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File No. SR-MSRB-90-2 (June 22, 1990); SEC Approval Order Release No. 34-29298 (June 13, 1991) OS/ARD Facility –
Official Statement and Advance Refunding In the course of its rulemaking activities, the Board has observed a critical need for an improved flow of information about municipal securities issues into the market. The municipal securities market is quite diverse. At year-end 1989, there were approximately 1.1 million outstanding issues comprising $740 billion in state and local government debt (excluding short-term notes). In 1989 alone, about 8500 issues comprising $122.5 billion in state and local debt were issued. These issues include not only general obligation bonds, but revenue and conduit bonds as well. The features of many municipal securities have become quite complex. There are a wide variety of call provisions that operate under specified conditions. In addition, put provisions often contain preconditions which the holder must satisfy prior to exercising the put. The credit structures of these securities, particularly revenue and conduit bonds, also can be complex. Board rules require dealers to explain to a potential customer all material facts about a proposed transaction,[2] to recommend the transaction to the customer only if it is suitable for the customer[3] and to price the transaction correctly.[4] These requirements are for the protection of customers and are similar or identical to the requirements placed on dealers in other securities markets. However, it has become clear that dealers do not always have ready access to information on municipal securities necessary for them to meet these standards. Such information includes the official statement or OS (the only document which provides a complete, official description of the terms of the security which applies for the up to 40 year life of the security); advance refunding documents or ARDs (information regarding a change in the credit of the security brought about by an advance refunding) and continuing disclosure information or CDI (secondary market information regarding the securities or the credit of the issuer, such as an issuer’s annual financial report or a trustee’s report on the status of a structured financing). Information about municipal securities exists. Under SEC rule 15c2-12, issuers must prepare an OS for most issues over $1 million. OSs also generally are voluntarily prepared for many issues under $1 million.[5] In addition, in recent years, more issuers are following the suggestions of issuer and analyst groups and providing CDI.[6] Finally, as noted above, trustees, pursuant to trust indentures for municipal securities issues, provide information to bondholders on the status of structured issues. Such information, however, is not being made available to the market in any organized manner. Municipal securities are exempt from any Commission filing requirement. Thus, there is no central location containing a complete set of disclosure documents. Rule G-36 will enable the Board to collect OSs for most issues. They are available, however, only for review and copying in the Board’s public access facility. OSs for issues subject to SEC Rule 15c2-12 also are being provided by underwriters to Nationally Recognized Municipal Securities Information Repositories (“NRMSIRs”) in order to limit the period of time after the end of the underwriting period underwriters must provide the information to potential customers. However, Rule 15c2-12 does not apply to issues under $1 million or certain private placements and short-term issues. Also, each NRMSIR does not necessarily have a complete set of OSs because underwriters may provide OSs to any of the three current NRMSIRs and there is no linkage among them. In addition, there is currently no central source of ARDs or CDIs.[7] Finally, trustees often provide notice on the status of issues exclusively to bondholders, creating an opportunity for bondholders to buy or sell in advance of the news reaching the market.[8] The Board believes that improved access to information about municipal securities is important to the municipal securities market not only so that dealers can comply with the Board’s fair practice rules, but also to enhance the integrity and efficiency of the market in general. When information is not readily available to the market, issuers may have to pay more in order to sell their securities. So too, in the secondary market, bonds are being priced on incomplete information. It is just as important to ensure a fair price to a customer purchasing a $5,000 retirement home bond from a $900,000 issue as it is to a customer purchasing a $5,000 state general obligation bond. Such market inefficiencies are costly to all market participants – issuers, dealers, and investors. Because of the Board’s role as the primary industry regulator, it has been asked to address a number of problems which touch on the activities of dealers, but which also relate to the municipal securities market in a more general manner. Examining these problems has involved numerous communications with diverse parties, including investors, issuers, dealers, bond trustees, bond insurance companies, registered securities clearing agencies and others. In addition to the information which comes to the Board through these channels, the dealer representatives, investor representatives, issuer representatives and other public representatives who have served on the Board also have brought their own expertise to address factors which affect the integrity and efficiency of the market. The Board has seen that market inefficiencies and other disclosure problems often result when market participants do not have ready access to official information about municipal securities issues. The Board believes that the municipal securities market needs a central facility through which important information regarding municipal securities and their issuers is made more readily available to market participants and information vendors. Thus, the Board plans to establish and operate the Official Statement and Advance Refunding Document – Paper Submission system (OS/ARD) of the MUNICIPAL SECURITIES INFORMATION LIBRARY system or MSIL system to provide market participants and information vendors with better access to more information regarding the description of municipal securities and the issuers of these securities. The Board believes that the MSIL system will increase the efficiency and fairness of the municipal securities market and protect investors and the public interest. This increased market efficiency should result in lower costs for issuers in the primary market and fairer prices in the secondary market reflecting all available official information about the issue. The Board, pursuant to rule G-36, currently collects and stores OSs for most municipal securities issues in paper form. In addition, the Board plans to add other documents in paper form to the MSIL system – ARDs provided by underwriters[9] and CDI voluntarily provided by issuers and their agents.[10] Thus, complete up-to-date information on municipal securities will be available from a central source. The Board’s role in the MSIL system will be analogous to the SEC’s role in collecting, storing, and providing access to corporate securities documents. However, it is important to emphasize that all CDI will be provided voluntarily to the MSIL system. Through its public access facility, any interested party may review and copy OSs at the Board’s offices. The OSs are available within one business day of receipt by the Board. Because of the limited accessibility the Board’s public access facility provides and because of the inefficiencies of storing paper documents, the Board plans to store these documents (along with ARDs and CDI) electronically. The Board also plans, through the MSIL system, to make these documents available, on paper and tape. The users of the MSIL system will be value-added resellers, municipal securities professionals and individual members of the public. The MSIL system is intended to foster “value added” information products. Vendors will be able to resell the whole documents and/or information from those documents (e.g., extracts, summaries) in any format the vendor chooses (e.g., paper, CD Rom, optical disks). The daily tape can be translated into character-coded form to allow for computerized text searches of documents (as one vendor has proposed to do). Demand for new products will occur as market participants seek to ensure that they have full access to the information found in the MSIL system database and will be shaped by availability of documents in electronic format. The Board does not intend, through its MSIL system, to be the sole source of information regarding municipal securities or to provide value-added services, rather it seeks to broaden access to existing public information through a variety of channels that are responsive to the needs of market participants. In this regard, the Board welcomes the plans of other groups to develop or serve as collectors and disseminators of municipal securities information. The Board does not believe that its efforts will inhibit the efforts of these groups to increase the availability of municipal securities information. In fact, the Board believes that the MSIL system will assist others in their important information collection and dissemination activities because of the completeness of the information in the MSIL system and its easy accessibility in a useful format. The Board believes that it is imperative that the MSIL system start providing access to municipal securities information as soon as possible. Within approximately six months of Commission approval, the MSIL system can begin operation.[11] System Objectives and Overview The MSIL system will be planned and operated under four guiding principles which define its scope and intent.
The Board’s operation of the facility will be subject to several important legal and policy constraints:
These restrictions require that the MSIL system be capable of accepting paper copies of OSs and ARDs, in any format, and of producing exact paper copies of these documents, upon request. The Board has concluded, after receiving the advice of its technical advisor, the MITRE Corporation, that electronic document storage by use of the digital imaging process is the best method of meeting these requirements while, at the same time, offering the best means for inexpensive long-term storage of and easy access to the documents. This has led the Board to adopt a plan to implement a system which can be expanded and improved to facilitate the purposes of the MSIL system and the guiding principles. In the system, the paper source documents submitted will be converted to digitized electronic images which can be used to print a faithful copy of the original. Two initial outputs will be produced: single printed copies of OSs and ARDs and a magnetic tape containing all documents imaged in one day. The central computer index, discussed below, and the imaging technology have been designed to include the possibility of accepting paper copies of CDI, such as annual financial reports, submitted on a voluntary basis. The systems regarding CDI also will be operated according to the Board’s guiding principles. As noted previously, the Board will begin developing its plan for accepting voluntary submissions of paper CDI, and pricing related output, soon after the OS/ARD system is operational. This plan will be filed with the Commission for its review and approval. The Board also intends to move rapidly to implement the capability to accept voluntary submissions of, and to provide access to, electronic submissions of certain CDI.[12] Electronic submissions would be more efficient to accept, store and process than paper documents and would be in a better format for manipulation, transmission and production of derived information products by VARs. Of course, the MSIL system always will accept paper copies of OSs, ARDs and CDI. Computer Index The MSIL system computer index will be developed to ensure that all documents received by the Board will be tracked efficiently and accessed quickly. In addition, because a number of documents may relate to the same issue (e.g., an OS, ARD and CDI), the computer index also must record relationships between documents. The basic concept is that of an electronic “file folder” -- all documents pertaining to an issue will be related through the index. This will facilitate the identification of documents which relate to specific issues. The computer index will, of necessity, be complex. While it will be based on the CUSIP numbering system, these numbers can change over time. Also, there are numerous relationships between documents (e.g., CDI must be related to a particular issue and that issue’s other documents) and documents may relate to one or more than one issue (e.g., refunded and refunding issues). The MSIL system computer index, however, will provide the necessary means for the Board to identify documents in a comprehensive and complete storage and access facility. System Operations The MSIL system will be composed of subsystems which capture and disseminate documents, as well as administer the system. In the document capture subsystem, the source documents will be received, indexed, scanned, quality checked and stored. A computer index database will be built using information from the documents themselves, the Board’s Form G-36 (provided by underwriters pursuant to rule G-36), and issue identification data from the CUSIP Service Bureau. Within three business days of receipt of each new issue document, the system will have completed its processing and will make the document available in both tape and paper form. The document capture subsystem will accept current OSs and ARDs at the rate they are submitted to the MSIL system. The rate of production of these documents varies from year to year. For purposes of sizing the system, the Board used an annual estimate of 10,000 OSs and 3,000 ARDs. A backlog of OSs and ARDs produced since January 1, 1990, also will be entered. These documents, in addition to historic OSs and ARDs, if made available, will be used to maintain a level daily workload. Based on these factors, the system has been designed to accommodate easily an annual processing rate of one million pages. The priorities for entering documents into the system will be (1) new issue documents; (2) the back-log of documents from January 1, 1990 received pursuant to rule G-36; and (3) certain other OSs and ARDs which have been made available. Thus, the Board expects that new issue documents generally will be processed in the MSIL system and available on the daily tape and by request within three days of receipt and, in most cases, probably earlier. Of course, documents received by the Board will be available at its public access facility within one business day of receipt. MSIL quality standards are intended to ensure that every document page is imaged and that the printed version is as legible as the original. Exception procedures will apply to problematic pages of documents containing poorly printed text, foldouts, the use of color, and grey or halftone artwork. In general, the imaging technology employed will store any information contained on a page with the same degree of accuracy as a photocopying machine. Additional information about quality standards is included in section 4.8 of the attached System Concept.[13] The procedures to be followed to ensure that these standards are met will be developed by the system contractor in its Quality Assurance Plan. Paper copies of inputted documents will be retained for one year, then discarded. The dissemination subsystem will produce a tape output with images on a daily basis and the printed document copies on request. The daily tape will contain an index of the documents included. The dissemination subsystem will include capabilities to search the computer index database to support system operators in filling individual requests for documents and to support the Board’s needs for system management information. Printed documents produced in response to individual requests received by 2:30 p.m. each business day will be mailed, express mailed or made available at the MSIL system the same day. The daily tape that includes documents made available during the day will be produced by the close of business the same day. The MSIL system customer service operation will be operated from at least 9:00 a.m. Eastern time to 4:30 p.m. Eastern time, the same hours of operation of the Board’s public access facility. The administrative subsystem will provide customer service, billing, document tracking, and project management capabilities. It will accumulate data about the number of documents processed, their status, and the workload performed by the system. Pricing In planning the MSIL system, the Board believed that the average annual cost of contracting with a service provider for this facility would be $.01or less per $1,000 par value of the bond based on current bond volume. The MITRE Corporation provided estimates to the Board that ranged between $700,000 and $1 million, depending on the volume of documents that were processed. The Board has received a number of bids in response to its request for proposal. Some bids were above and some below these estimates. Since the Board will be negotiating with the potential service providers, it is not in a position to provide further details. However, based on the bids, the Board believes that these estimates are correct. The Board plans to use general revenues of the Board for the collecting, indexing, and storing costs of MSIL system documents. The costs of providing paper copies and the daily tape will be paid for by user fees. This is consistent with the Commission’s policy to require that SRO fees be based on the expenses it incurs in providing the information, i.e., cost-based.[14] The Board believes that this dissemination cost-based pricing plan is in the public interest because it will ensure that a complete collection of important municipal securities information will be available, at a fair price, for the life of the municipal securities. Based on the information currently available to the Board, the Board believes that it will charge approximately $15.00 for a paper copy of an OS or an ARD. The daily tape will be provided on an annual subscription basis of approximately $12,000. Postage or delivery fees also will be added to the tape or document price. Based on an average of 25 documents per daily tape, this will result in a per document cost of less than $2.00 per OS or ARD. The Board will review the MSIL system prices annually to ensure that the MSIL system dissemination costs are paid for from user fees. The Board does not expect to make a profit from the MSIL system. [1] MUNICIPAL SECURITIES INFORMATION LIBRARY and MSIL are trademarks of the Board. [5] Pursuant to Board rule G-32, dealers must deliver a copy of the final OS to new issue customers by settlement. [6] See, Government Finance Officer’s Association, Disclosure Guidelines for State and Local Government Securities (January 1988); National Federal of Municipal Analysts, Disclosure Handbook for Municipal Securities (January 1990); and National Council of State Housing Agencies, Quarterly Reporting Format for Housing Bonds. [7] See, Municipal Disclosure Task Force Report of the National Association of Auditors, Comptrollers and Treasurers (May 25, 1990). [8] In response to this problem, the American Bankers Association has proposed Draft Voluntary Disclosure Guidelines for Corporate Trustees that seek to ensure more timely dissemination of information to the municipal securities market. These Guidelines are discussed in the Board’s filing of the Continuing Disclosure Information/Electronic Submission system, SR-MSRB-90-4. [9] In SR-MSRB-90-3, the Board has filed an amendment to rule G-36 to require underwriters to provide certain ARDs (i.e., escrow agreements) to the Board. [10] The Board intends to develop its plans to accept paper copies of CDI voluntarily provided by issuers once the OS/ARD system is operational. [11] The Board suspended its contracting schedule to await Commission approval of the MSIL system. Prior to the suspension, the Board received a number of bids from service providers. [12] In a separate filing (SR-MSRB-90-4), the Board has proposed a system to electronically receive and disseminate CDI (the CDI/ES system). The Board also will examine the possibility of collecting electronic submissions of all or part of OSs and ARDs and paper submission of CDI. The Board plans for the MSIL system include a complete and comprehensive computerized index of all documents related to an issue in both systems. [13] It should be noted that the MSIL System Concept, while the basis for obtaining bids from service contractors, is only an outline of the technical aspects of the MSIL system. The final MSIL system configuration, arrived at after discussion and negotiation with possible contractors, may possess different technological solutions to the issues posed in the System Concept under the same basic approach – digital imaging. A copy of the System Concept is attached. Because it includes certain revisions to the System Concept, the Request for Proposal, and Amendment No. 1, also are attached. [14] See e.g., Securities Exchange Act Rel. No. 20874 (April 17, 1984) affd, NASD v. SEC, 801 F. 2d 1415 (D.C. Cir. 1986). This “cost-based” concept applies when an SRO is competing with private-sector information vendors. As discussed below, the Board does not believe that the MSIL system is competing with any such vendors. It has determined, however, to use this cost-based approach because it should result in a fair price for MSIL system services. * * * * * File No. SR-MSRB-2001-03 (June 11, 2001); SEC Approval Order Release No. 34-44458 (June 20, 2001) Optional Procedure for Electronic Submissions Consistent with the Board’s stated objectives to pursue collection of electronic submissions of official statements and advance refunding documents, the Board is implementing an optional procedure for electronic submission by underwriters of official statements, advance refunding documents and Forms G-36(OS) and G-36(ARD), together with amendments thereto, to the MSIL® system. Underwriters are not required to make submissions electronically and the Board will continue to accept submissions made on paper. The Board expects the optional procedure for electronic submissions to become operational on the later of January 1, 2002 or 60 days after Commission approval. Electronic submissions will be made by underwriters through a secured, password-protected Internet website. Forms G-36(OS) and G-36(ARD) will be submitted by completion of an on-line form. On-line forms will elicit the same information as paper Forms G-36(OS) and G-36(ARD) and will be in substantially the same format. Notice of cancellation of an issue also will be effected by means of on-line entry of information by the underwriter. Official statements and advance refunding documents will be submitted by underwriters by uploading through the website simultaneously with the completed on-line forms. Underwriters will receive electronic records of submissions. All official statements, advance refunding documents and amendments submitted electronically must be in Adobe Acrobat® portable document format (“PDF”). Such documents may be in either a “native” PDF file or a scanned image PDF file. For scanned image PDF files, underwriters are required to use a resolution of 300 dpi. Underwriters may be required to compress submissions using file compression software in order to speed transmission times. Documents submitted electronically will be included in the daily and back-log collections currently produced by the MSIL® system and also will be available for viewing and printing at the public access facility. Upon the electronic system becoming operational, the Board will disseminate new submissions (whether submitted electronically or in paper form) as PDF files. * * * * * File No. SR-MSRB-90-4, Amendment No. 1 (October 7, 1991); SEC Approval Order Release No. 34-30556 (April 6, 1992) Plan for CDI Pilot System The Board is planning to create and operate a pilot system to accept and disseminate continuing disclosure information about outstanding issues of municipal securities. The proposed system, called the Continuing Disclosure Information Pilot System (“CDI Pilot System” or “Pilot System”), would become part of the Board’s Municipal Securities Information LibraryTM (“MSIL”TM)[1] system. Overview The CDI Pilot System is designed to accept and disseminate official continuing disclosure documents relating to outstanding issues of municipal securities (“continuing disclosure information” or “CDI”). Voluntary submissions of CDI would be accepted from trustees and issuers of municipal securities issues (“submitters”) when provided by mail, by facsimile transmission or by computer modem. The Board anticipates that, during the pilot period, the system would be limited to short disclosure documents (e.g., one to three pages in length or the equivalent in electronic form, if provided by modem). To help ensure the authenticity of CDI disseminated, the CDI Pilot System would include procedures to confirm the identity of the party sending the document. Recognizing that CDI may be of immediate relevance to pricing decisions being made in the market, the Board would seek to ensure that documents accepted in the Pilot System are disseminated on a timely basis and made available on equal terms to all interested parties. Methods For Sending Documents to System A submitter that chooses to disseminate CDI to the market through the Pilot System would, at its option, either mail a paper document to the system, send the document by facsimile transmission, or send the document electronically by computer modem. As discussed in further detail below, CDI sent to the system would have to be accompanied by information that identifies who is submitting the document, the issuer of the securities to which the document relates and the nature of the document being submitted. Procedures to Check Authenticity of Incoming Documents Before a trustee or issuer could begin submitting documents for dissemination through the CDI Pilot System, it first would identify itself to the Board as a submitter of CDI and identify the persons responsible for submission of CDI to the system. The Pilot System would keep this information in a “submitter file.” To establish a submitter file with the Board, a trustee or issuer would provide the Board with: (i) its name and address; (ii) the names and signatures of one or two persons who will be responsible for the documents sent to the system (“designated responsible parties”); and (iii) the telephone numbers that are to be used to communicate with the submitter. Submitters would be responsible for keeping the Board apprised of any changes in the submitter file information. Upon creation of a submitter file, the Board would: (i) provide the submitter with a submitter number and (ii) provide each designated responsible party for the submitter with one “personal identification number” (“PIN”). PINs would be kept confidential by the Board. Each designated responsible party would be responsible for the security of his PIN. After a submitter file is established, a designated responsible party for that submitter would be able to submit CDI to the Pilot System. In order to be disseminated by the system, an incoming document would have to be accompanied by the following information: (i) the name and identifying number of the submitter; (ii) the name of the designated responsible party; (iii) the PIN for the designated responsible party; (iv) information to identify the issuer of the securities to which the document relates;[2] (v) the date of the document that is being submitted; (vi) a short description of the document (limited to 320 characters), which would help identify the document to potential readers; and (vii) for facsimile transmissions and mailed documents, the signature of the designated responsible party.[3] For documents submitted by mail or facsimile transmission, this information would be provided by the submitter on a cover sheet (“cover sheet information”). For transmissions by modem, cover sheet information would be provided by modem.[4] Before a document is accepted by the Pilot System for dissemination, cover sheet information items (i) – (iii) would be checked to ensure that the information matches information within a submitter file. This review procedure would help to verify the authenticity of a document by ensuring that the document is being received from a designated responsible party. For a document transmitted by modem, these three items would be verified automatically by a computer program. This computer program also would ensure that the modem transmission from the submitter is being sent from the telephone number listed for this purpose in the submitter file and would allow the submitter to give a final authorization to the Board verifying that the document that was received by the Board is the one that the submitter wishes to disseminate. Methods of Dissemination The CDI Pilot System would provide two methods of dissemination. The primary means of dissemination would be a subscription service transmitting each document accepted by the Pilot System as soon as possible after the document is accepted (“subscription service”). CDI sent to the Pilot System in paper form or by facsimile transmission would be sent to subscribers by facsimile transmission. CDI sent to the Pilot System by modem would be sent to subscribers by modem. Use of facsimile and modem transmissions for dissemination would provide the CDI to subscribers as quickly as possible and would allow subscribers to have access to the documents on an equal and simultaneous basis.[5] As a secondary means of dissemination, documents provided to subscribers also would be available at the Board’s Public Access Facility (“PAF”) for review and copying. However dissemination is made – either through the subscriber service or the PAF – each document disseminated by the system would be accompanied by the following cover sheet information: name of submitter; issuer identification information; the date of the document; and the description of the document. The Board would encourage redistribution of the documents and cover sheet information provided by the Pilot System and would not place any restrictions on redistribution. Timing of Dissemination The Board would operate the CDI Pilot System with the goal of disseminating CDI as quickly as possible after it is received by the system. The actual time period between receipt by the system of a document and its dissemination would depend on a number of factors. The Board estimates that the average time for a person to review and process an incoming document in paper or facsimile form would be approximately 10-15 minutes. After acceptance into the system, the document would be ready for dissemination. However, the speed of facsimile transmission (approximately one minute per page) may create processing queues. In addition, depending on the incoming volume of CDI in paper and facsimile form, processing queues might develop for acceptance review. The Board is planning the CDI Pilot System so that it can accommodate up to 100 incoming documents per day during the pilot period. The Board also plans for the system to meet the following minimum goals in the event of such a high volume of input. CDI submitted by computer modem would be disseminated within minutes of the final authorization given by the submitter[6] and CDI submitted by facsimile transmission and mail would be transmitted to subscribers no later than the day that it is received by the Board. As noted above, the Board anticipates that normal time between receipt and dissemination of a document would be much faster than this. As between mail and facsimile transmissions, the Board believes a submitter likely would use facsimile transmission if he believes that the CDI contains time-critical information that is of immediate importance to the market. Thus, the Board would give priority in system processing queues to incoming facsimile transmissions over mailed documents. Hours of Operation The CDI Pilot System would operate on business days on which the Board is open (most business days except for federal holidays). Documents would be accepted and disseminated only on Board business days. The system would receive documents submitted by trustees and issuers by mail, facsimile transmission and computer modem from 9:00 a.m. to 4:00 p.m. Eastern Time. Subscribers would begin receiving transmissions from the system at 9:00 a.m. Eastern Time and transmissions would continue throughout the business day until all documents accepted by the system on that day are transmitted. During PAF business hours (9:00 a.m. to 4:30 p.m. Eastern Time), PAF users would have access to all documents that have been disseminated to subscribers. Pilot Procedure The Board plans for the CDI Pilot System to operate for a period of 18 months. At the end of the pilot period, the Board would evaluate system operations and decide whether to continue, substantially modify or discontinue the system. The Board would report on the pilot program to the Commission at the end of the pilot period. In addition, the Pilot System would be implemented in phases. At the end of each phase, the Board would evaluate and address any technical, policy and cost issues which arose during that phase, prior to committing the system to a greater capacity. The Board would report to the Commission on each phase after it is completed. During the first six months of pilot operations, the system would establish submitter files and accept short disclosure notices only from trustees. After this phase, submitter files also would be established for issuers and short disclosure notices would be accepted from issuers as well as trustees. Limiting the system initially to trustees would allow the Board to gain experience with a relatively limited universe of potential submitters (approximately 1,800 trustees), prior to expanding the system to a much larger and more diverse universe of potential submitters (approximately 80,000 issuers). The Board plans that, during the pilot period, the CDI Pilot System would accept only short disclosure notices (e.g., one to three pages of text, exclusive of the cover sheet or the equivalent in electronic form if submitted via modem).[7] The Board believes that, by assisting in the dissemination of such notices, it would address one of the most important problems with respect to CDI in the municipal securities market, while helping to assure that the Pilot System operates in a successful and cost-effective manner. After gaining experience with short disclosure notices, the Board would evaluate how to expand the system to accommodate longer documents. System Costs and Fees The operational cost of the CDI Pilot System would be dependent on a number of factors that can not be predicted in advance, including: (i) the number of submitters that will seek access to the system; (ii) the volume of incoming documents (iii) the percentages of incoming documents that are mailed, transmitted by facsimile, and transmitted by modem;[8] (iv) the intra-day pattern of submissions;[9] (v) the number of subscribers; and (vi) the number of PAF users seeking CDI and the volume of their document requests. Based on an assumption of 50 incoming documents per day by mail or facsimile transmission, 20 subscribers, and relatively limited PAF use, the Board anticipates that yearly operational costs would fall within a range of $300,000 to $500,000. Cost estimates could move outside this range depending on the volume of incoming paper or facsimile documents and the number of subscribers and PAF users. As more information becomes available in the planning and/or implementation process, the Board would report to the Commission any material revisions in these cost estimates. Although Board funds would be expended to initiate the project and most likely would be necessary to support the Pilot System, the Board intends that, over time, the operational costs of any Board-operated CDI system would be borne primarily by fees paid by system subscribers and PAF users. Submitters would not be charged a fee to establish submitter files or to submit documents to the system. Since operational costs and the number of subscribers and PAF users cannot be predicted at this time, fee estimates for the CDI Pilot System necessarily are preliminary and subject to change. At a maximum, total subscriber and PAF fees received by the Board would not exceed the operational cost of the system. At a minimum, fees would cover costs of dissemination of the documents. Subscribers would pay a one time “set-up” fee to cover the cost of equipment and telephone installation necessary to service that subscriber (estimated at $2,000). In addition, a subscriber would pay a flat fee to receive all documents accepted by the system and would pay the telephone charges actually incurred by the Board to transmit documents to that subscriber. At this time, the Board estimates that first year costs for the subscription service (excluding the set-up fee) would be approximately $10,000 to $15,000, plus the cost of telephone service to that subscriber. PAF users would be able to review documents free of charge. Paper copies of documents could be obtained at the PAF at a cost of approximately $.20 per page.[10] [1] MUNICIPAL SECURITIES INFORMATION LIBRARY and MSIL are trademarks of the Board. [2] Under current planning, this item would be satisfied by providing the name of the issuer and at least one 6-digit number used in the CUSIP numbering system to identify the issuer. [3] A signature would not be required for documents sent by computer modem. [4] For those trustees and issuers seeking to submit documents by computer modem, the Board would provide free or at nominal cost (e.g., under $100) software that would allow the submitter to enter all necessary cover sheet information. The software would guide the submitter in the process of entering cover sheet information and transmitting it and the document to the System. [5] Once a document has been accepted by the system and is ready for dissemination, the facsimile or modem transmission would begin simultaneously to all subscribers. However, if a subscriber is not able to begin to receive the transmission (e.g., because its facsimile machine is out of service) transmission to other subscribers would not be delayed. [6] Modem transmissions could be processed more quickly than mailed and facsimile transmissions because of the automated processing and dissemination of the documents, which also allows these documents to be processed and disseminated separately from facsimile and mailed transmissions. [7] If longer documents are sent to the Board, they will not be accepted or disseminated during the pilot period. [8] Because of automated processing of cover sheet information, modem transmissions would be much less expensive to process than paper or facsimile documents. Facsimile documents would be moderately less expensive to process than mailed documents since they will be received in the form in which they will be disseminated to subscribers. [9] Greater costs would be incurred if facsimile transmissions are “bunched” at one time period each day because sufficient system personnel would be needed to ensure that these documents are disseminated as quickly as possible on the day that they are received. [10] The Board would review CDI Pilot System fees annually. * * * * * File No. SR-MSRB-95-6 (May 24, 1995); SEC Approval Order Release No. 34-35911 (June 28, 1995) 1. The enrollment procedure for issuers and trustees and use of unique identifying numbers to make submissions to the System will be discontinued. Submissions with cover sheets or that refer to one of the 12 enumerated material events in their title will be accepted from any submitter.[1] 2. The cover sheet in use under the enrollment procedure has been modified to reflect the discontinuation of the enrollment procedure and to obtain identifying information about the issuer, the securities at issue, and the material event being disclosed.[2] 3. The current limit of three pages will be discontinued. The full text of documents, up to 10 pages, will be disseminated electronically. For documents exceeding 10 pages, the first 10 pages will be transmitted, with the full text made available to subscribers by mail, upon request. 4. The interim CDI System will expand its hours for accepting submissions from 9 a.m. to 4 p.m., Eastern Time, to 8 a.m. to 5 p.m., Eastern Time. * * * * * MATERIAL EVENT NOTICE COVER SHEET 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 relates: _______ ____________________________________________________________________ Number of pages of attached material event notice: _____________ Description of Material Event Notice (Check One): 1.___ Principal and interest payment delinquencies 2.___ Non-payment related defaults 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 security 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:_________________________ Employer:_____________________________________________________________________ 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) 683-3644. Contact the MSRB at (202) 223-9503 with questions regarding this form or the dissemination of this notice. [1] Rule 15c2-12(b)(5)(i)(C) specifies 11 material events to be disclosed, if material. Rule 15c2- 12(b)(5)(i)(D) also requires that issuers provide notice of the failure to provide required annual financial information. These events are referred to herein as the 12 enumerated material events. [2] A copy of the modified cover sheet [appears below]. * * * * * File No. SR-MSRB-96-12 (November 18, 1996); SEC Approval Order Release No. 34-38066 (December 19, 1996) 1. The current limit of 10 pages per document for fax and paper submissions will be changed to 25 pages. For documents exceeding 25 pages, the first 25 pages will be transmitted, with the full text made available to subscribers by mail, upon request. The capacity of the system to transmit documents will also be increased. 2. CDINet will replace the interim CDI System’s modem submission system with a secure Web page on the Internet that may be used by submitters of disclosure documents. 3. The annual subscription price for CDINet will be increased to $23,000. |
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