[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