[Federal Register Volume 60, Number 129 (Thursday, July 6, 1995)]
[Notices]
[Pages 35248-35250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16479]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35911; File No. SR-MSRB-95-6]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval to a Proposed Rule Change by the
Municipal Securities Rulemaking Board Relating to Interim Changes to
the Operation of Its Continuing Disclosure Information System of the
Municipal Securities Information Library Through December 31, 1995
June 28, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on May 24,
1995, the Municipal Securities Rulemaking Board (``Board'') or
``MSRB'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') a proposed rule change (File No. SR-MSRB-
95-6). The proposed rule change is described in Items I, II, and III
below, which Items have been prepared by the Board. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB is filing herewith a proposed rule change for interim
changes to the operation of its Continuing Disclosure Information
(``CDI'') System of the Municipal Securities Information Library
(``MSIL'') system through December 31, 1995.\1\ The Board requests
accelerated approval of the proposed rule change in order to permit the
CDI System to process material event notices that may be sent to the
Board after July 3, 1995, the effective date of certain amendments to
SEC Rule 15c2-12 on municipal securities disclosure. The interim
changes are as follows:
\1\ The MUNICIPAL SECURITIES INFORMATION LIBRARY system and the
MSIL system are trademarks of the Board. The MSIL system, which was
approved in Securities Exchange Act Release No. 29298 (June 13,
1991) 56 FR 28194, is a central facility through which information
about municipal securities is collected, stored and disseminated.
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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.\2\
\2\ Rule 15c2-12(b)(5)(i)(C) specifies 11 events which, if
material, must be disclosed in a timely manner. 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.
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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.
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.
II. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
In its filing with the Commission, the Board included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Board has prepared summaries, set forth in Section
(A), (B), and (C) below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
On April 6, 1992, the Commission approved the CDI System for an 18-
month pilot period.\3\ The CDI System began operating on January 23,
1993, and functions as part of the Board's MSIL system. The CDI System
accepts and electronically disseminates voluntary submissions of
official disclosure notices relating to outstanding issues of municipal
securities. During its first phase of operation, the CDI System only
accepted disclosure notices from trustees. On May 17, 1993, the CDI
System began accepting disclosure notices from issuers also.\4\ On
March 10, 1995, the Commission approved an additional extension of the
pilot period for the CDI
[[Page 35249]]
System which will expire on December 31, 1995.\5\
\3\ See Securities Exchange Act Release No. 30556 (April 6,
1992) 57 FR 12534. A complete description of the CDI system is
contained in File No. SR-MSRB-90-4, Amendment No. 1.
\4\ On May 17, 1993, the Board reported to the Commission on the
initial phase of operation of the CDI System regarding technical,
policy and cost issues and proposed enhancements to the System.
\5\ See Securities Exchange Act Release No. 35467 (Mar. 10,
1995) 60 FR 14313.
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On November 10, 1994, the Commission approved amendments to its
Rule 15c2-12 which prohibit dealers from underwriting issues of
municipal securities unless the issuer commits, among other things, to
provide notice of material events to the MSRB or to all Nationally
Recognized Municipal Securities Information Repositories (``NRMSIRs'')
and to the applicable state information depository if any.\6\ In
addition, the Rule prohibits dealers from recommending municipal
securities without having a system in place to receive material events
notices.\7\
\6\ See Securities Exchange Act Release No. 34961 (Nov. 10,
1994) 59 FR 59590. This provision of the Rule will become effective
on July 3, 1995.
\7\ The effective date of this provision of the Rule is January
1, 1996.
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The Board has proposed certain changes to the CDI System consistent
with the requirements of the new amendments to Rule 15c2-12. The
changes discussed herein are interim changes to the CDI System to allow
it to accept and disseminate material event notices received after the
July 3, 1995, effective date of the amendments to Rule 15c2-12. A
permanent system designed to process even more submissions and
submissions of varied lengths is currently under development and is
expected to be ready for operation by the end of 1995. A filing for
approval of the permanent system changes will be made prior to the
expiration of the CDI System's pilot period.
There are four areas of change in the interim CDI System. First,
the enrollment procedure will be discontinued. As currently operated,
an issuer or trustee must enroll in the CDI System and receive a unique
identification number and a personal identification number before
documents are accepted from the issuer or trustee. The enrollment
procedure was designed to provide a measure of security that the
submission is authentic and intended for public dissemination. Pursuant
to the amendments to Rule 15c2-12, the CDI System must accept material
event notices from any issuer or its agent, therefore the MSRB finds
the enrollment procedure no longer feasible.
While discontinuing the enrollment procedure leaves the Board
without a verification mechanism for submissions, the Commission has
stated that NRMSIRs will not be required to verify the accuracy of the
information submitted, only to accurately convey the information.\8\
The Board similarly asserts that it is not required to undertake to
establish the authenticity or accuracy of documents submitted, but that
it will attempt to ensure accurate dissemination of documents accepted
into the System.
\8\ See Securities Exchange Act Release No. 34961 at 51 n.155
(Nov. 10, 1994).
The second change to the operation of the CDI System, designed to
assist users in identifying a submission as a material event notice, is
a modification to the voluntary cover sheet used by submitters. The use
of the modified cover sheet will help to afford some limited assurance
to subscribers that the submission is authentic and intended for
disclosure to the market as a material event notice. However, the
interim CDI System will nevertheless attempt to disseminate a document
even when not accompanied by a cover sheet if the document refers, in
its title, to one of the 12 enumerated material events.
The third change relates to the length of documents submitted to
the CDI System and how they will be handled. Currently, the CDI System
disseminates only those documents that do not exceed three pages. The
current CDI System was designed with the capability to process about
100 such submissions a day. To open up the CDI System to longer
documents, it will begin accepting and disseminating submissions of up
to 10 pages in addition to the voluntary cover sheet. It is expected
that the capacity of the interim CDI System will allow for processing
and electronically disseminating about 200 10-page documents a day.
Should a submission exceed 10 pages, the first 10 pages and the cover
sheet will be disseminated with a notice to subscribers that the
submission exceeds 10 pages. The CDI System will, upon request by a
subscriber, make available, by express or regular mail, a copy of the
complete submission at the subscriber's expense.\9\
\9\ Copies will be charged at 20 cents per page plus the cost of
postage or express mail.
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The fourth change extends the hours during which the CDI System
will accept submissions. Currently available to receive submissions
from 9 a.m. to 4 p.m., Eastern Time, the CDI System will accept
documents for an additional two hours; from 8 a.m. to 5 p.m., Eastern
Time. Submissions will continue to be disseminated to subscribers after
5 p.m. The additional hours will allow more flexibility for submitters,
especially those on the West Coast.
Regarding processing time, the Commission stated in Release 34-
34961, approving the amendments to Rule 15c2-12, that 15 minutes might
be an appropriate turnaround time for dissemination of material event
notices by NRMSIRs, but that it would further discuss the issue during
the NRMSIR recognition process. The CDI System had previously processed
documents received by facsimile or modem in about 15 minutes, but with
a much smaller volume of submissions than is currently anticipated. The
Board will use its best efforts to maintain a quick turnaround time for
documents sent by facsimile and modem to the interim CDI System. The
Board will ensure that any document with a voluntary cover sheet
received by facsimile, modem or mail will be disseminated the same day
it is received. Depending upon the volume of documents received,
documents that refer to the 12 enumerated material events in their
title, but do not have voluntary cover sheet, will be disseminated on
the same day if possible, however documents received with cover sheets
have higher dissemination priority.
The long-term goal is to create a permanent system that will
process and disseminate longer documents on a faster turnaround basis.
During the interim period prior to the startup of the permanent system,
CDI personnel will maintain a log of all submissions disseminated
through the CDI System. A long of documents received at Board offices
that appeared to be disclosure documents but that were not labeled as
material event notices in either a cover sheet or their title will also
be maintained.\10\ These logs will help the Board to determine whether
refinements to the design of the permanent system are needed.
\10\ The CDI System will process any document that is received
with a cover sheet or that refers to one of the 12 enumerated
material events in its title. However, should documents that clearly
are not material event notices, such as official statements, annual
or quarterly financial reports, or budgets, be received without a
cover sheet, they will be rejected and returned to the submitter, if
possible, with a notice that the CDI System accepts material event
notices only. The notice will also identify the current NRMSIRs that
accept annual financial reports.
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The Board believes that approval of the operation of the interim
CDI System will allow it to process material event notices to be
received after July 3, 1995. In addition, it will give the Board
sufficient time and experience to determine the permanent changes
needed, in consultation with the Commission as well as potential users
of the system, including NRMSIRs. We anticipate filing permanent system
changes before the December 31, 1995, expiration date of the pilot
period for the CDI System. At that time, the Board
[[Page 35250]]
also plans to ask the Commission for permanent approval of the CDI
System.\11\
\11\ For the interim CDI System, the price will remain $16,000
for an annual subscription. The price for the permanent system will
be reviewed for any appropriate adjustment.
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The Board believes the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act, which requires, in pertinent part,
that the Board's rules:
Be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect
to, and facilitating transactions in municipal securities, to remove
impediments to and perfect the mechanism of a free and open market
in municipal securities, and, in general, to protect investors and
the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement of Comments on the Proposed
Rule Change Received from Members, Participants, or Others
Written comments where neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The Board requests that the Commission find good cause, pursuant to
Section 19(b)(2) of the Act, for approving the proposed rule change
prior to the thirtieth day after publication of the notice of filing in
the Federal Register. Such accelerated approval would permit the
interim CDI System to accommodate the notices of material events
required to be sent under the amendments to Rule 15c2-12 beginning July
3, 1995. The Board believes that the CDI system will increase the
integrity and efficiency of the municipal securities market by helping
to ensure that the prices charged for securities trading in the
secondary market reflect all available official information about that
issue.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Room. Copies of the filing will also be
available for inspection and copying at the Board's principal offices.
All submissions should refer to File No. SR-MSRB-95-6 and should be
submitted by [insert date 21 days from the date of publication].
V. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to the Board, and, in particular, the
requirements of Section 15B and the rules and regulations thereunder.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of the
notice of filing in the Federal Register, in that accelerated approval
is appropriate to provide for uninterrupted operation of the CDI
system, especially in light of the July 3, 1995 effectiveness of the
amendments to Rule 15c2-12. Programs like the CDI System are imperative
to the effectiveness of Rule 15c2-12. Issuers have the option of
providing material event notices to the MSRB or all NRMSIRS and to the
State Information Depository, if one exists. The CDI System provides
issuers an alternative to providing disclosure information to multiple
NRMSIRS. Therefore the functionality of the CDI System is tantamount to
its being a useful tool for issuers in complying with Rule 15c2-12.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change be, and hereby is, approved
through December 31, 1995.
\12\ 15U.S.C. 78s(b)(2).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\13\
\13\ 17 U.S.C. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-16479 Filed 7-5-95; 8:45 am]
BILLING CODE 8010-01-M