This provision only requires disclosure of whether such other arrangement exists and would not require the dealer to disclose any of the terms of such relationship. [12] Unlike in the case of the disclosure required to be made to an individual issuer as to whether there exists such an arrangement for that specific issuer, the dealer would be required to provide an affirmative response on Form G-37/G-38 if any such arrangement exists for any issuer of municipal securities. See revised draft Form G-37/G-38 appearing at the end of this notice. This provision only requires disclosure of whether such other arrangement exists and would not require the dealer to disclose any of the terms of such relationship. [13] This clarification reflects the fact that, under the revised draft amendments, some solicitor MFPs may be entities that are not entitled to vote. [14] Form G-37/G-38 also would be amended to reflect the previous renaming of “executive officers” as “non-MFP executive officers” under Rule G-37 and to rename the municipal securities business category designation of “private placement” to “agency offering” to more accurately reflect the nature of this category. [15] Since contributions to issuer officials and payments to state or local political parties made by independent solicitors, their solicitor personnel and PACs they control would be treated as contributions and payments made by MFPs, records of such contributions would already be covered under the recordkeeping provision relating to Rule G-37. [16] Blount v. SEC, 61 F. 3d 938 (D.C. Cir. 1995), cert. denied, 116 S. Ct. 1351 (1996). [17] An associated person of a broker or dealer is defined under Section 3(a)(18) of the Exchange Act as any partner, officer, director or branch manager of the broker or dealer (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with the broker or dealer, or any employee of the broker or dealer. In the case of a municipal securities dealer that is a bank, an associated person is defined under Section 3(a)(32) of the Exchange Act as any person directly engaged in the management, direction, supervision, or performance of any of the municipal securities dealer’s activities with respect to municipal securities, and any person directly or indirectly controlling such activities or controlled by the municipal securities dealer in connection with such activities. MSRB Rule D-11 provides that persons whose functions are solely clerical or ministerial are not treated as associated persons of brokers, dealers or municipal securities dealers. [18] The MSRB observes that, pursuant to Section 15B(b)(2)(H) of the Exchange Act, Congress directed the MSRB to define the term “separately identifiable department or division” (“SID”) of a bank in a manner that would permit a SID to engage in municipal securities activities within the bank itself and also to engage in activities unrelated to municipal securities. This Congressional formulation clearly envisioned that many personnel within SIDs who are engaged in municipal securities activities would be subject to dual regulatory structures. See MSRB Rule G-1. [19] See Rule G-37 Questions and Answers IV.10-13, reprinted in MSRB Rule Book. [20] Several commentators also recommend that the MSRB amend Rule G-37 to require disclosure of contributions to issuer officials by dealer affiliated banks, bank PACs and bank holding company PACs. [21] Underlining indicates additions; strikethrough indicates deletions. |
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