( Volume 16, Number 1 ) JANUARY 1996
Route To: Manager, Muni Department Sales Operations Compliance
The Board reminds dealers that the guidance given by the Securities and Exchange Commission with respect to Rule 10b-10 is not applicable to municipal securities confirmations, which are governed by Board rule G-15(a).
Questions about this notice may be directed to Marianne I. Dunaitis, Assistant General Counsel.
The Securities and Exchange Commission (SEC) recently amended Exchange Act Rule 10b-10, governing confirmation requirements for securities other than municipal securities. The Rule amendment requires a broker-dealer to disclose on the confirmation if a debt security, other than a government or municipal security, is unrated by a nationally recognized statistical rating organization (NRSRO). In the recent amendments to rule G-15(a), on customer confirmations, the Board included the same disclosure requirement for confirmations of customer transactions in municipal securities.
In September 1995, the SEC provided guidance with respect to meeting the requirement to disclose the unrated status of nongovernment, nonmunicipal securities. The guidance relates to a broker-dealer's access to, and use of, rating information for a certain percentage of outstanding "taxable debt securities" as a basis for determining whether a confirmation should state that a security is "unrated." The Board wishes to remind brokers, dealers, and municipal securities dealers (dealers) that the guidance given by the SEC with respect to Rule 10b-10 is not applicable to municipal securities confirmations, which are governed by Board rule G-15(a). Under Board rule G-15(a), "unrated" is considered to have its normal meaning. The confirmation of a municipal securities transaction must therefore state "unrated" if, and only if, no NRSRO has assigned a rating to the security. To determine the rated or unrated status of a security, a dealer may use information obtained from an information vendor that has access to rating information, or may obtain rating information directly from the rating agencies. However, as with all information provided to customers, the dealer is responsible to the customer for the accuracy of the information contained on the confirmation.
December 13, 1995
 Letter of Sept. 29, 1995, from Catherine McGuire, Chief Counsel, Div. of Market Reg., SEC, to George P. Miller, Vice Pres. and Assoc. General Counsel, Public Securities Association.
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