MSRB NOTICE 2005-53 (OCTOBER 11, 2005)

REMINDER:  NEW FORMS G-37 AND G-38t TO BE USED IN CONNECTION WITH SUBMISSIONS UNDER RULES G-37 AND G-38 FOR CALENDAR QUARTER ENDED SEPTEMBER 30, 2005

Brokers, dealers and municipal securities dealers (“dealers”) are reminded that former Form G-37/G-38 will not be accepted for purposes of submitting information to the Municipal Securities Rulemaking Board (“MSRB”) under Rule G-37, on political contributions and prohibitions on municipal securities business, and Rule G-38, on solicitation of municipal securities business, for the calendar quarter ended September 30, 2005 or for any subsequent calendar quarter.  All information required to be submitted under Rule G-37 must be included on new Form G-37, and all information required to be submitted under Rule G-38 (including information required to be submitted through August 29, 2005 under former Rule G-38, on consultants) must be included on new Form G-38t.[1]  New Forms G-37 and G-38t for the calendar quarter ended September 30, 2005 must be sent to the MSRB by October 31, 2005.

Dealers should review Instructions for Forms G-37, G-37x and G-38t, available in the Political Contributions Information area of the MSRB’s website at www.msrb.org, for detailed instructions for completing the new forms.  Certain specific instructions are highlighted below.

FORM G-38t

Use of Consultants From July 1, 2005 to August 29, 2005.  All information required to be reported concerning the use of consultants under former Rule G-38 during the period from July 1, 2005 to August 29, 2005 (the effective date of revised Rule G-38) must be reported on new Form G-38t.  Dealers are not to use former Form G-37/G-38 to report consultant information, even if such information pertains solely to consultant activities occurring prior to August 29, 2005.

Any payments made to consultants on or prior to August 29, 2005 should be noted as such (e.g., “pre-8/29/2005 payment”); any payments made after August 29, 2005 must comply with the reporting requirements described below.

All Transitional Payments Paid or Payable Under Rule G-38(c) Must Be Reported on Form G-38t for the Calendar Quarter Ended September 30, 2005.  Rule G-38(c)(i)(B) provides that transitional payments to consultants for solicitation activities undertaken on or prior to August 29, 2005 may only be made by a dealer if, among other things, the amounts of such payments made or pending, as described below, are listed (i) on the Form G-38t submitted for the quarter ended on September 30, 2005 and (ii) on each subsequent quarterly Form G-38t until such quarter in which payment is finally made.

Reporting of Transitional Payments for Specific Municipal Securities Business or Retainer Arrangements.  Information on each former consultant must be provided on an attachment page to Form G-38t, as described in Instructions for Forms G-37, G-37x and G-38t.  As it is particularly crucial for dealers to accurately report information concerning paid or pending transitional payments in order to avoid potential rule violations, the MSRB has provided below more detailed instructions on disclosing such payments on the attachment page to Form G-38t under the headings “Municipal Securities Business Obtained or Retained by Consultant for Which Payment is Made or is Pending” and “Total Dollar Amount Paid to Consultant During Reporting Period.”

●          Municipal Securities Business Obtained or Retained by Consultant for Which Payment is Made or is Pending – Each item of municipal securities business obtained or retained by the consultant for the dealer must be listed separately.  The dealer also must indicate the specific dollar amount (or an objective formula for determining the specific dollar amount) of pending payments for each item of municipal securities business listed.

Where pending payments cannot be reasonably allocated to a specific item of municipal securities business, such as where a dealer is contractually obligated to make a retainer payment that is not tied to specific items of municipal securities business, the dealer must indicate the specific dollar amount (or an objective formula for determining the specific dollar amount) of such pending payments and, in lieu of identifying a specific item of municipal securities business, must disclose that such payments are in respect to a contractual retainer or similar obligation and the geographic scope of the solicitation activities to which such payments relate.

The dealer also must include the specific dollar amount actually paid to the consultant during the reporting period, if any, in connection with each such item of municipal securities business or each such retainer arrangement.  Once a payment has been fully made or is no longer payable with respect to a specific item of municipal securities business or retainer arrangement, a dealer need not continue listing such item in future submissions of Form G-38t.

●          Total Dollar Amount Paid to Consultant During Reporting Period – The cumulative total for all payments made during the calendar quarter must be provided.  This total should be equal to the sum of all specific dollar amounts paid to the consultant during the reporting period included under the heading “Municipal Securities Business Obtained or Retained by Consultant for Which Payment is Made or is Pending”.

Required Submission of Form G-38t.  Form G-38t is required to be submitted to the MSRB: (i) for the calendar quarter ended September 30, 2005, if the dealer used consultants during the period from July 1, 2005 to August 29, 2005, or (ii) for any calendar quarter ending on or after September 30, 2005, if any transitional payment is made or remains pending during such calendar quarter.  Otherwise, dealers are not required to submit Form G-38t to the MSRB.

FORM G-37x

Dealers that have submitted Form G-37x on or prior to August 29, 2005 and that continue to qualify for the exemption provided under Rule G-37(e)(ii)(B) are not required to submit a revised Form G-37x.

 

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Questions regarding this notice and amended Rule G-38 may be directed to Ernesto A. Lanza, Senior Associate General Counsel.

 

October 11, 2005

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