MSRB Reports -- (Volume 15, Number 3) October 1995

(Volume 15, Number 3) October 1995



ROUTE TO: Manager, Muni Department Underwriting Trading Public Finance Compliance

Changes Approved The changes permit the CDI System to process material event notices that may be sent to the Board pursuant to Commission Rule 15c2-12 on municipal securities disclosure.

Questions about the changes to the CDI System may be directed to Marianne I. Dunaitis, Assistant General Counsel, or Thomas A. Hutton, Director of MSIL.

On June 28, 1995, the Securities and Exchange Commission (Commission)[1] approved changes to the operation of the Board's Continuing Disclosure Information (CDI) System of the Municipal Securities Information Library(TM) (MSIL)(TM) system.[2] The CDI System accepts and electronically disseminates voluntary submissions of official disclosure notices relating to outstanding issues of municipal securities, i.e., continuing disclosure information. The changes permit the CDI System to process material event notices that may be sent to the Board pursuant to Commission Rule 15c2-12 on municipal securities disclosure.


On November 10, 1994, the Commission approved amendments to its Rule 15c2-12 which prohibit dealers from underwriting issues of municipal securities unless the issuer commits, among other things, to provide notice of material events to the Board's CDI System or to all Nationally Recognized Municipal Securities Information Repositories (NRMSIRs) and to the applicable state information depository.[3] In addition, the Rule prohibits dealers from recommending municipal securities without having a system in place to receive material events notices.[4] The Board has made certain changes to the CDI System consistent with the new Commission requirements. The changes are interim changes to the System to allow it to accept and disseminate material event notices received after the July 3, 1995, effective date of the amendments to Rule 15c2-12. A permanent System designed to process more and longer submissions is currently under development and is expected to be ready for operation by the end of 1995.[5]


There are four areas of change in the interim System. First, the enrollment procedure has been discontinued. As previously operated, an issuer who enrolled in the System received a unique identification number and a personal identification number before documents were accepted from the issuer. The enrollment procedure was designed to provide a measure of security that each submission was authentic and intended for public dissemination. The recent amendments to Rule 15c2-12 contemplate that the CDI System will accept material event notices from any issuer or its agent. Therefore, the enrollment procedure was deemed to be no longer feasible.

While discontinuing the enrollment procedure leaves the Board without a verification mechanism for submissions, the Commission has stated that NRMSIRs will not be required to verify the accuracy of the information submitted, only to accurately convey the information.[6] The Board similarly asserts that it is not required to undertake to verify the authenticity or accuracy of documents submitted, but that it will attempt to ensure accurate dissemination of documents accepted into the System.

In the second change to the operation of the CDI System, to assist users of the System in identifying a submission as a material event notice, the Board modified the cover sheet for use by submitters.[7] The modified cover sheet will help to afford limited assurance to subscribers that the submission is authentic and intended for disclosure to the market as a material event notice. However, the Board will nevertheless attempt to disseminate through the interim System those documents not accompanied by the cover sheet, if the document refers in its title to one of the 12 enumerated "material events" set forth in Rule 15c2-12.

The third area of change relates to the length of documents submitted to the System and how they will be handled. Previously, the CDI System disseminated only those documents that did not exceed three pages. The prior System was designed with the capability to process about 100 such submissions a day. To open up the System to longer documents, the interim System accepts and disseminates submissions of up to 10 pages, exclusive of the cover sheet. It is expected that the capacity of the interim System will allow for processing and electronically disseminating about 200 10-page documents a day. In addition, should a submission exceed 10 pages, the first 10 pages and the cover sheet will be disseminated, with a notice to subscribers that the submission exceeds 10 pages. The System then will make available a copy of the complete submission to any subscriber upon request, by express or regular mail, at the subscriber's expense.[8]

Fourth, the hours during which the CDI System will accept submissions has been expanded. Previously available to receive submissions from 9 a.m. to 4 p.m., Eastern Time, the System now accepts documents for an additional two hours, from 8 a.m. to 5 p.m., Eastern Time. Submissions will continue to be disseminated to subscribers after 5 p.m. The additional hours allow more flexibility for submitters, especially those on the West Coast.

Regarding processing time, the Commission stated in the Release approving the amendments to Rule 15c2-12 that 15 minutes might be an appropriate turnaround time for dissemination of material event notices by NRMSIRs, but that it would further discuss the issue during the NRMSIR recognition process. The CDI System had previously processed documents received by facsimile or modem in about 15 minutes, but with a much smaller volume of submissions than is currently anticipated. The Board will use its best efforts to maintain a quick turnaround time for documents sent by facsimile and modem to the interim System. The Board will ensure that any document with a voluntary cover sheet received by facsimile, modem or mail will be disseminated the same day it is received. Depending upon the volume of documents received, documents that refer to any one of the 12 enumerated material events in their title but do not have voluntary cover sheets will be disseminated on the same day, if possible, but documents with cover sheets have higher dissemination priority.

The changes to the interim CDI System are effective as of July 3, 1995. The Board believes that approval of the changes to the interim CDI System will allow it to process material event notices to be received after July 3, 1995, as well as give it sufficient time and experience to determine the permanent changes needed, in consultation with the Commission as well as potential users of the System, including NRMSIRs.

July 3, 1995


This cover sheet and material event notice should be sent to the Municipal Securities Rulemaking Board or to all Nationally Recognized Municipal Securities Information Repositories, and the State Information Depository, if applicable, pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D).

Issuer's and/or Other Obligated Person's Name:___________________


Issuer's Six-Digit CUSIP Number(s):______________________________


or Nine-Digit CUSIP Number(s) to which this material event notice



Number of pages of attached material event notice :______________

Description of Material Events Notice (Check One):_______________

1.___ Principal and interest payment delinquencies 2.___ Non-Payment related default 3.___ Unscheduled draws on debt service reserves reflecting financial difficulties 4.___ Unscheduled draws on credit enhancements reflecting financial difficulties 5.___ Substitution of credit or liquidity providers, or their failure to perform 6.___ Adverse tax opinions or events affecting the tax-exempt status of the security 7.___ Modifications to rights of securities holders 8.___ Bond calls 9.___ Defeasances 10.__ Release, substitution, or sale of property securing repayment of the securities 11.__ Rating changes 12.__ Failure to provide annual financial information as required 13.__ Other material event notice (specify )____________________

I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly:

Signature: _____________________________________________________

Name: ______________________________Title:_______________________


Address: ________________________________________________________

City, State, Zip Code: __________________________________________

Voice Telephone Number(______________) __________________________

Please print the material event notice attached to this cover sheet in 10-point type or larger. The cover sheet and notice may be faxed to the MSRB at (703) 683-1930. Contact the MSRB at (202) 223-9503 with questions regarding this form or the dissemination of this notice.


[1] See Exch. Act Rel. No. 35911 (June 28,1995).

[2] The Municipal Securities Information Library system and the MSIL system are trademarks of the Board. The MSIL system, which was approved in Securities Exchange Act Release No. 29298 (June 13, 1991), is a central facility through which information about municipal securities is collected, stored and disseminated.

[3] Sec. Exch. Act Rel. No. 34961 (Nov. 10,1994). This provision of the rule became effective on July 3,1995.

[4] The effective date of this provision of the rule is January 1, 1996.

[5] For the interm System, the price remains $16,000 for an annual subscription. The price for the permanent System will be reviewed for any appropriate adjustment.

[6] Sec. Exch. Act Rel. No. 34961 at 51 n.155 (Nov. 10,1994).

[7] The cover sheet requests information regarding the issuer, the municipal security at issue, the type of material event being disclosed, and the person submitting the notice. A sample cover sheet is contained on the next page.

[8] Copies will be charged at 20 cents a page, plus any applicable sales tax, and the cost of postage or express mail. Complete copies of submissions will also be available in the Board's Public Access Facility for review or copying at the same charge.


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