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Delivery Requirements: Partials
Delivery requirements: partials. I am writing to confirm the substance of our telephone conversation concerning the provision of rule G-12(e)(iv) on partial deliveries. In our discussion, you posed a specific example of a single purchase of securities in which half are of one maturity and half of another maturity and inquired whether or not delivery of only one of the maturities would constitute a "partial" under the terms of the rule.
As I stated to you, if the transaction is effected on an "all or none" basis, and your confirmation is marked "all or none" or "AON," this would suffice to indicate that the purchase of both maturities constitutes a single transaction, and that both maturities must be delivered to effect good delivery. MSRB interpretation of February 23, 1978.
Periodic compliance examinations
This will acknowledge receipt of your letter dated February 2, 1978 in which you request a clarification of Board rule G-16 relating to periodic compliance examinations.
In your letter you express your understanding that rule G-16 does not apply to bank dealers. This understanding is incorrect. Rule G-16 applies to all municipal securities brokers and municipal securities dealers and requires that all such organizations be examined at least once each [two calendar years] to determine compliance with, among other things, rules of the Board. Under section 15B(c)(7) of the Securities Exchange Act of 1934, as amended (the “Act”), such examinations of bank dealers will be conducted by the appropriate federal bank regulatory agency. The Office of the Comptroller of the Currency is designated by the Act as the appropriate agency for national banks. MSRB interpretation of February 17, 1978.
NOTE: revised to reflect subsequent amendments.
Apprenticeship
Apprenticeship. This will acknowledge receipt of your letter dated January 30, 1978 and will confirm our recent telephone conversation.
In your letter you seek clarification of the applicability of the requirements of rule G-3(i)[*]relating to apprenticeship periods to a municipal securities representative who has previously qualified as a general securities representative. As I indicated in our conversation, an individual who was previously qualified as a general securities representative is not required to serve the 90-day apprenticeship period. MSRB interpretation of February 17, 1978.
[*] [Currently codified at rule G-3(a)(iii)]
Uniform Practice and Rule G-15 on Customer Confirmations
This notice addresses several questions that have arisen concerning Board rules G-12 and G-15. Board rule G-12 establishes uniform industry procedures for the processing, clearance, and settlement of transactions in municipal securities... Board rule G-15 requires municipal securities professionals to send written confirmations of transactions to customers, and specifies the information required to be set forth on the confirmation.
Settlement Dates
In order to establish uniform settlement dates for "regular way" transactions in municipal securities, rule G-12(b)(i)(B) defines the term "business day" as "a day recognized by the National Association of Securities Dealers, Inc. [the "NASD"] as a day on which securities transactions may be settled." The practice of the NASD has been to exclude from the category of "business day," any day widely designated as a legal bank holiday, and to notify the NASD membership accordingly. Such notices set forth the NASD’s trade and settlement date schedules for periods which include a legal holiday.
"Catastrophe" Call Features
Rules G-12 and G-15 require that confirmations of transactions set forth a "description of the securities, including at a minimum… if the securities are subject to redemption prior to maturity (callable)… an indication to such effect…" (paragraphs G-12(c)(v)(E) and G-15(a)(v)[*]). Both rules also require that in transactions in callable securities effected on a yield basis, dollar price must be shown and "the calculation of dollar price shall be to the lower of price to call or price to maturity" (paragraphs G-12(c)(v)(I) and G-15(a)(viii)[†]).
The references to "callable" securities and pricing to call in rules G-12 and G-15 do not refer to "catastrophe" call features, such as those relating to acts of God or eminent domain, which are beyond the control of the issuer of the securities.
[*] [Currently codified at rule G-15(a)(i)(C)(2)(a)]
[†] [Currently codified at rule G-15(a)(i)(A)(5)]
Agency Transactions: Remuneration
Agency transactions: remuneration. This will acknowledge receipt of your letter dated November 1, 1977 in which you request an interpretation concerning the provision in Board rule G-15(b)(ii)[*] which requires that "the source and amount of any commission or other remuneration" received by a municipal securities dealer in a transaction in which the municipal securities dealer is acting as agent for a customer be disclosed on the confirmation to the customer.
The reference to the "amount of any commission or other remuneration" requires that an aggregate dollar amount be shown, in a purchase transaction on behalf of an equivalent of the dealer concession, and, if applicable, any additional charge to the customer above the price paid to the seller of the securities. In a sale transaction on behalf of a customer, this would normally be the difference between the net price paid by the purchaser of the securities and the proceeds to the customer. If a percentage of par value or unit profit were shown it would be difficult for many customers to relate this information to the "total dollar amount of [the] transaction" required by rule G-15(a)(xi)[†] to be shown on the confirmation.
The reference in rule G-15(b)(ii)[*] to the "source" of remuneration would not require you to differentiate between the concession and any additional charge. Standard language could be included on the confirmation to indicate that your remuneration may include dealer concessions and other charges. MSRB interpretation of November 10, 1977.
[†] [Currently codified at rule G-15(a)(i)(A)(6)(a)]
[*] [Currently codified at rule G-15(a)(i)(A)(1)(e)]
Callable Securities: "Catastrophe" Calls
Callable securities: "catastrophe" calls. This will acknowledge receipt of your letter dated October 20, 1977 which has been referred to me for reply. In your letter you request an interpretation of the provisions in rules G-12 and G-15 requiring that the dollar price for transactions in callable securities effected on a yield basis be priced to the lower of price to call or price to maturity. (See rules G-12(c)(v)(I) and G-15(a)(viii))[*].
At its meeting held October 25-26, 1977, the Board confirmed that the requirements in rules G-12 and G-15 relating to pricing to call do not include "catastrophe" calls, that is, calls which occur as a result of events specified in the bond indenture which are beyond the control of the issuer. MSRB interpretation of November 7, 1977.
[*] [Currently codified at rule G-15(a)(i)(A)(5)]
INTERPRETIVE NOTICE ON RECORDKEEPING
The Municipal Securities Rulemaking Board (the "Board") has received a number of inquiries concerning Board rules G-8 and G-9. These rules require municipal securities brokers and municipal securities dealers to make and keep current certain specified records concerning their municipal securities business and to preserve such records for specified periods of time. This interpretive notice addresses several of the more frequent inquiries received by the Board regarding these rules.
General Purposes of Recordkeeping Rules
The Board’s recordkeeping rules are designed to require organizations engaged in the municipal securities business to maintain appropriate records concerning their activities in such business. In writing the rules, the Board adopted the approach of specifying in some detail the information to be reflected in the various records. The Board believed that this approach would provide helpful guidance to municipal securities professionals as well as the regulatory agencies charged with the responsibility of examining the records of such firms. At the same time, the Board attempted to provide a degree of flexibility to firms concerning the manner in which their records are to be maintained, recognizing that various recordkeeping systems could provide a complete and accurate record of a firm’s municipal securities activities. The interpretations set forth in this notice are intended to be consistent with the foregoing purposes.
This notice is not intended to address all of the questions which have arisen, or may arise; the Board will continue its policy of responding to written requests for individual interpretations and may issue further interpretive notices on recordkeeping should additional questions of general interest arise.
The following topics are covered in this interpretive notice:General Purposes of Recordkeeping Rules
Election to Follow Board or Commission Recordkeeping Rules
Maintenance of Records on a Trade Date or Settlement Date Basis
Current Posting of Records
Unit System Method of Recordkeeping
Rule G-8(a)(ii)—Account Records
Rule G-8(a)(iii)—Securities Records
Rules G-8(a)(vi) and (vii)—Records for Agency and Principal Transactions
Rule G-8(a)(xi)—Customer Account Information
Rule G-8(c)—Non-Clearing Municipal Securities Brokers and Municipal Securities Dealers
Rule G-9(b)(viii)(C)—Preservation of Written Communications
Election to Follow Board or Commission Recordkeeping Rules
Rules G-8(f) and G-9(g) provide that municipal securities brokers and municipal securities dealers other than bank dealers, who are in compliance with the recordkeeping rules of the Securities and Exchange Commission (the "Commission"), will be deemed to be in compliance with Board rules G-8 and G-9, provided that the following additional records, not specified in the Commission’s rules, are maintained by such firms: records of uncompleted transactions involving customers (subparagraph (a)(iv)(D)); records relating to syndicate transactions (paragraph (a)(viii)); new account information (paragraph (a)(xi)); and information concerning customer complaints (paragraph (a)(xii)). Conversely, Commission rules 17a-3 and 17a-4 provide that securities firms engaged in the municipal securities business will satisfy all regulatory requirements concerning recordkeeping with respect to their municipal securities business if they are in compliance with the Board’s rules.
Securities firms must determine to comply with either the Board or Commission rules, but are not required to file with either the Board or the commission a formal written notice of election. Satisfactory compliance with either set of rules will be subject to determination in the course of periodic compliance examinations conducted by the regulatory organizations charged with enforcement of Board and Commission rules.
Maintenance of Records on a Trade Date or Settlement Date Basis
Under rule G-8, records concerning purchases and sales of municipal securities may be maintained on either a trade date or settlement date basis, provided that all records relating to purchases and sales are maintained on a consistent basis. For example, if a municipal securities broker or municipal securities dealer maintains its records of original entry concerning purchases and sales (rule G-8(a)(i)) on a settlement date basis, the municipal securities broker or municipal securities dealer must also maintain its account records (rule G-8(a)(ii)) and securities records (rule G-8(a)(iii)) on the same basis.
The above records may not be maintained on a clearance date basis, that is, the date the securities are actually delivered or received. Records maintained on a clearance date basis would not accurately reflect obligations of a municipal securities broker or municipal securities dealer to deliver or accept delivery of securities. Of course, the date of clearance should be noted in the records of original entry, account records and securities records, regardless of whether these records are kept on a trade date or settlement date basis.
Current Posting of Records
Rule G-8 provides that every municipal securities broker or municipal securities dealer must make and keep current the records specified in the rule. The Board has received inquiries as to the time within which records must be posted to satisfy the currency requirement.
Blotters or other records of original entry showing purchases and sales of municipal securities should be prepared no later than the end of the business day following the trade date. Transactions involving the purchase and sale of securities should be posted to the account records no later than settlement date and to the securities records no later than the end of the business day following the settlement date. Records relating to securities movements and cash receipts and disbursements should reflect such events on the date they occur and should be posted to the appropriate records no later than the end of the following business day.
Commission rule 17a-11 requires municipal securities dealers, other than bank dealers, to give immediate notice to the Commission and their designated examining authorities of any failure to make and keep current the required records, and to take corrective action within forty-eight hours after the transmittal of such notice.
Unit System Method of Recordkeeping
Under rule G-8, records may be maintained in a variety of ways, including a unit system of recordkeeping. In such a system, records are kept in the form of a group of documents or related groups of documents. For example, customer account records may consist of copies of confirmations and other related source documents, if necessary, arranged by customer.
A unit system of recordkeeping is an acceptable system for purposes of rule G-8 if the information required to be shown is clearly and accurately reflected and there is an adequate basis for audit. This would require in most instances that each record in a unit system be arranged in appropriate sequence, whether chronological or numerical, and fully integrated into the overall recordkeeping system for purposes of posting to general ledger accounts.
Rules G-8(a)(ii)—Account Records
Rule G-8(a)(ii) requires every municipal securities broker and municipal securities dealer to maintain account records for each customer account and the account of the municipal securities broker and municipal securities dealer, showing all purchases and sales, all receipts and deliveries of securities, all receipts and disbursements of cash, and all other debits and credits to such account.
The account records may be kept in several different formats. Ledger entries organized separately for each customer and for the municipal securities broker or municipal securities dealer, showing the requisite information, would clearly satisfy the requirements of rule G-8(a)(ii).
The requirements of rule G-8(a)(ii) can also be satisfied by a unit system of recordkeeping. See discussion above. Under such a system, a municipal securities professional might maintain files, organized by customer, containing copies of confirmations and other pertinent documents, if necessary, which reflect all the information required by rule G-8(a)(ii).
The question has also been raised whether the account records requirement of rule G-8(a)(ii) can be satisfied by an electronic data processing system which can produce account records by tracing through separate transactions. The Board is of the view that such a system is acceptable if the account records should be obtainable without delay, although the records need not be maintained by customer prior to being produced. The account records so produced must also reflect clearly and accurately all the required information, provide an adequate basis for audit and be fully integrated into the overall recordkeeping system. Under rule G-27, on supervision, a municipal securities principal is required to supervise the activities of municipal securities representatives with respect to customer accounts and other matters. In this connection, it may be appropriate to obtain printouts of customer accounts on a periodic basis.
The Board believes that it is important to maintain account records in the fashion described above in view of several of the Board’s fair practice rules, such as the rules on suitability and churning. Account records will be important both as a tool for management to detect violations of these rules and for enforcement of these rules by the regulatory agencies conducting compliance examinations or responding to complaints.
The requirement to maintain account records does not apply to a firm which effects transactions exclusively with other municipal securities professionals and has no customers, as defined in paragraph (e) of rule G-8.
Rule G-8(a)(iii)—Securities Records
Rule G-8(a)(iii) requires that records be kept showing separately for each municipal security all long and short positions carried by a municipal securities broker or municipal securities dealer for its account or for the account of a customer, the location of all such securities long and the offsetting position to all such securities short, and the name or other designation of the account in which each position is carried.
The securities records should reflect not only purchases and sales, but also any movement of securities, such as whether securities have been sent out for validation or transfer. If there is no activity with respect to a particular security, it is not necessary to make daily entries for the security in the securities records. The last entry will be deemed to be carried forward until there is further activity involving the security.
Rule G-8(a)(iii) requires that the securities records show all long security count differences and short count differences classified by the date of physical count and verification on which they were discovered. The Board currently has no rule requiring municipal securities professionals to make periodic securities counts. However, if such counts are made, all count differences must be noted as provided in this section. Commission rule 17a-13 requires municipal securities dealers, other than bank dealers and certain securities firms exempted from the rule, to examine and count securities at least once in each quarter.
The requirement to maintain securities records under rule G-8 does not apply to a firm which effects municipal securities transactions exclusively with other municipal securities professionals and has no customers, as defined in paragraph (e) of rule G-8, provided the firm does not carry positions for its own account and records or fails to deliver, fails to receive and bank loans are reflected in other records of the firm.
Rules G-8(a)(vi) and (vii)—Records for Agency and Principal Transactions
Rules G-8(a)(vi) and (vii) require municipal securities brokers and municipal securities dealers to make and keep records for each agency order and each transaction effected by the municipal securities broker or municipal securities dealer as principal. The records may be in the form of trading tickets or similar documents. In each case, the records must contain certain specified information, including "to the extent feasible, the time of execution."
The phrase "to the extent feasible" is intended to require municipal securities professionals to note the time of execution for each agency and principal transaction except in extraordinary circumstances when it is impossible to determine the exact time of execution. In such cases, the municipal securities professional should note the approximate time of execution and indicate that it is an approximation.
Rule G-8(a)(xi)—Customer Account Information
Rule G-8(a)(xi) requires a municipal securities broker or municipal securities dealer to obtain certain information for each customer. Several distinct questions have been raised with respect to this provision.
The requirement to obtain the requisite information may be satisfied in a number of ways. Some municipal securities brokers and municipal securities dealers have prepared questionnaires which they have had their customers complete and return. Others have instructed their salesmen to obtain the information from customers over the telephone at the time orders are placed. It is not necessary to obtain a written statement from a customer to be in compliance with the provision.
Except for the tax identification or social security number of a customer, the customer account information required by this provision must be obtained prior to the settlement of a transaction. The Board believes that such a requirement is reasonable since the information is basic and important.
The requirement in subparagraph (C) of rule G-8(a)(xi) to obtain the tax identification or social security number of a customer tracks the requirement in section 103.35, Part 103 of Title 31 of the Code of Federal Regulations, which was adopted by the Treasury Department and became effective in June 1972. Under this section, every broker, dealer and bank must obtain the tax identification or social security number of customers. If a broker, dealer or bank is unable to secure such information after reasonable effort, it must maintain a record identifying all such accounts. The Board interprets subparagraph (C) of rule G-8(a)(xi) in a similar fashion to require municipal securities professionals to make a reasonable effort to obtain a customer’s tax identification or social security number and, if they are unable to do so, to keep a record of that fact.
Several inquiries have focused on the scope of subparagraph (G) of rule G-8(a)(xi) which requires that a record be made and kept of the name and address of the beneficial owner or owners of such account if other than the customer and transactions are to be confirmed to such owner or owners.
This provision applies to the situation in which securities are confirmed to an account which has not directly placed the order for the securities. This frequently occurs in connection with investment advisory accounts, where the investment advisor places an order for a client and directs the executing firm to confirm the transaction directly to the investment advisor’s client.
Under rule G-8, the only information which must be obtained in such circumstances for the account to which the transaction is confirmed is the name and address of the account, information which would have to be obtained in any event in order to transmit the confirmation. Since the investment advisor itself is the customer, the other items of customer account information set forth in rule G-8(a)(xi) need not be obtained for the investment advisor’s client. The customer account information applicable to institutional accounts, however, must be obtained with respect to the investment advisor. Also, the account records required by rule G-8(a)(ii) would not be required to be maintained for the investment advisor’s client, although such records would have to be maintained with respect to the account of the investment advisor.
A municipal securities professional is not required to ascertain the name and address of the beneficial owner or owners of an account if such information is not voluntarily furnished. Subparagraph G-8(a)(xi)(G) applies only when an order is entered on behalf of another person and the transaction is to be confirmed directly to the other person.
A recent court decision, Rolf v. Blyth Eastman Dillon & Co. Inc., et al. issued on January 17, 1977, in the United States District Court, Southern District of New York, may have important implications with respect to the obligations generally of securities professionals to beneficial owners of accounts, especially to clients of investment advisors. We commend your attention to this decision, which has been appealed.
Rule G-8(c)—Non-Clearing Municipal Securities Brokers and Municipal Securities Dealers
Rule G-8(c) provides that a non-clearing municipal securities broker or municipal securities dealer is not required to make and keep the books and records prescribed by rule G-8 if they are made and kept by a clearing broker, dealer, bank or clearing agency. Accordingly, to the extent that records required by rule G-8 are maintained for a municipal securities broker or municipal securities dealer by a clearing agent, the municipal securities broker or municipal securities dealer does not have to maintain such records. A non-clearing municipal securities broker or municipal securities dealer is still responsible for the accurate maintenance and preservation of the records if they are maintained by a clearing agent other than a clearing broker or dealer, and should assure itself that the records are being maintained by the clearing agent in accordance with applicable recordkeeping requirements of the Board.
In the case of a bank dealer, clearing arrangements must be approved by the appropriate regulatory agency for the bank dealer. The bank regulatory agencies are each considering the adoption of procedures to approve clearing arrangements. It is contemplated that these procedures will require the inclusion of certain provisions in clearing agreements, such as an undertaking by the clearing agent to maintain the bank dealer’s records in compliance with rules G-8 and G-9, and will specify the mechanics for having such arrangements considered and approved. The bank regulatory agencies indicate that they will advise bank dealers subject to their respective jurisdictions on this matter in the near future.
In the case of a securities firm, Commission approval is required for all clearing arrangements with entities other than a broker, dealer or bank. The Commission has recently proposed an amendment to its rule 17a-4 which would eliminate the need to obtain Commission approval of clearing arrangements with such other entities, provided that certain specified conditions are met. If the proposed rule is adopted, the Board would make a corresponding change in rule G-8.
If an agent clears transactions, but transmits copies of all records to the municipal securities broker or municipal securities dealer, and these records are preserved by the municipal securities broker or municipal securities dealer in accordance with rule G-9, the clearing arrangement is not subject to the rule G-8(c).
Rule G-9(b)(viii)(C)—Preservation of Written Communications
Subparagraph (C) of rule G-9(b)(viii) requires municipal securities brokers and municipal securities dealers to preserve for three years all written communications received or sent, including inter-office memoranda, relating to the conduct of the activities of such municipal securities broker or municipal securities dealer with respect to municipal securities.
The communications required to be preserved by this provision relate to the conduct of a firm’s activities with respect to municipal securities. Accordingly, such documents as internal memoranda regarding offerings or bids, letters to or from customers and other municipal securities professionals regarding municipal securities, and research reports must be preserved. Documents pertaining purely to administrative matters, such as vacation policy and the like, would not have to be preserved for purposes of the rule.
Quotation of municipal securities
Quotation of municipal securities. This will acknowledge receipt of your letter dated February 9, 1977 concerning the Board’s proposed rule G-13 on quotations relating to municipal securities. In your letter you raise certain questions concerning the intent and application of paragraph (b)(ii) of proposed rule G-13, which prohibits a municipal securities professional from distributing or publishing a municipal securities quotation, or causing such a quotation to be distributed or published, unless the quotation is based upon the professional’s best judgment as to the fair market value of the security.
While the provision in question would undoubtedly apply to situations involving outright fraud, the Board believes the rule to have appropriate application in other circumstances as well. Thus, the Board has attempted in paragraph (b)(ii) to proscribe conduct which, in the Board’s opinion, constitutes bad business practice but may not, depending on the circumstances, constitute fraud. The Board firmly believes that as a matter of just and equitable principles of trade in the municipal securities industry and with a view to promoting free and open markets in municipal securities, certain practices should not be condoned, even though they do not necessarily rise to the level of fraud or cannot be proven to constitute fraud.
Some examples of how paragraph (b)(ii) would operate may be useful. First, assume that a dealer submits a bid for bonds, knowing that they have been called by the issuer. The bonds are not general market bonds and the fact that they have been called is not widely known. While called bonds ordinarily trade at a premium, the dealer’s bid is based on the value of the bonds as though they had not been called and is accepted by the dealer on the other side of the trade who is unaware of the called status of the bonds. In these circumstances, the bid clearly would not have been based upon the best judgment of the dealer making it as to the fair market value of the bonds. While one might argue that the dealer accepting the bid should have known of the called status of the bonds, the dealer making the bid acted unethically and in a manner not conducive to free and open markets in municipal securities. In the Board’s view, the actions of the dealer making the bid should not be condoned, although a charge of fraud might be difficult to sustain in dealings between professionals and might be inappropriate. The improper nature of the dealer’s conduct would be exacerbated, of course, if the person on the other side of the transaction is a non-professional. However, difficulties in proof that the conduct of the dealer was fraudulent suggest that the best judgment rule would provide an appropriate alternative basis for enforcement action.
Another situation that would be covered by the best judgment rule is one in which a dealer submits a bid for bonds based on valuations obtained from independent sources, which in turn are based on mistaken assumptions concerning the nature of the securities in question. The circumstances indicate that the dealer submitting the bid knows that the securities have a substantially greater market value than the price bid, but the fact that independent valuations were obtained, albeit based on mistaken facts, clouds the dealer’s culpability.
A third situation to which the best judgment rule would apply is one in which a dealer makes a bid for or offer of a security without any knowledge as to the value of the security or the value of comparable securities. While the Board does not intend that the best judgment of a dealer as to the fair market value of a security be second-guessed for purposes of the proposed rule, the Board does intend that the dealer be required to act responsibly and to exercise some judgment in submitting a quotation. In other words, a quotation which has been “pulled out of the air” is not based on the best judgment of the dealer and, in the interests of promoting free and open markets in municipal securities, should not be encouraged.
Given the manner in which the Board intends the “best judgment” rule to operate, the Board concluded that it would not have an anti-competitive impact on the municipal markets. The proposed rule is not intended to prohibit legitimate price discounts or mark-ups, as the case may be, based upon a dealer’s anticipation of the direction of the movement of the markets and other factors. The Board does not intend to interfere with legitimate pricing mechanisms and recognizes that there may be a variety of quotations with respect to a given security, each of which would comply with the terms of the proposed rule.
While it is not possible to anticipate all of the specific fact situations that might run afoul of the “best judgment” rule, I would like to make some general observations concerning the operation of the proposed rule. As you know, one of Congress’ principal purposes in calling for the establishment of the Board was to promote the development of a body of rules for the municipal securities industry that would furnish quidelines for good business conduct. The Senate Committee on Banking, Housing and Urban Affairs observed in its Report on the Securities Acts Amendments of 1975 that prior to the legislation, the conduct of municipal market professionals could be controlled only after the fact through enforcement by the Commission of the fraud prohibitions of the federal securities laws. The Senate Committee expressed hope that a self-regulatory body like the Board would develop prophylactic rules for the industry which would deter unethical and fraudulent practices in the first instance. See Senate Report 94-75, 94th Cong., 1st Sess., 42-43. MSRB interpretation of February 24, 1977.
Interpretive Notice on Professional Qualifications
On December 23, 1976, the Municipal Securities Rulemaking Board (the "Board") issued an interpretive notice addressing certain questions received by the Board with respect to its professional qualifications rules (rules G-2 through G-7). Since that time, the Board has received additional questions concerning rule G-3 which are discussed in this interpretive notice.
1. Requirements for Financial and Operations Principals.
Under the rule G-3(b)(ii)[*], every municipal securities broker and municipal securities dealer other than a bank dealer is required to have at least one qualified financial and operations principal. As defined in the rule, this person is responsible for the overall supervision and preparation of financial reports to the Securities and Exchange Commission and self-regulatory organizations and for the processing, clearance, safekeeping and recordkeeping activities of the firm. If more than one person shares these overall supervisory responsibilities, each such person must be qualified as a financial and operations principal.
The question has been asked whether a financial and operations principal whose duties relate solely to financial and operational matters and not, for example, to underwriting, trading, or sales functions must qualify also as a municipal securities principal by passing the Board's municipal securities principal examination when it is prescribed. The Board does not intend to impose such a requirement on persons whose functions are limited to those set forth in the definition of a financial and operations principal.
The question has also been asked whether a person performing only the functions of a financial and operations principal on and after December 1, 1975 would be "grandfathered" as a municipal securities principal for purposes of taking the Board's municipal securities principal examination when prescribed if such person begins supervising underwriting, trading or sales functions. Activities relating to financial and operational matters are substantially different from those relating to underwriting, trading and sales or other categories of activities supervised by municipal securities principals. The Board does not intend, therefore, that financial and operations principals be "grandfathered" for purposes of the Board's examination requirements for municipal securities principals, or that a financial and operations principal would be qualified to engage in such other supervisory activities solely by reason of having met the Board's requirements for financial and operations principals.
The Board has also been asked whether senior officers or general partners of a firm, who may bear ultimate legal responsibility for the financial and operational activities of the firm, must be qualified as financial and operations principals under the Board's rules. Although the answer depends on the particular factual situation, officers or partners not directly involved in the financial and operations affairs of a firm generally would not be required to qualify as financial and operations principals.
2. Activities Requiring Qualification as a Municipal Securities Principal.
The question has been asked whether supervisory personnel in the processing and clearance areas must qualify as the municipal securities principals under rule G-3. In a securities firm, the financial and operations principal ordinarily would be the only person supervising operations-related activities who will be required to pass an examination. With respect to bank dealer supervisory personnel, to whom the financial and operations principal classification does not apply, qualification in a principal capacity in the operations area will not be required unless the person in question exercises policy-making authority. Thus, an individual may supervise a bank dealer's processing activities without qualifying as a municipal securities principal, regardless of the number of persons supervised by such individual, if policy-making functions and discretionary authority are delegated to a higher level.
Somewhat different considerations apply in determining which persons are required to be qualified as municipal securities principals in connection with underwriting, trading, sales or other activities referred to in the Board's rules as municipal securities principal activities. In these areas, the qualification requirements apply to persons having supervisory responsibility with respect to the day-to-day conduct of the activities in question, even though such persons may not have a policy-making role. The Board's conclusions in this regard are based on the fact that in these other areas the supervisory person is responsible for the activities of personnel who communicate directly with issuers, traders, and investors.
3. Activities Requiring Qualification as a Municipal Securities Representative.
In certain cases, communications from customers may be received at a time when a duly qualified municipal securities representative or municipal securities principal is unavailable. Similarly, there may be situations in which it becomes important to advise a customer promptly of transactions effected and orders confirmed, even though the individual responsible for the account may not be able to communicate with the customer at that time.
In many cases under the rules of other self-regulatory organizations, communications of this nature, which in essence reflect a mechanical function, may be received and made by properly supervised competent individuals whose clerical and ministerial functions would not otherwise subject them to qualification requirements. The Board believes the principle underlying this practice and the application of other self-regulatory organizations' qualification rules is sound.
Accordingly, the Board interprets rule G-3 to permit the recording and transmission in customary channels of orders, the reading of approved quotations, and the giving of reports of transactions by non-qualified clerical personnel when the duly qualified municipal securities representative or municipal securities principal who normally handles the account or customer is unavailable. The foregoing interpretation is applicable only to clerical personnel who are: (a) deemed capable and competent by a municipal securities principal or general securities principal to engage in such activities; (b) specifically authorized in writing to perform such functions on an occasional basis as necessary or directed to perform such functions in specific instances, in either case by a duly qualified municipal securities principal or general securities principal; (c) familiar with the normal type and size of transaction effected with or for the customer or the account; and (d) closely supervised by duly qualified municipal personnel.
All orders for municipal securities received by clerical personnel under the foregoing interpretation must be reviewed and approved by duly qualified municipal personnel familiar with the customer or account prior to being accepted or effected by the municipal securities broker or municipal securities dealer. Solicitation of orders by clerical personnel is not permitted. Confirmations of transactions may be given and quotations read by clerical personnel only when approved by duly qualified municipal personnel. Individuals subject to the 90-day apprenticeship requirements of rule G-3(i)[†] are not clerical personnel and are not authorized or permitted to engage in such activities with members of the public.
Also, the question has been raised whether a bank's branch office personnel, who are not otherwise required to be qualified under rule G-3, will be required to take and pass the qualification examination for municipal securities representatives in order to respond to a depositor's inquiry concerning possible investments in municipal securities. Insofar as the branch office personnel merely refer the depositor to qualified bank dealer personnel for discussion concerning the merits of an investment in municipal securities and execution of the depositor's order, the branch office personnel would not be required to be qualified under the Board's professional qualifications requirements. However, if branch office personnel seek to advise the depositor concerning the merits of a possible investment, or otherwise perform more than a purely ministerial function, qualification under the Board's rules would be required.
[*] [ Currently codified at rule G-3(d)(iii)]
[†] [ Currently codified at rule G-3(a)(iii)]
Previously Registered Entitites
Previously registered entitites. Thank you for your letter [name and date deleted] which has been referred to me for response. The letter relates to the Municipal Securities Rulemaking Board's rule A-12, which imposes an initial fee of $100 on municipal securities brokers and municipal securities dealers.
We note that the terms "municipal securities broker" and "municipal securities dealer" are not restricted under the Securities Acts Amendments of 1975 (the "1975 Amendments") to securities firms and banks effecting transactions exclusively in municipal securities. Many municipal securities brokers and municipal securities dealers (other than bank dealers) were registered with the Securities and Exchange Commission (the "Commission") as brokers or dealers prior to the 1975 Amendments. Municipal securities brokers and municipal securities dealers already registered with the Commission were not required to re-register with respect to their municipal securities activities, but nevertheless are subject to payment of the Board's initial fee. In addition, many municipal securities brokers and municipal securities dealers have been and are members of the national securities exchanges and the National Association of Securities Dealers, Inc.
We are unable to conclude from the information set forth in your letter that the initial fee imposed by the Board's rule A-12 is inapplicable to your firm. MSRB interpretation of June 16, 1976.
Interpretive Notice on Underwriting Assessment
The Municipal Securities Rulemaking Board (the “Board”) has received several requests for interpretation of rule A-13, which requires each municipal securities broker and municipal securities dealer to pay the Board a fee [on] … the face amount of municipal securities purchased from an issuer as part of a new issue. These requests concern the applicability of the fee to securities which have a stated maturity of [nine months or less], but are part of a new issue having a final stated maturity of [more than nine months]. Rule A-13 is intended to impose the … underwriting assessment on the face amount of all securities purchased from an issuer that are part of a new issue of municipal securities if any part of the issue has a final stated maturity of [nine months or less]… from the date of the securities. Thus, calculation of the fee should be based upon all municipal securities which are part of such new issue, including securities having a stated maturity of [nine months or less]. The assessment is not intended to apply, however, to short-term issues having a final maturity of [nine months or less].
NOTE: Revised to reflect subsequent amendments.
Separately Identifiable Department or Division of a Bank
Separately identifiable department or division of a bank. This will acknowledge receipt of your letter of November 12, 1975, in which you request, on behalf of the Dealer Bank Association, an interpretative opinion with respect to the rule of the Municipal Securities Rulemaking Board (the "Board") defining the term "separately identifiable department or division of a bank," as used in section 3(a)(30) of the Securities Exchange Act of 1934, as amended (the "Act"). Such rule was originally numbered rule 4 of the Board and became effective on October 15, 1975. The rule is presently numbered rule G-1 of the Board.
In your letter you pose a series of questions concerning rule G-1, as follows:
- A bank has an operations department that performs processing and clearance activities, and maintains records, with respect to the bank's underwriting, trading and sales of municipal securities, as well as with respect to certain other bank activities. Can this bank have a "separately identifiable department or division" as defined in rule G-1?
- In a bank with numerous branches, an employee or officer in a branch will on occasion accept or solicit an order from a customer for municipal securities. Does this preclude a finding that the bank has a "separately identifiable department or division"?
- Mr. X is a senior vice president of a bank. He is not a director. Mr. X's only relationship to the bank's municipal securities dealer activities is that he is a member of a management committee within the bank that determines the amount of the bank's funds that will be made available for the bank's municipal securities dealer activities, as well as for other bank activities. The bank has a separately identifiable department or division that otherwise meets the requirements of rule G-1. Is Mr. X a person who must be designated by the board of directors of the bank under rule G-1(a)(1)?
- A bank has a corporate trust department that, among other things, serves as paying agent for certain municipal securities and performs clearing functions in municipal securities, in addition to the processing and clearance activities performed in connection with the bank's underwriting, trading and sales of municipal securities. Are the persons in the bank's corporate trust department who engage solely in activities that do not relate to the underwriting, trading and sales of municipal securities by the bank performing municipal securities dealer activities?
With respect to question (1) above, paragraph (d) of rule G-1 contemplates that the municipal securities dealer activities of a bank, as such activities are defined in paragraph (b) of the rule, may be conducted in more than one organizational or operational unit of the bank, for example, underwriting, trading and sales activities in the bond department, and processing and clearance activities in the operations department of the bank. Under the rule, all such units can be aggregated to constitute a separately identifiable department or division within the meaning of section 3(a)(30) of the Act, provided that each such unit is identifiable and under the direct supervision of an officer designated by the board of directors of the bank as responsible for the day-to-day conduct of the bank's municipal securities dealer activities. The officer so designated need not be the same for all such units. For example, the senior officer of the bank's bond department may be designated as responsible for the municipal securities dealer activities conducted by that department, while the senior officer of the bank's operations department may be designated as responsible for the municipal securities dealer activities conducted by that department. In addition, the records of each such unit relating to municipal securities dealer activities must be separately maintained or separately extractable so as to permit independent examination of such records and enforcement of applicable provisions of the Act, the rules and regulations of the Commission thereunder and the rules of the Board. Finally, each such unit comprising the separately identifiable department or division may be engaged in activities other than those relating to municipal securities dealer activities. For example, the bond department may also engage in activities relating to United States government obligations, while the operations department may perform processing and clearance functions for departments of the bank other than the bond department.
With respect to question (2) above, paragraph (d) of rule G-1 also contemplates that the municipal securities dealer activities of a bank may be conducted at more than one geographic location. However, in order for such a bank to have a separately identifiable department or division, the branch employees who accept or solicit orders for municipal securities must, with respect to acceptance or solicitation of such orders, be affiliated with one of the identifiable units of the bank comprising such department or division and must, with respect to acceptance or solicitation of such orders, be responsible to an officer designated by the board of directors of the bank as responsible for the day-to-day conduct of the bank's municipal securities dealer activities. Further, the bank's records relating to the transactions effected by such branch employees must meet the criteria of paragraph (a) of rule G-1 with respect to separate maintenance and accessibility.
With respect to question (3) above, paragraph (c) of rule G-1 recognizes that senior officers of a bank may make determinations affecting bank policy as a whole which have an indirect effect on the municipal securities dealer activities of the bank. For example, determinations with respect to the deployment of the bank's funds may affect the size of the bank's inventory of municipal securities or volume of underwriting. Ordinarily such determinations would not directly relate to the day-to-day conduct of the bank's municipal securities dealer activities and senior officers making such determinations need not be designated by the board of directors of the bank as responsible for the conduct of such activities. However, if the determinations of senior officers have a direct and immediate impact on the day-to-day conduct of the bank's municipal securities dealer activities, whether by reason of the scope of such determinations, the frequency with which such determinations are made, or by reason of other factors, such officers may be considered to be directly engaged in the conduct of the bank's municipal securities dealer activities and required to be designated by the board of directors of the bank as responsible for the day-to-day conduct of such activities.
With respect to question (4) above, the regulatory focus of section 15B(b)(2)(H) of the Act is on the dealer activities of a bank. Accordingly, subparagraph (b)(2) of rule G-1 was intended to relate to such dealer activities, and not to describe other activities of the bank which might involve municipal securities. Employees of a bank's corporate trust department who perform clearance and other functions with respect to municipal securities, but which do not relate to the underwriting, trading and sales activities of the bank, do not perform municipal securities dealer activities within the meaning of rule G-1.
This opinion is rendered on behalf of the Board, pursuant to authority delegated by the Board. Copies of this opinion are being sent to the Securities and Exchange Commission, the bank regulatory agencies and the National Association of Securities Dealers, Inc. MSRB interpretation of November 17, 1975.
archive97
Archive 1997
Operational Start Date for Customer Transaction Reporting, December 29, 1997
Proposed amendments to rules G-11, G-12, and G-8, December 23, 1997
Amendment filed to rule G-23, December 23, 1997
Proposed amendments to rule G-32, December 22, 1997
Series 53 study outline, December 19, 1997
Effective date for revised Series 53 study outline changed to March 1, 1998.
Amendment filed, December 18, 1997
Notice of filing, December 16, 1997
Amendment Filed, revised forms G-36(OS) and G-36(ARD): December 2, 1997
Consultants Rule G-38 November 25, 1997
Arbitration Rule G-35 November 13, 1997
The Board has filed an amendment to its File No. SR-MSRB-97-4 relating to rule G-35.
The Board is publishing a third Question and Answer notice concerning consultants. November 13, 1997
Question and Answer notice concerning consultants.
Notice: October 1997
MSRB Transaction Reporting Program Questions and Answers.
Amendments Filed: September 30, 1997
Draft Amendments to Rules G-38 and G-8 and Draft Changes to Form G-37/G-38: September 11, 1997
Additional Questions and Answers: Rule G-37 on Political Contributions and Prohibitions on Municipal Securities Business:
Rule G-35: Arbitration: May 22, 1997
Rule G-38: Consultants: May 21, 1997
Text of Proposed Rule & Forms G-36 (OS) & G-36(ARD)
Proposed Change Filed to Establish a Fee Relating to the OS/ARD Subsystem: May 19, 1997
From the Chairman
The Board is publishing Chairman Roger Hayes' letter to the municipal securities industry
Rule G-32: Notice of the Draft Amendments
Rule G-39: Telemarketing Rule Approved
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Operational Start Date for Customer Transaction Reporting
Operational Start Date for Customer Transaction Reporting
The operational start date of the customer transaction phase of the Board's Transaction Reporting Program has been delayed from January 1, 1998 to March 1, 1998. However, the Board's testing program is ongoing and dealers should ensure that they are testing their transaction reporting capabilities with the Board at this time or have scheduled a date to do so.
The Board's Transaction Reporting Program is designed to provide transparency and audit trail capabilities in the municipal securities market. Since 1995, the program has accepted dealer reports of inter-dealer transactions in municipal securities. Using these transaction reports, the Board publishes daily summaries of price and volume information about frequently traded municipal securities. The Board also maintains a surveillance database containing all transactions reported to the Board, and makes this database available to market regulators responsible for market surveillance and enforcement of Board rules.
During the next phase of the Transaction Reporting Program, dealers will report their dealer-customer transactions in municipal securities to the Board. This will allow information on customer transactions to be included in the daily price/volume summaries and in the surveillance database. Toward this end, the Securities and Exchange Commission in November 1996 approved amendments to Board rule G-14 on transaction reporting that require dealers to report their dealer-customer transactions to the Board.(1) When effective, these amendments will require that dealers send to the Board each day an electronic file containing the municipal securities transactions that were effected with customers on that day. An individual dealer may send the electronic file directly to the Board or may use an intermediary such as a clearing broker or a service bureau.(2)
At the time the amendments to rule G-14 were approved, the Board also announced a mandatory testing program. This program requires that dealers who will submit transactions to the Board under rule G-14 test their transaction reporting capabilities with the Board to ensure that their electronic files of transaction data are in the correct format and otherwise comply with the Board's requirements. The Board began the testing program with dealers in July 1997, and has received test data from over 40 service bureaus and clearing brokers on behalf of over 330 dealers. Most other dealers and service bureaus that will be submitting data to the Board are scheduled to begin testing before year-end.
Because of technical difficulties encountered in the development of computer systems that will operate Transaction Reporting Program, it is necessary for the Board to delay the operational start date for the customer transaction phase of the program -- originally scheduled for January 1, 1998 -- to March 1, 1998. This delay in the effective date for full operation of rule G-14 does not affect dealer obligations under the ongoing testing program. During December 1997, the Board will provide test dates to all dealers that have not yet been scheduled for testing. Dealers that plan to use the "PC dial-up" option for submitting data to the MSRB have now been sent necessary software and user manuals to submit test transactions to the MSRB. Dealers that plan to submit transactions via a clearing broker or service bureau may consider themselves as having tested if the clearing broker or service bureau is submitting (or is scheduled to submit) test data on their behalf. Dealers that plan to submit transactions via National Securities Clearing Corporation should have begun testing or have a test date scheduled and should contact the MSRB immediately if they do not have a test date.
As part of the testing program, dealers will continue to submit data reflecting their actual transactions once their initial test protocols have been successfully completed with the Board. Submission of the transaction data should be done by midnight of trade date -- the same deadline as will exist in the operational system. Testing in this manner will continue until the operational start date for the Program in March. Using live transaction data during the testing period will serve two purposes. It will assist the Board in designing the daily reports of price and volume information that will be provided to increase transparency in the municipal securities market and also will provide dealers and the Board with an opportunity to uncover and address problems that may arise in the reporting of specific types of transactions. This, in turn, will help the Board and the industry to ensure that system operations begin successfully in March 1998.
December 23, 1997
ENDNOTES
1. Securities Exchange Act Release No. 37998 (November 29, 1996).
2. The format for these electronic files, data element definitions and other requirements concerning the details of customer transaction reporting may be found in MSRB Reports, Volume 16, No.3 (September 1996), at 3. The most current status of the Transaction Reporting Program, frequently asked questions, additional technical details, and other helpful explanatory material can be found on the Board's World Wide Web site at www.msrb.org.
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The Board has filed proposed amendments to rule G-32, on disclosures in connection with new issues
The Board has filed proposed amendments to rule G-32, on disclosures in connection with new issues
On December 22, 1997, the Board filed with the Securities and Exchange Commission ("SEC") proposed amendments to rule G-32, on disclosures in connection with new issues, that would strengthen the rule's existing requirements regarding dissemination of official statements to dealers purchasing new issue municipal securities during the underwriting period and would incorporate a longstanding Board interpretation regarding disclosure to customers of initial offering prices in negotiated underwritings.(1)
Rule G-32 currently provides that no dealer shall sell any new issue municipal securities to a customer unless such dealer delivers to the customer no later than the settlement of the transaction, among other things, a copy of the official statement in final form and, in connection with a negotiated sale of new issue municipal securities, information regarding the initial offering price for each maturity in the new issue (the "Offering Price Disclosure Provision"). The rule also requires that managing underwriters and other dealers that sell new issue municipal securities to purchasing dealers furnish copies of the official statement to such purchasing dealers upon request (the "Dealer Dissemination Provisions"). The proposed amendments to rule G-32 would strengthen the Dealer Dissemination Provisions by requiring that official statements be sent to purchasing dealers within one business day of request and would make explicit in the Offering Price Disclosure Provision that the required disclosure to customers of the initial offering price of each maturity includes any maturities that have not been reoffered.
Amendments to Dealer Dissemination Provisions
All dealers selling new issue municipal securities to customers, not just dealers that participated in the underwriting of the new issue, are required to deliver official statements to their customers by no later than settlement of their transactions. As a result, the Dealer Dissemination Provisions were included in rule G-32 to make official statements for new issues available to all dealers so that they may fulfill their customer delivery obligation under the rule. Because dealers that are not part of the underwriting group have indicated from time to time that they have some difficulty in obtaining official statements from the managing underwriter or other selling dealers on a timely basis, the Board is proposing amendments to the Dealer Dissemination Provisions of rule G-32 to provide a specific time frame and method for delivery of official statements to purchasing dealers.
The proposed amendments would retain the existing responsibility of the managing underwriter under the rule to provide, upon request, one copy of the official statement to purchasing dealers, together with the disclosure information required for negotiated offerings, and one additional official statement per $100,000 par value purchased for resale to customers. The managing underwriter also would continue to be required to provide purchasing dealers, upon request, with instructions on how to order copies of the official statement from the printer.(2) The amendments would add a requirement that the official statement be sent by the managing underwriter to the purchasing dealer no later than the business day after the request or, if the official statement has not been received from the issuer or its agent, the business day after receipt. The managing underwriters would be required to send official statements by first class mail or other equally prompt means unless the purchasing dealer arranges some other method of delivery at its own expense. These obligations of the managing underwriter would continue to apply with respect to all purchasing dealers, even where the managing underwriter did not sell the securities to the purchasing dealer.
In addition, the proposed amendments would retain the existing requirement that every dealer selling a new issue municipal security to another dealer must furnish the official statement to such purchasing dealer upon request. The amendments would add a requirement that the selling dealer send the official statement to the purchasing dealer within the same time frame and by the same means as would be required of the managing underwriter.
The Board believes that the proposed amendments to the Dealer Dissemination Provisions would help dealers to comply with their obligation to deliver official statements to their customers by settlement and would improve dissemination of official statements to the marketplace generally during the underwriting period.
Amendment to Offering Price Disclosure Provision
Since January 1983,(3) the Board has interpreted the Offering Price Disclosure Provision to require that the initial offering price of all maturities of a new issue of municipal securities in a negotiated offering must be disclosed to customers, even for maturities that are not reoffered. The proposed amendment to the Offering Price Disclosure Provision of rule G-32 would incorporate into the rule language this longstanding Board interpretation. The Board believes that the application of the Offering Price Disclosure Provision to maturities that are not reoffered permits customers to determine whether the price they paid for a new issue municipal security is substantially different from the price being paid by presale purchasers.
December 22, 1997
Text of Amendments(4)
Rule G-32. Disclosures in Connection with New Issues
(a) Disclosure Requirements. No broker, dealer or municipal securities dealer shall sell, whether as principal or agent, any new issue municipal securities to a customer unless such broker, dealer or municipal securities dealer delivers to the customer no later than the settlement of the transaction:
(i) No change.
(ii) in connection with a negotiated sale of new issue municipal securities, the following information concerning the underwriting arrangements:
(A)-(B) No change.
(C) the initial offering price for each maturity in the issue that is offered or to be offered in whole or in part by the underwriters, including maturities that are not reoffered.
In the event an official statement in final form will not be prepared by or on behalf of the issuer, an official statement in preliminary form, if any, shall be sent to the customer with a notice that no final official statement is being prepared.
Every broker, dealer or municipal securities dealer shall send, upon request, promptly furnish the documents and information referred to in this section (a) to any broker, dealer or municipal securities dealer to which it sells new issue municipal securities , upon the request of such broker, dealer or municipal securities dealer. no later than the business day following the request or, if an official statement in final form is being prepared but has not been received from the issuer or its agent, no later than the business day following such receipt. Such items shall be sent by first class mail or other equally prompt means, unless the purchasing broker, dealer or municipal securities dealer arranges some other method of delivery and pays or agrees to pay for such delivery.
(b) Responsibility of Managing Underwriters, and Sole Underwriters and Financial Advisors. (i) Managing Underwriters and Sole Underwriters. When a final official statement is prepared by or on behalf of an issuer, the managing underwriter or sole underwriter, upon request, shall send to provide all brokers, dealers and municipal securities dealers that purchase the new issue municipal securities with an official statement and other information required by paragraph (a)(ii) of this rule and not less than one additional official statement in final form per $100,000 par value of the new issue purchased by the broker, dealer or municipal securities dealer and sold to customers. Such items shall be sent no later than the business day following the request or, if an official statement in final form is being prepared but has not been received from the issuer or its agent, no later than the business day following such receipt. Such items shall be sent by first class mail or other equally prompt means, unless the purchasing broker, dealer or municipal securities dealer arranges some other method of delivery and pays or agrees to pay for such delivery. In addition, the managing underwriter or sole underwriter, upon request and shall provide all purchasing brokers, dealers and municipal securities dealers with instructions on how to order additional copies of the final official statement directly from the printer. A managing underwriter or sole underwriter that prepares an official statement on behalf of an issuer shall print the final official statement and other information required by paragraph (a)(ii) of this rule and make them available promptly after the date of sale of the issue but no later than two business days before the date all securities are delivered by the syndicate manager to the syndicate members.
(ii) Finanicial Advisors. A broker, dealer or municipal securities dealer that, acting as financial advisor, prepares a final official statement on behalf of an issuer, shall make that official statement in final form available to the managing underwriter or sole underwriter promptly after the award is made. If the financial advisor is responsible for printing the final official statement, it shall make adequate copies of the final official statement available to the managing underwriter or sole underwriter promptly after the award is made but no later than two business days before the date all securities are delivered by the syndicate manager to the syndicate members to permit their compliance with paragraph (b)(i) of this rule.
(c) No change.
ENDNOTES
1. File No. SR-MSRB-97-14. Comments sent to the SEC should refer to the file number.
2. Consistent with the position taken by the SEC in connection with its Rule 15c2-12, the Board recognizes that the official statement is the issuer's document. As a result, the proposed amendments would remove references in the existing rule to the preparation of official statements by underwriters and dealers that act as financial advisors.
3. See "Rule G-32 - Frequently Asked Questions Concerning Disclosures in Connection with New Issues," MSRB Reports, Vol. 3, No. 1 (Jan. 1983) at 25-27. See also "Disclosure Requirements for New Issue Securities: Rule G-32," MSRB Reports, Vol. 6, No.4 (Sept. 1986) at 17-20; and "Disclosures in Connection with New Issues: Rule G-32," MSRB Reports, Vol. 16, No. 3 (Sept. 1996) at 19-23.
4. Underlining indicates additions; strikethrough denotes deletions.
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osfee2
Proposed Change Filed to Establish a Fee Relating to the OS/ARD Subsystem
Notice of Filing The Board has filed a proposed change to establish a fee relating to the operation of its OS/ARD subsystem of the MSIL(R) system.
Questions about the filing may be directed to Thomas A. Hutton, Director of MSIL.
On May 19, 1997, the Board filed with the Securities and Exchange Commission (Commission) a proposed change to establish a fee relating to the operation of its Official Statement/Advance Refunding Document (OS/ARD) subsystem of the Municipal Securities Information Library(R) ("MSIL(R)") system.[1] The Board is establishing a price of $7,000 (plus delivery or postage charges) for its 1996 document collection of official statements and refunding documents, sold as a "backlog" collection. This fee change was effective upon filing with the Commission.[2]
The OS/ARD subsystem, which was activated on April 20, 1992, is a central electronic facility through which information collected and stored pursuant to MSRB rule G-36 is made available electronically and in paper form to market participants and information vendors. [3]
May 19, 1997
ENDNOTES
[1] Municipal Securities Information Library and MSIL are registered 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.
[2] File No. SR-MSRB-97-3. Comments submitted to the Commission should refer to this file number.
[3] Rule G-36 requires underwriters to provide copies of final official statements and advance refunding documents within certain specified time frames for most new issues issued since January 1, 1990.
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